-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HGCI6WvHFB1ndnXpeD7rWrCE5v0ke1CXVGZFWblCRWNmS6W8Mv5LuMiH4AsP/Hdr mTppG3LZGPmOyW3caCtuqw== 0001047469-99-031620.txt : 19990816 0001047469-99-031620.hdr.sgml : 19990816 ACCESSION NUMBER: 0001047469-99-031620 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FALCON COMMUNICATIONS LP CENTRAL INDEX KEY: 0000900346 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 954654565 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-60776 FILM NUMBER: 99686695 BUSINESS ADDRESS: STREET 1: 10900 WILSHIRE BLVD STREET 2: 15TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90024 BUSINESS PHONE: 3108249990 FORMER COMPANY: FORMER CONFORMED NAME: FALCON HOLDING GROUP LP DATE OF NAME CHANGE: 19940601 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FALCON FUNDING CORP CENTRAL INDEX KEY: 0001060530 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 954681480 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-55755-01 FILM NUMBER: 99686696 BUSINESS ADDRESS: STREET 1: 10900 WILSHIRE BLVD STREET 2: 15TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90024 BUSINESS PHONE: 3108249990 MAIL ADDRESS: STREET 1: 10900 WILSHIRE BLVD CITY: LOS ANGELES STATE: CA ZIP: 90024 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------------------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 -------------------- 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 Numbers: 33-60776 and 333-55755 --------------------------- FALCON COMMUNICATIONS, L.P. FALCON FUNDING CORPORATION* - ------------------------------------------------------------------------------- (Exact Names of Registrants as Specified in Their Charters) California 95-4654565 California 95-4681480 - ------------------------------- --------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification Incorporation or Organization) Numbers) 10900 Wilshire Boulevard - 15th Floor Los Angeles, California 90024 - ---------------------------------------- --------------------------------- (Address of Principal Executive Offices) (Zip Code) (310) 824-9990 -------------------------------------------------- (Registrants' Telephone Number, Including Area Code) - ------------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report. Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No --- --- Number of shares of common stock of Falcon Funding Corporation outstanding as of August 9, 1999: 1,000. * Falcon Funding Corporation meets the conditions set forth in General Instruction H(1)(a) and (b) to the Form 10-Q and is therefore filing with the reduced disclosure format. PART I - FINANCIAL INFORMATION FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ----------------------------------------------
December 31, June 30, 1998* 1999 ------------ ------------ (Unaudited) (Dollars in Thousands) ASSETS: Cash and cash equivalents $ 14,284 $ 11,852 Receivables: Trade, less allowance of $670,000 and $699,000 for possible losses 15,760 19,102 Affiliates 2,322 6,949 Other assets 16,779 35,007 Property, plant and equipment, less accumulated depreciation and amortization of $320,209,000 and $349,316,000 505,894 522,587 Franchise cost, less accumulated amortization of $226,526,000 and $251,998,000 397,727 384,197 Goodwill, less accumulated amortization of $25,646,000 and $30,547,000 135,308 133,480 Customer lists and other intangible costs, less accumulated amortization of $59,422,000 and $97,912,000 333,017 300,314 Deferred loan costs, less accumulated amortization of $2,014,000 and $2,352,000 24,331 23,354 ------------ ------------ $ 1,445,422 $ 1,436,842 ============ ============ LIABILITIES AND PARTNERS' DEFICIT LIABILITIES: Notes payable $ 1,611,353 $ 1,665,676 Accounts payable 10,341 6,088 Accrued expenses 83,077 138,804 Customer deposits and prepayments 2,257 2,630 Deferred income taxes 8,664 2,287 Minority interest 403 387 ------------ ------------ TOTAL LIABILITIES 1,716,095 1,815,872 ------------ ------------ COMMITMENTS AND CONTINGENCIES REDEEMABLE PARTNERS' EQUITY 133,023 400,471 ------------ ------------ PARTNERS' EQUITY (DEFICIT): General partner (408,369) (783,100) Limited partners 4,673 3,599 ------------ ------------ TOTAL PARTNERS' DEFICIT (403,696) (779,501) ------------ ------------ $ 1,445,422 $ 1,436,842 ============ ============
*As presented in the audited financial statements. See accompanying notes to condensed consolidated financial statements. -2- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -----------------------------------------------
Unaudited ---------------------------- Three months ended June 30, ---------------------------- 1998 1999 ------------ ------------ (Dollars in Thousands) REVENUES $ 68,775 $ 106,396 ------------ ------------ OPERATING COSTS AND EXPENSES: Programming costs 13,285 24,247 Service costs 7,207 11,731 General and administrative expenses 12,838 21,369 Equity-based deferred compensation - 42,000 Depreciation and amortization 32,927 55,622 ------------ ------------ Total operating costs and expenses 66,257 154,969 ------------ ------------ Operating income (loss) 2,518 (48,573) OTHER INCOME (EXPENSE): Interest expense, net (24,212) (32,407) Equity in net income (loss) of investee partnerships (18) 273 Other expense, net (50) (1,041) Income tax benefit 1,466 1,325 ------------ ------------ Net loss before extraordinary items (20,296) (80,423) Extraordinary items (28,412) - ------------ ------------ NET LOSS $ (48,708) $ (80,423) ============ ============
See accompanying notes to condensed consolidated financial statements. -3- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -----------------------------------------------
Unaudited ---------------------------- Six months ended June 30, ---------------------------- 1998 1999 ------------ ------------ (Dollars in Thousands) REVENUES $ 133,332 $ 212,205 ------------ ------------ OPERATING COSTS AND EXPENSES: Programming costs 25,933 47,233 Service costs 14,124 25,545 General and administrative expenses 24,516 39,779 Equity-based deferred compensation - 44,600 Depreciation and amortization 64,006 110,048 ------------ ------------ Total operating costs and expenses 128,579 267,205 ------------ ------------ Operating income (loss) 4,753 (55,000) OTHER INCOME (EXPENSE): Interest expense, net (44,699) (64,852) Equity in net income (loss) of investee partnerships (266) 163 Other income (expense), net (824) 9,807 Income tax benefit 1,831 2,459 ------------ ------------ Net loss before extraordinary items (39,205) (107,423) Extraordinary items (28,412) - ------------ ------------ NET LOSS $ (67,617) $ (107,423) ============ ============
See accompanying notes to condensed consolidated financial statements. -4- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -----------------------------------------------
Unaudited ------------------------------ Six months ended June 30, ------------------------------ 1998 1999 ------------ ------------ (Dollars in Thousands) Net cash provided by operating activities $ 13,558 $ 36,697 ------------ ------------ Cash flows from investing activities: Acquisition of cable television systems (76,789) (16,450) Capital expenditures (38,609) (59,034) Increase in intangible assets (1,102) (2,151) Other 1,065 (2,107) ------------ ------------ Net cash used in investing activities (115,435) (79,742) ------------ ------------ Cash flows from financing activities: Borrowings from notes payable 1,445,957 68,500 Repayment of debt (1,224,683) (27,871) Deferred loan costs (23,944) (16) Other 83 - ------------ ------------ Net cash provided by financing activities 197,413 40,613 ------------ ------------ Net increase (decrease) in cash and cash equivalents 95,536 (2,432) Cash and cash equivalents at beginning of period 13,917 14,284 ------------ ------------ Cash and cash equivalents at end of period $ 109,453 $ 11,852 ============ ============
See accompanying notes to condensed consolidated financial statements. -5- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------- NOTE 1 - BASIS OF PRESENTATION Falcon Communications, L.P., a California limited partnership (the "Partnership") and successor to Falcon Holding Group, L.P. ("FHGLP"), owns and operates cable television systems serving small to medium-sized communities and the suburbs of certain cities in 23 states. On September 30, 1998, pursuant to a Contribution and Purchase Agreement dated as of December 30, 1997, as amended (the "Contribution Agreement"), FHGLP acquired the assets and liabilities of Falcon Video Communications, L.P. ("Falcon Video" or the "Falcon Video systems"), in exchange for ownership interests in FHGLP. Simultaneously with the closing of that transaction, in accordance with the Contribution Agreement, FHGLP contributed substantially all of the existing cable television system operations owned by FHGLP and its subsidiaries (including the Falcon Video systems) to the Partnership and TCI Falcon Holdings, LLC ("TCI") contributed certain cable television systems owned and operated by affiliates of TCI (the "TCI systems") to the Partnership (the "TCI Transaction"). In March 1999, AT&T and Tele-Communications, Inc. completed a merger under which Tele-Communications, Inc. became a unit of AT&T called AT&T Broadband & Internet Services, which became the owner of TCI Falcon Holdings, LLC as a result of the merger. As a result, AT&T Broadband and Internet Services holds approximately 46% of the equity interests of the Partnership and FHGLP holds the remaining 54% and serves as the managing general partner of the Partnership. The TCI Transaction has been accounted for as a recapitalization of FHGLP into the Partnership and the concurrent acquisition by the Partnership of the TCI systems. On May 26, 1999, the Partnership and Charter Communications ("Charter") announced a definitive agreement in which Charter will acquire the Partnership in a cash and stock transaction valued at approximately $3.6 billion. Closing of the pending sale is subject to obtaining all necessary government approvals, and is anticipated to take place in the fourth quarter of 1999. NOTE 2 - INTERIM FINANCIAL STATEMENTS The interim financial statements for the three and six months ended June 30, 1999 and 1998 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. 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 six months ended June 30, 1999 are not indicative of results for the entire year. NOTE 3 - REDEEMABLE PARTNERS' EQUITY Redeemable partners' equity has been adjusted as of June 30, 1999 based on the estimated redemption value to be recognized from the pending sale to Charter. NOTE 4 - EQUITY-BASED DEFERRED COMPENSATION In connection with the pending sale of the Partnership to Charter discussed in Note 1, the Partnership recorded a non-cash charge of $42 million during the three months ended June 30, 1999 related to both the 1993 Incentive Performance Plan ($17.2 million) and the 1999 Employee Restricted Unit Plan ($24.8 million). The amounts were determined based on the value of the underlying ownership units, as established by the pending sale of the Partnership to Charter. $2.6 million of additional compensation related to the 1993 Incentive Performance Plan was recorded in the three -6- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------- NOTE 4 - EQUITY-BASED DEFERRED COMPENSATION (CONTINUED) months ended March 31, 1999 based on management's estimate of the increase in value of the underlying ownership interests since December 31, 1998. Payments under the plans are subject to closing of the sale to Charter, and will be paid from net sales proceeds. The total deferred compensation of $44.6 million under these plans is included in accrued expenses. NOTE 5 - ACQUISITIONS In March 1998, the Partnership acquired substantially all of the assets of Falcon Classic Cable Income Properties, L.P. As discussed in Note 1, on September 30, 1998 the Partnership acquired the TCI systems and the Falcon Video systems in accordance with the Contribution Agreement. The following unaudited condensed consolidated pro forma statement of operations presents the consolidated results of operations of the Partnership as if the acquisitions had occurred at January 1, 1998 and is not necessarily indicative of what would have occurred had the acquisitions been made as of that date or of results which may occur in the future. Three Six Months Ended Months Ended June 30, 1998 June 30, 1998 ------------ ------------ (Dollars in Thousands) Revenues $ 108,090 $ 213,639 Expenses (108,745) (221,238) ------------ ------------ Operating loss (655) (7,599) Interest and other expenses (31,168) (63,951) ------------ ------------ Loss before extraordinary items $ (31,823) $ (71,550) ============ ============= In January 1999, the Partnership acquired the assets of certain cable systems located in Oregon for $800,700. The acquired systems serve approximately 591 customers, and are being operated as part of the Medford region. On March 15, 1999, the Partnership acquired the assets of certain cable systems located in Utah for $6.8 million. This system serves approximately 7,928 customers and is being operated as part of the St. George region. On March 22, 1999, the Partnership acquired the assets of the Franklin, Virginia system in exchange for the assets of its Scottsburg, Indiana systems and $8 million in cash and recognized a gain of $8.3 million. The Franklin system serves approximately 9,042 customers and the Scottsburg systems served approximately 4,507 customers. The effects of this transaction on results of operations are not material. On July 30, 1999, the Partnership acquired the assets of certain cable systems serving 6,500 customers located in Oregon for $9.5 million. NOTE 6 - RECENT DEVELOPMENTS On April 8, 1999, the Partnership announced that it had executed a term sheet with regard to a joint venture to be formed called @Home Solutions which would offer turnkey, fully managed and comprehensive high speed Internet access to cable operators serving small to medium-sized -7- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------- NOTE 6 - RECENT DEVELOPMENTS (CONTINUED) communities, including the Partnership. In connection with the sale of the Partnership to Charter as discussed in Note 1, the Partnership withdrew from the @Home Solutions joint venture and reimbursed @Home Solutions $500,000 for costs incurred. NOTE 7 - SALE OF SYSTEMS On March 1, 1999, the Partnership contributed $2.4 million cash and certain systems located in Oregon with a net book value of $5.6 million to a joint venture with Bend Cable Communications, Inc., who manages the joint venture. The Partnership owns 17% of the joint venture. These systems had been acquired from Falcon Classic in March 1998, and served approximately 3,471 subscribers at March 1, 1999. On March 26, 1999, the Partnership sold certain systems serving approximately 2,550 subscribers in Kansas for $3.2 million and recognized a gain of $2.5 million. -8- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The Cable Television Consumer Protection and Competition Act of 1992 required the FCC to, among other things, implement extensive regulation of the rates charged by cable television systems for basic and programming service tiers, installation, and customer premises equipment leasing. Compliance with those rate regulations has had a negative impact on our revenues and cash flow. The Telecommunications Act of 1996 substantially changed the competitive and regulatory environment for cable television and telecommunications service providers. Among other changes, the Telecommunications Act of 1996 ended regulation of cable programming service tier rates on March 31, 1999. The FCC, Congress or other regulatory authorities could take actions in the future that could negatively impact the Partnership's business. Accordingly, the historical financial results described below are not necessarily indicative of future performance. REVENUE. Substantially all of our revenue is earned from subscriber fees for cable television programming services, the sale of advertising, commissions for products sold through home shopping networks, fees for ancillary services (such as the rental of set top and remote control devices), and installations. OPERATING COSTS AND EXPENSES. Operating costs and expenses consist of programming expenses, service costs, general and administrative expenses and depreciation and amortization expense. Programming expenses have historically increased at rates in excess of inflation due to system acquisitions, as well as increases in the number, quality and costs of programming services offered. Service costs primarily include expenses related to wages and employee benefits of technical personnel, franchise fees, copyright fees, property taxes, electricity, systems supplies and vehicles. General and administrative expenses include wages and employee benefits of customer service, accounting and administrative personnel, marketing and advertising costs and expenses related to billing, payment processing, office administration, insurance and corporate overhead. Depreciation and amortization expense relates to depreciation of tangible assets and the amortization of intangible costs. This report includes certain forward looking statements regarding, among other things, future results of operations, regulatory requirements, acquisition transactions, competition, capital needs and general business conditions applicable to us. 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 us. In addition to the information provided herein, reference is made to our annual report on Form 10-K for the year ended December 31, 1998 and the other periodic reports and registration statements filed by Falcon Holding Group, L.P. and Falcon Communications, L.P. with the Securities and Exchange Commission from time to time for additional information regarding such matters and the effect thereof on our business. -9- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES RESULTS OF OPERATIONS The following table sets forth the historical statement of operations data and the components of net earnings and EBITDA expressed as a percentage of revenue for the periods indicated.
Unaudited ------------------------------------------------------ Three months Ended Six months Ended June 30, June 30, -------------------------- -------------------------- 1998 1999 1998 1999 ------------ ------------ ------------ ------------ Statement of Operations Data: Revenue 100.0% 100.0% 100.0% 100.0% ------------ ------------ ------------ ------------ Operating costs and expenses: Programming costs 19.3% 22.8% 19.4% 22.3% Service costs 10.5% 11.0% 10.6% 12.0% General and administrative expenses 18.7% 20.1% 18.4% 18.7% Depreciation and amortization 47.9% 52.3% 48.0% 51.9% Equity-based deferred compensation - 39.5% - 21.0% ------------ ------------ ------------ ------------ Total operating costs and expenses 96.4% 145.7% 96.4% 125.9% ------------ ------------ ------------ ------------ Operating income (loss) 3.6% (45.7%) 3.6% (25.9%) Interest expense, net (35.2%) (30.5%) (33.5%) (30.6%) Other income 2.0% 0.5% 0.6% 5.9% ------------ ------------ ------------ ------------ Net loss before extraordinary items (29.6%) (75.7%) (29.3%) (50.6%) Extraordinary items (41.3%) - (21.3%) - ------------ ------------ ------------ ------------ Net Loss (70.9%) (75.7%) (50.6%) (50.6%) ============ ============ ============ ============ EBITDA 51.5% (6.6%) 51.6% 26.0%
Our revenues increased from $68.8 million to $106.4 million, or by 54.7%, and from $133.3 million to $212.2 million, or by 59.2%, for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998. Of the $37.6 million net increase in revenues for the three months ended June 30, 1999 as compared to the corresponding period in 1998, $30.5 million was due to the acquisition in September 1998 of the TCI systems, $8.7 million was due to the acquisition in September 1998 of the Falcon Video systems and $384,000 was due to the acquisition in July 1998 of the rest of the Falcon Classic systems. These increases were partially offset by decreases of $1.3 million related to reductions in the number of regulated and premium subscriptions for cable service and to a $554,000 reduction in management fees. Of the $78.9 million net increase in revenues for the six months ended June 30, 1999 compared to the corresponding period in 1998, $60.5 million was due to the acquisition of the TCI systems, $16.7 million was due to the acquisition of the Falcon Video systems, $4.6 million was due to the acquisition in July 1998 of the Falcon Classic systems and $440,000 was due to increases in regulated service rates implemented during 1998 and 1999. These increases were partially offset by decreases of $2.1 million related to reductions in the number of regulated and premium subscriptions for cable service and to a $1.2 million reduction in management fees. As of June 30, 1999, we had approximately 1,008,000 basic subscribers and 276,000 premium service units. Management and consulting fees decreased from $1.0 million to $397,000 and from $2 million to $796,000 for the three and six months ended June 30, 1999 compared to the corresponding periods -10- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES RESULTS OF OPERATIONS (CONTINUED) in 1998 primarily due to our acquisition of cable systems we managed. Of the total reduction for the three and six months ended June 30, 1999 as compared to the corresponding periods in 1998, $431,000 and $811,000 related to the acquisition of the Falcon Video systems, $189,000 for the six months ended June 30, 1999 related to the acquisition of the Falcon Classic systems and $123,000 and $242,000 was due to a reduction in the amounts received from Enstar Communications Corporation, the general partner of partnerships owning approximately 93,000 subscribers that we manage. Programming costs increased from $13.3 million to $24.2 million, or by 82.0%, and from $25.9 million to $47.2 million, or by 82.2%, for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998. Of the $10.9 million and $21.3 million increase in programming fees paid to programming suppliers (including primary satellite fees) for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998, $8.8 million and $17.4 million related to the acquisition of the TCI systems, $1.9 million and $3.6 million related to the acquisition of the Falcon Video systems and $936,000 for the six month period only related to the acquisition of the Falcon Classic systems. These increases were partially offset by reductions in the number of subscriptions for cable service and by reductions in rates payable for certain programming services due to the TCI transaction. Service costs increased from $7.2 million to $11.7 million, or by 62.5%, and from $14.1 million to $25.5 million, or by 80.9%, for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998. Service costs represent costs other than programming costs that are directly attributable to providing cable services to customers. Of the $4.5 million and $11.4 million increase in service costs, for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998, $3.6 million and $7.8 million related to the acquisition of the TCI systems, $943,000 and $1.9 million related to the acquisition of Falcon Video systems and $709,000 for the six months ended June 30, 1999 related to the acquisition of the Falcon Classic systems. The remainder of the increase in service costs for the six months ended June 30, 1999 were the result of increases in a number of categories, primarily personnel costs and property taxes. General and administrative expenses increased from $12.8 million to $21.4 million, or by 67.2 %, and from $24.5 million to $39.8 million, or by 62.4%, for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998. Of the $8.6 million increase for the three months ended June 30, 1999 compared to the corresponding period in 1998, $5.6 million related to the acquisition of the TCI systems, $1.2 million related to the acquisition of Falcon Video systems, $820,000 related to personnel costs and $768,000 related to increases in other general and administrative expenses, primarily related to workman's compensation claims recorded during 1999. Of the $15.3 million increase for the six months ended June 30, 1999, $10.5 million related to the acquisition of the TCI systems, $2.3 million related to the acquisition of the Falcon Video systems, $1.5 million related to increases in personnel costs and $607,000 related to the acquisition of the Falcon Classic systems. As discussed in Note 4 to the financial statements, we recorded a non-cash charge of $42 million during the three months ended June 30, 1999 related to both the 1993 Incentive Performance Plan ($17.2 million) and the 1999 Employee Restricted Unit Plan ($24.8 million). In the three months ended March 31, 1999, $2.6 million related to the 1993 Incentive Performance Plan was recorded. -11- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES RESULTS OF OPERATIONS (CONTINUED) Payments under the plans are subject to closing of our pending sale to Charter, and will be paid from net sales proceeds. Depreciation and amortization expense increased from $32.9 million to $55.6 million, or by 69.0%, and from $64 million to $110 million, or by 71.9%, for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998. Of the $22.7 million and $46 million increase in depreciation and amortization expense for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998, $17.6 million and $35.2 million related to the acquisition of the TCI systems, $5.1 million and $9.9 million related to the acquisition of the Falcon Video systems, $240,000 and $2.9 million related to the acquisition of the Falcon Classic systems. These increases were partially offset by accelerated depreciation related to asset retirements. Operating income of $2.5 million and $4.8 million changed to operating loss of $48.6 million and $55 million for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998. The $51.1 million and $59.8 million changes were principally due to the equity-based deferred compensation expense discussed above and to the depreciation and amortization expense associated with the acquisition of the TCI, Falcon Video and Falcon Classic systems (which had a combined operating loss of $5.5 million and $12 million for the three and six month periods in 1999). Interest expense, net, including the effects of interest rate hedging agreements, increased from $24.2 million to $32.4 million, or by 33.9%, and from $44.7 million to $64.9 million, or by 45.2%, for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998. The increases were primarily due to higher average debt balances outstanding partially offset by the effect of lower average interest rates (7.4% and 7.5% during the three and six months ended June 30, 1999 compared to 9.4% and 9.1% during the corresponding periods in 1998). Non-cash interest expense associated with our senior discount debentures amounted to $7 million and $13.7 million for the three and six months ended June 30, 1999. Interest rate hedging agreements resulted in additional interest expense of $1.8 million and $3.2 million during the three and six months ended June 30, 1999 compared to additional interest expense of $162,000 and $215,000 during the corresponding periods in 1998. Other expense, net, increased from $50,000 to $1.0 million for the three months ended June 30, 1999 and changed from $824,000 of expense to $9.8 million of income for the six months ended June 30, 1999 compared to the corresponding periods in 1998. We recorded $804,000 of expenses during the second quarter of 1999 related to our pending sale to Charter. The change for the six months ended June 30, 1999 as compared to the corresponding period in 1998 was primarily related to the recognition of $11 million gain from the exchange of cable systems located in Indiana ($8.5 million) and Kansas ($2.5 million) during the first quarter of 1999. Due to the factors described above, our net loss increased from $48.7 million to $80.4 million, or by 65.1%, and from $67.6 million to $107.4 million, or by 58.9% for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998. Based on our experience in the cable television industry, we believe that operating income before depreciation and amortization, commonly referred to as "EBITDA", and related measures of cash flow serve as important financial analysis tools for measuring and comparing cable television -12- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES RESULTS OF OPERATIONS (CONTINUED) companies in several areas, such as liquidity, operating performance and leverage. In addition, the covenants in our primary debt instruments use EBITDA-derived calculations as a measure of financial performance. EBITDA is not a measurement determined under generally accepted accounting principles and does not represent cash generated from operating activities in accordance with these accounting principles. EBITDA should not be considered by the reader as an alternative to net income as an indicator of our financial performance or as an alternative to cash flows as a measure of liquidity. In addition, our definition of EBITDA may not be identical to similarly titled measures used by other companies. EBITDA decreased from $35.5 million to $7 million, or by 80.3% and from $68.8 million to $55 million, or by 20.1%. EBITDA as a percentage of revenues decreased from 51.5% to 6.6% and from 51.6% to 25.9% for the three and six months ended June 30, 1999 compared to the corresponding periods in 1998. The decrease was primarily caused by the deferred compensation costs, as described above and by impact of the systems acquired from TCI (which had an EBITDA margin of 41.1% and 41.0% for the three and six months 1999 periods). Absent the impact of the equity-based deferred compensation adjustments, EBITDA for the three and six months ended June 30, 1999 would have been $49 million and $99.6 million, respectively, and EBITDA as a percentage of revenues would have been 46.1% and 47.0%. LIQUIDITY AND CAPITAL RESOURCES Historically, our primary need for capital has been to acquire cable systems, to finance plant extensions, rebuilds and upgrades and to add addressable set top devices to certain of our cable systems. We spent $96.4 million during 1998 on capital expenditures. Our 1999 plan called for capital expenditures of approximately $190 million, consisting of approximately $111 million to rebuild and upgrade certain cable systems and $79 million for line extensions and other new equipment. Due to various factors, we do not currently anticipate spending that much, and for the six months ended June 30, 1999 we spent $29 million to rebuild and upgrade certain cable systems and $30 million for line extensions and other new equipment. We plan to finance capital expenditures with cash flow from operations and borrowings under our bank credit facility, subject to our ability to remain in compliance with certain covenants of the bank credit facility and the indenture for our outstanding debentures. The restriction on incurring indebtedness contained in our partnership agreement was waived pending the completion of our pending sale to Charter. Our proposed spending plans are frequently reviewed and revised with respect to changes in technology, acceptable leverage parameters (including those specified in our debt agreements), franchise requirements, competitive circumstances and other factors, and may change under Charter's management. The bank credit facility entered into on June 30, 1998 provides for maximum committed available borrowings of $1.15 billion, reducing to $827.5 million at December 31, 2004. As of June 30, 1999, the amount outstanding under the bank credit facility was $967 million and, subject to complying with covenants, we had available additional committed borrowing capacity (excluding the supplemental credit facility) of approximately $179.1 million. The bank credit facility requires that interest be tied to the ratio of consolidated total debt to consolidated annualized cash flow, and further requires that we maintain hedging arrangements with respect to at least 50% of the outstanding borrowings thereunder plus any of our additional borrowings, including the debentures, for a two-year period. As of June 30, 1999 borrowings under the bank credit facility bore interest at an average rate of 7.4% (including the effect of interest rate hedging agreements). We have entered into fixed interest -13- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) rate hedging agreements with an aggregate notional amount at June 30, 1999 of $1.5 billion. Agreements in effect at June 30, 1999 totaled $885 million, with the remaining $575 million to become effective as certain of the existing contracts mature during 1999 through October of 2004. The agreements serve as a hedge against interest rate fluctuations associated with our variable rate debt. These agreements expire at various times through October 2006. In addition to these agreements, we had one interest rate swap contract with a notional amount of $25 million under which we paid variable LIBOR rates and received fixed rate payments. This contract expired on July 1, 1999. Our earnings are affected by changes in short-term interest rates applied to the portion of our debt that is not protected by hedging agreements. Because most of our debt is protected by hedging agreements, a 1% change in average interest rates would have an immaterial impact on our reported interest expense for the six months ended June 30, 1999. The bank credit facility 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. We believe that we were in compliance with all such requirements as of June 30, 1999. We believe that borrowings under the credit facility together with cash flow from operations will be adequate to meet our liquidity needs for the foreseeable future. Charter has indicated its intent to keep the bank credit facility in place, and is obtaining an amendment which will become effective upon closing. We have outstanding $375 million aggregate principal amount of senior debentures and $435.2 million aggregate principal amount at maturity of senior discount debentures. Semiannual interest payments with respect to the senior debentures are approximately $15.7 million. Interest on the senior discount debentures accrete semiannually until April 15, 2003, unless we elect to pay cash interest. After April 15, 2003, semiannual cash interest payments will be approximately $35.9 million in the aggregate. We anticipate that cash flow from operations and, if necessary, borrowings under the bank credit facility (or a successor credit facility) will continue to be adequate to meet our interest payment obligations under the debentures. Charter has also indicated its intent to assume the outstanding senior debentures and senior discount debentures upon closing. Falcon Communications is a separate, stand-alone holding company which employs all of the management personnel for its cable television systems. All of the Falcon systems are owned by the subsidiaries of Falcon Communications. Accordingly, to fund its operations and to pay our expenses, including interest expense, we are financially dependent on the receipt of funds from our subsidiaries, management fees from domestic cable ventures, and the reimbursement of specified expenses by Enstar Communications Corporation. Expected increases in funding requirements combined with limitations on our sources of cash could create liquidity issues in the future. The bank credit facility permits our subsidiaries to remit to us no more than 4.5% of their net cable revenues in any year. For the six months ended June 30, 1999, our credit agreements permitted our subsidiaries to remit approximately $9.4 million to us, and $9.4 million was actually remitted. As a result of the 1998 acquisition of the Falcon Video and Falcon Classic systems, we no longer receive management fees and reimbursed expenses from Falcon Classic or management fees from Falcon Video. Receivables from Enstar Communications Corporation for services and reimbursements described above amounted -14- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) to approximately $6.9 million at June 30, 1999. It is anticipated that our expenses for managing our systems will decrease upon closing our pending sale to Charter due to personnel reductions and amendments to certain provisions in the bank credit agreement. We have historically pursued a strategy of seeking to acquire attractive acquisition candidates, with an emphasis on the acquisition of systems which can be integrated with our existing operations. Over the past few years, we have emphasized the acquisition of our affiliated systems due to our familiarity with these assets and because, in many cases, these assets were already operationally integrated with our systems located nearby. Except for one acquisition of an affiliated Enstar partnership for approximately $10.5 million and the July 30, 1999 acquisition discussed in Note 5 to the financial statements, we do not anticipate making additional acquisitions until after the closing of our pending sale to Charter. In October 1998, we reinstated third-party insurance coverage against damage to its cable distribution plant and subscriber connections and against business interruptions resulting from such damage. Although this coverage is subject to a significant annual deductible, the policy is intended to insure us against catastrophic losses, if any, in future periods. SIX MONTHS ENDED JUNE 30, 1999 AND 1998 Cash provided by operating activities (including interest expense and management fee income) increased from $13.5 million to $36.7 million for the six months ended June 30, 1999 compared to the corresponding period in 1998, an increase of $23.2 million. The increase resulted primarily from a net increase of $15.7 million in other operating items (receivables, other assets, payables, accrued expenses and subscriber deposits and prepayments) and to an increase of $7.5 million in non-cash interest expense recorded in 1999 related to the senior discount debentures. Cash used in investing activities decreased from $115.4 million to $79.7 million, or by 30.9%, for the six months ended June 30, 1999 compared to the corresponding period in 1998. The $35.7 million decrease was primarily due to the 1998 acquisition of the Falcon Classic assets for $76.8 million partially offset by increases of $20.4 million in capital expenditures, a $16.4 million related to the 1999 acquisition of certain cable systems located in Virginia, Utah and Oregon and a $2.4 million investment in a joint venture with Bend Cable Communications, Inc. Cash from financing activities decreased from $197.4 million to $40.6 million, or by 79.4%, for the six months ended June 30, 1999 compared to the corresponding period in 1998. The decrease was primarily related to a reduction in net borrowings of approximately $180.6 million from the 1998 six month period related to the bank credit facility, partially offset by the expenditure of $23.9 million in 1998 on deferred loan costs. YEAR 2000 During the second quarter of 1999, we continued identification, evaluation and remediation of our Year 2000 business risks associated with operations directly under our control and those risks that are dependent on third parties related to our exposure to computer systems, to operating equipment -15- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) which is date sensitive and to the interface systems of our vendors and service providers. The evaluation has focused on identification, assessment and remediation of systems and equipment that may fail to distinguish between the year 1900 and the year 2000 and, as a result, may cease to operate or may operate improperly when dates after December 31, 1999 are introduced. Most of our exposure to Year 2000 issues is dependent in large part on third parties. Failure to identify and remediate a critical Year 2000 issue could result in an interruption of services to customers or in the interruption of critical business functions, either of which could result in a material adverse impact on our financial results. We have concluded that certain of our internal information systems were not Year 2000 compliant and elected to replace such software and hardware with applications and equipment certified by the vendors as Year 2000 compliant. Replacement costs are capitalized in accordance with generally accepted accounting principles and amortized over the lives of the assets. Maintenance costs are expensed as incurred. We installed the new systems in the first quarter of 1999. We are continuing to utilize internal and external resources to extend the functionality of the new systems. The total anticipated cost, including replacement software and hardware, is expected to be approximately $2.7 million and is being funded through operating cash flow. As of June 30, 1999, we had spent approximately $2.3 million. We do not believe that any other significant information technology projects affecting us have been delayed due to efforts to identify or address Year 2000 issues. Additionally, we continue to inventory internal operating and revenue generating equipment to identify items that need to be upgraded or replaced and survey cable equipment manufacturers to determine which of their models require upgrade or replacement to become Year 2000 compliant. Identification and evaluation, while ongoing, are substantially completed and a plan has been developed to remediate or replace non-compliant equipment. Of the total number of potentially non-compliant items identified in the inventory, approximately 1.5% are in the assessment stage. Approximately 14.4% of non-compliant items are in the remediation planning phase and 85.6% are in the implementation stage. We plan to conduct limited testing of our systems, software and equipment in the third quarter of 1999 and place significant reliance on test results provided by AT&T Broadband & Internet Services. The cost of such replacement or remediation is currently estimated to be $1.7 million, of which $1.4 million had been incurred as of June 30, 1999. We have also substantially completed the assessment and replacement or remediation of the majority of our internal equipment containing embedded computer chips. We continue to survey our significant third party vendors and service suppliers to determine the extent to which our interface systems are vulnerable should those third parties fail to solve their own Year 2000 problems on a timely basis. We are heavily dependent on third parties and these parties are themselves heavily dependent on technology. For example, in a situation impacting the entire cable industry, much of our headend equipment that controls cable set-top devices was not Year 2000 compliant. The manufacturers have been working with cable industry groups to develop solutions that we are installing in our head-end equipment. It is currently expected that these solutions will be substantially implemented by the end of the third quarter of 1999. In addition, if a television broadcaster or cable programmer encounters Year 2000 problems that impede its ability to deliver its programming, we will be unable to provide that programming to our cable customers, which would result in a loss of revenues, although we would attempt to provide our customers with alternative -16- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) program services. Virtually all of our most critical equipment vendors have responded to the surveys regarding the Year 2000 compliance of their products and indicated that they are already compliant or have indicated their intent to be compliant. Additional compliance information has been obtained for specific products from vendor Web sites, interviews, on-site visits, system interface testing and industry group participation. Among the most significant third party service providers upon which we rely are programming suppliers, power and telephone companies, various banking institutions and our customer billing service. We are taking steps to attempt to satisfy ourselves that the third parties on which we are heavily reliant are Year 2000 compliant and are developing satisfactory contingency plans, or that alternative means of meeting our business requirements are available, but cannot predict the likelihood of such compliance nor the direct or indirect costs to us of non-compliance by those third parties or of securing such services from alternate compliant third parties. In areas in which we are uncertain about the anticipated Year 2000 readiness of a significant third party, we are investigating available alternatives, if any. We believe that we have established an effective program to resolve all significant Year 2000 issues in our control in a timely manner. As noted above, however, we have not yet completed all phases of our program and are dependent on third parties whose progress is not within our control. In the event that we do not complete our currently planned additional remediation prior to the Year 2000, we could experience significant difficulty in producing and delivering our products and services and conducting our business in the year 2000. In addition, disruptions experienced by third parties with which we do business as well as by the economy generally could also materially adversely affect us. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. We have focused our efforts on identification and remediation of Year 2000 exposures and are beginning to develop specific contingency plans in the event we do not successfully complete our remaining remediation as anticipated or experience unforeseen problems. Considerable effort has been directed toward distinguishing between those contingencies with a greater probability of occurring from those whose occurrence is considered remote, and on those systems whose failure poses a material risk to our results of operations and financial condition. We are also examining our business interruption strategies to evaluate whether they would satisfactorily meet the demands of failures arising from Year 2000 related problems. We intend to examine our status periodically to determine the necessity of establishing and implementing such contingency plans or additional strategies, which could involve, among other things, manual workarounds, adjusting staffing strategies and sharing resources. INFLATION Certain of our expenses, such as those for wages and benefits, equipment repair and replacement, and billing and marketing generally increase with inflation. However, we do not believe that our financial results have been, or will be, adversely affected by inflation in a material way, provided that we are able to increase our service rates periodically, of which there can be no assurance. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK See Item 2., "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." -17- FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES PART II. OTHER INFORMATION ITEMS 1-5. Not applicable. ITEM 6. Exhibits and Reports on Form 8-K (a) EXHIBIT 10.36 Purchase and Contribution Agreement, dated as of May 26, 1999, by and among Charter Communications, Inc., Falcon Communications, L.P., Falcon Holding Group L.P., TCI Falcon Holdings, LLC, Falcon Cable Trust, Falcon Holding Group, Inc., and DHN Inc. (incorporated herein by reference to Exhibit 2.1 to the partnership's 8-K dated June 9, 1999. EXHIBIT 10.37 First Amendment to Purchase and Contribution Agreement, dated as of June 22, 1999, by and among Charter Communications, Inc., Charter Communications Holding Company, LLC, Falcon Communications, L.P., Falcon Holding Group, L.P., TCI Falcon Holdings, LLC, Falcon Cable Trust, Falcon Holding Group, Inc., and DHN Inc. EXHIBIT 10.38 Consent under Credit Agreement among Falcon Cable Communications, LLC, certain of its subsidiaries, BankBoston, N.A. and a group of lenders for which it is acting as documentation agent. EXHIBIT 27.1 Financial Data Schedule (b) The Registrant filed a form 8-K dated June 9, 1999, reporting under Item 5 that it had issued certain press releases in which Charter will acquire Falcon in a cash and stock transaction valued at approximately $3.6 billion. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. FALCON COMMUNICATIONS, L.P. By: Falcon Holding Group, L.P. General Partner By: Falcon Holding Group, Inc., its General Partner Date: August 13, 1999 By: /s/ MICHAEL K. MENEREY --------------------------------- Michael K. Menerey, Executive Vice President, Secretary and Chief Financial Officer FALCON FUNDING CORPORATION Date: August 13, 1999 By: /s/ MICHAEL K. MENEREY --------------------------------- Michael K. Menerey, Chief Financial Officer and Secretary FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES EXHIBIT INDEX Exhibit Number Description 10.37 First Amendment to Purchase and Contribution Agreement dated as of June 22, 1999 by and among Charter Communications, Inc., Charter Communications Holding Company, LLC, Falcon Communications, L.P., Falcon Holding Group, L.P., TCI Falcon Holdings, LLC, Falcon Cable Trust, Falcon Holding Group, Inc., and DHN Inc. 10.38 Consent under Credit Agreement among Falcon Cable Communications, LLC, certain of its subsidiaries, BankBoston, N.A. and a group of lenders for which it is acting as documentation agent. E-1 EX-10.37 2 EXHIBIT 10.37 EXHIBIT 10.37 FIRST AMENDMENT TO PURCHASE AND CONTRIBUTION AGREEMENT THIS FIRST AMENDMENT TO PURCHASE AND CONTRIBUTION AGREEMENT ("Amendment") is made and entered into as of June 22, 1999 by and among Charter Communications, Inc., a Delaware corporation ("CCI"), Charter Communications Holding Company, LLC, a Delaware limited liability company ("Charter LLC"), Falcon Communications, L.P., a California limited partnership ("Falcon"), Falcon Holding Group, L.P., a Delaware limited partnership ("FHGLP"), TCI Falcon Holdings, LLC, a Delaware limited liability company ("TCI"), Falcon Cable Trust, a California trust ("FC Trust"), Falcon Holding Group, Inc., a California corporation ("FHGI"), and DHN Inc., a California corporation ("DHN") (FHGLP, TCI, FC Trust, FHGI and DHN are sometimes referred to herein as "Sellers"). PRELIMINARY STATEMENT A. CCI, Falcon, and Sellers entered into the Purchase and Contribution Agreement on May 26, 1999 (the "Purchase and Contribution Agreement"). B. The parties hereto desire to modify the Purchase and Contribution Agreement in certain respects as described herein. Section 11.9 of the Purchase and Contribution Agreement provides that the Purchase and Contribution Agreement may be amended; provided that any such amendment will be binding on the parties prior to Closing only if set forth in writing executed by them. C. Section 11.3 of the Purchase and Contribution Agreement permits CCI to assign its rights, but not its obligations, under the Purchase and Contribution Agreement to an Affiliate of CCI under certain circumstances. CCI desires to assign its rights to purchase the Purchased Interests under the Purchase and Contribution Agreement to Charter LLC, and Charter LLC is willing to accept such assignment and assume the obligations of CCI under the Purchase and Contribution Agreement. Sellers consent to such assignment of CCI's rights to Charter LLC on the terms and conditions set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. Except as otherwise provided in the Amendment, all capitalized terms used herein and not otherwise defined herein shall have the same meanings assigned to them in the Purchase and Contribution Agreement. As used in the Purchase and Contribution Agreement, the term "Charter LLC" shall have the meaning given to it in this Amendment. 2. Subject to the terms set forth herein, (a) CCI assigns, transfers and conveys to Charter LLC any and all rights of CCI under the Purchase and Contribution Agreement to purchase the Purchased Interests; (b) Charter LLC accepts such assignment and assumes and undertakes to discharge, satisfy and perform all obligations of CCI under the Purchase and Contribution Agreement; and (c) Sellers consent to such assignment. This assignment and assumption shall not (i) relieve CCI of any liability or obligation as Buyer under the Purchase and Contribution Agreement; or (ii) deprive Sellers of any rights or benefits under the Purchase and Contribution Agreement. Upon such assignment, the term "Buyer" as used in the Purchase and Contribution Agreement shall include Charter LLC, to the extent applicable as purchaser of and Purchased Interest, as well as CCI. Charter LLC's assumption of the obligations of CCI under the Purchase and Contribution Agreement is intended to be for the benefit of and shall be enforceable by Sellers. 3. Clause (5) of Section 2.1(a) of the Purchase and Contribution Agreement is hereby amended to read in its entirety as follows: from FHGLP, all of the capital stock in Enstar, its entire membership interest in Enstar Finance Company, LLC, and its entire membership interest in CC VII, LLC, a Delaware limited liability company ("CC VII, LLC"); and 4. The term "Minimum Contributed Interest" as defined in the fourth sentence of Section 2.1(b) of the Purchase and Contribution Agreement is hereby amended to be not less than 45.3% of FHGLP's partnership interest in Falcon. 5. Clause (i) of Section 2.3(b) of the Purchase and Contribution Agreement is hereby amended to read in its entirety as follows: the value of the Aggregate Consideration allocated to FHGLP with respect to its partnership interest in Falcon in Part III of the Allocation Notice, and 6. Section 4 of the Purchase and Contribution Agreement is hereby amended as follows: (a) by amending the parenthetical clause of the first paragraph of such Section to read in its entirety as follows: (with respect to such Seller and not with respect to any other Seller, and only FHGLP makes the representations and warranties in Sections 4.4(b), 4.7 and 4.9) (b) by adding the following new subsection 4.9 to the end of such Section: 4.9 CC VII, LLC was duly formed as a limited liability company under the laws of the State of Delaware and is validly existing and in good standing under the laws of the State of Delaware. FHGLP is the record and beneficial owner of each issued and outstanding Equity Interest of CC VII, LLC. FHGLP has formed CC VII, LLC solely to hold the interest in Falcon to be transferred to it pursuant to Section 6.6(g) hereof and to exercise all rights and perform all obligations pertaining thereto. At no time prior to Closing will CC VII, LLC conduct any business activities or other operations of any kind, or hold any asset other than the interest in Falcon, or become liable for any obligation except its obligation under the Agreement. At all times since its formation, CC VII, LLC has been treated for federal income tax purposes as a disregarded entity under Treasury Regulations ss.301.7701-3(b)(1)(ii). 2 7. Section 5.6 of the Purchase and Contribution Agreement is hereby amended to read in its entirety as follows: The ownership chart of CCI and its Subsidiaries included as SCHEDULE 5.6 is true and correct in all material respects. Without limiting the generality of the foregoing, CCI is, and as of the Closing either CCI or Charter LLC will be, the record and beneficial owner of all of the issued and outstanding Equity Interests of Charter Holdings, and CCI is, and as of the Closing CCI will be, the record and beneficial owner of all of the issued and outstanding equity Interest of Charter LLC. 8. Section 6.1(a) is hereby amended by adding the following new subparagraph (1): (10) TAX STATUS OF CC VII, LLC. Take any action that would cause CC VII, LLC to be treated for federal income tax purposes as an entity other than a disregarded entity under treasury Regulations ss.301.7701-3(b)(1)(ii). 9. Clause (1) of Section 6.6(c)of the Purchase and Contribution Agreement is hereby amended to read in its entirety as follows: the definitive Charter LLC Operating Agreement to be effective upon the Closing in accordance with the terms set forth on Exhibit D, with such changes as are appropriate to reflect the assignment by CCI to Charter LLC of the right to acquire the Purchased Interests, and such additional terms as Buyer and FHGLP may mutually agree, 10. Section 6.6 of the Purchase and Contribution Agreement hereby amended by adding the following new paragraph (g): (g) On or prior to the Closing, FHGLP shall contribute a one percent (1%) limited partnership interest in Falcon to CC VII, LLC, free and clear of all Encumbrances and subject to the Legal Restrictions. 11. Clause (i) of Section 6.10(h) of the Purchase and Contribution Agreement is hereby amended to read in its entirety as follows: the Cash Consideration allocable (pursuant to Section 2.3(d)) to the membership interest in CC VII, LLC and to the partnership interests in Falcon other than the Contributed Interest, 12. For the purpose of this paragraph 12, each of CCI and Charter LLC is referred to as a "Buyer" and CCI and Charter LLC are referred to collectively as the "Buyers." CCI and Charter LLC agree that all obligations specified in the Purchase and Contribution Agreement as obligations of CCI, including the obligation to pay the Aggregate Consideration and any other amounts payable to Sellers, whether to be performed at, before or after Closing, shall be joint and several obligations of CCI and Charter LLC. All such obligations, including those pay money, including, without limitation, the Cash Consideration, may be enforced by Sellers against either Buyer individually, and such enforcement shall not be conditioned or contingent upon the pursuit of any remedies against the other Buyer. Each Buyer hereby waives diligence, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the other Buyer, 3 any right to require a proceeding first against the other Buyer, the benefit of discussion, protest or notice and all demands whatsoever, and covenants that this agreement will not be discharged as to any obligation except by satisfaction of such obligation in full. Until Sellers have been paid in full any amounts due and owing to them under this Amendment and the Purchase and Contribution Agreement, each Buyer hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against the other Buyer that arise from the existence, payment, performance or enforcement of its obligations under the Amendment or the Purchase and Contribution Agreement, including, without limitation, any right of reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of any Seller against the other Buyer or any collateral that any Seller hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the other Buyer, directly or indirectly, in cash or other property or by set-off in any other manner, payment or security on account of such claim or other rights. To the fullest extent permitted by applicable law, the obligations of each Buyer under this Amendment and the Purchase and Contribution Agreement shall not be affected by (a) the failure of the applicable obligee to assert any claim or demand or to enforce any right or remedy against the other Buyer pursuant to the provisions of this Amendment or the Purchase and Contribution Agreement or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of this Amendment or the Purchase and Contribution Agreement or the invalidity or unenforceability (in whole or in part) of this Amendment or the Purchase and Contribution Agreement, unless consented to in writing by Sellers, each Buyer, and Falcon and (c) any change in the existence (corporate or otherwise) of either Buyer or any Seller or any insolvency, bankruptcy, reorganization or similar proceeding affecting any of them or their assets. 13. Exhibit F to the Purchase and Contribution Agreement is hereby amended in its entirety as set forth on the attached Exhibit I. 14. The parties hereby agree that the Purchase and Contribution Agreement is hereby deemed amended in all respects necessary to give effect to the consents, agreements and waivers contained in the Amendment, whether or not a particular Section or provision of the Purchase and Contribution Agreement has been referred to in this Amendment. Except as amended hereby, the Purchase and Contribution Agreement shall remain unchanged and in full force and effect, and this Amendment shall be governed by and subject to the terms of the Purchase and Contribution Agreement, as amended hereby. From and after the date of this Amendment, each reference in the Purchase and Contribution Agreement to :"this Agreement," "hereof," "hereunder" or words of like import, and all references to the Purchase and Contribution Agreement in any and all agreements, instruments, documents, notes, certificates and other writings of every kind and nature (other than in this Amendment or as otherwise expressly provided) shall be deemed to mean the Purchase and Contribution Agreement, as amended by this Amendment, whether or not such Amendment is expressly referenced. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURES ON FOLLOWING PAGES] 4 IN WITNESS WHEREOF, this Amendment has been executed by each of CCI, Charter LLC, Falcon and Sellers as of the date first written above.
SELLERS: CCI: FALCON HOLDING GROUP, L.P. CHARTER COMMUNICATIONS, INC. By: Falcon Holding Group, Inc., General Partner By: /s/ Curtis S. Shaw ------------------------------------- Name: Curtis S. Shaw By: /s/ Stanley S. Itskowitch Title: Senior Vice President ---------------------------------- Name: Stanley S. Itskowitch Title: Executive Vice President CHARTER LLC: TCI FALCON HOLDINGS, LLC CHARTER COMMUNICATIONS HOLDING COMPANY, LLC By: /s/ Derek Chang By: /s/ Curtis S. Shaw ---------------------------------- ------------------------------------- Name: Derek Chang Name: Curtis S. Shaw Title: Vice President Title: Senior Vice President FALCON HOLDING GROUP, INC. FALCON: By: /s/ Stanley S. Itskowitch FALCON COMMUNICATIONS, L.P. ---------------------------------- Name: Stanley S. Itskowitch Title: Executive Vice President By: Falcon Holding Group, L.P. General Partner FALCON CABLE TRUST By: Falcon Holding Group, L.P. By: /s/ Marc B. Nathanson General Partner ---------------------------------- Name: Marc B. Nathanson Title: Trustee By: /s/ Stanley S. Itskowitch ------------------------------------- Name: Stanley S. Itskowitch Title: Executive Vice President DHN, INC. By: /s/ Stanley S. Itskowitch By: TCI Falcon Holding, L.L.C. ---------------------------------- General Partner Name: Stanley S. Itskowitch Title: Executive Vice President By: /s/ Derek Chang ------------------------------------- Name: Derek Chang Title: Vice President
[THIS IS A SIGNATURE PAGE TO THE AMENDMENT] 5
EXHIBIT I EXHIBIT F FORM OF ALLOCATION NOTICE (Example) I. Percentage of FHGLP's partnership interest in Falcon represented by % the Contributed Interest: II. Aggregage Consideration based on Preliminary Closing Statement: Less payment to Encore Escrow III. Aggregate Consideration payable to Sellers Allocation of Aggregate Consideration based on Preliminary Closing Statement: FHGLP, with respect to the stock of Enstar: 1 DHN, with respect to its interest in Adlink: 1 ALLOCATION OF PERCENTAGE SHARE REMAINING OF REMAINING AGGREGATE AGGREGATE CONSIDERATION CONSIDERATION FHGLP: With respect to its membership interest in CC VII, LLC With respect to its partnership interest in Falcon Total to FHGLP % TCI % FC Trust % FHGI % Total 100.000000% IV. Equity Value: V. Payment of Cash Portion of Closing Payment: FHGLP [wire instructions] TCI [wire instructions] FC Trust [wire instructions] FHGI [wire instructions] Total VI. Payment to Sellers of Funds from Adjustment Escrow Account: FHGLP % TCI % FC Trust % FHGI % Total 100.000000%
EX-10.38 3 EXHIBIT 10.38 EXHIBIT 10.38 FALCON CABLE COMMUNICATIONS, LLC CONSENT UNDER CREDIT AGREEMENT Notwithstanding Section 7.9.7(b)(A) of the Credit Agreement dated as of June 30, 1998, as now in effect (the "CREDIT AGREEMENT"), among Falcon Cable Communications, LLC (the "COMPANY"), certain of its Subsidiaries, BankBoston, N.A. and a group of Lenders for which it is acting as documentation agent (the "DOCUMENTATION AGENT"), the Documentation Agent consents that: 1. Falcon Community Ventures I Limited Partnership ("COMMUNITY VENTURES"), a Subsidiary of the Company, may consummate the acquisition contemplated by the Asset Purchase Agreement made effective as of September 9, 1998 by and between Jones Cable Income Fund 1-B/C Venture, Jones Intercable, Inc. and Community Ventures, pursuant to the terms thereof, for a purchase price not to exceed $10,000,000 (prior to the application of all purchase price adjustments provided for therein). 2. Falcon Cablevision ("CABLEVISION") and Falcon Telecable ("TELECABLE"), Subsidiaries of the Company, may consummate the acquisition contemplated by the Asset Purchase Agreement dated as of November 6, 1998 by and among Cablevision, Telecable and Enstar Income/Growth Program Six-B, L.P., pursuant to the terms thereof, for a purchase price not to exceed $10,473,200 (prior to the application of all purchase price adjustments provided for therein). 3. The aggregate purchase price paid in the acquisitions described above shall not be counted toward the aggregate limit set forth in Section 7.9.7(b)(A) for the fiscal year of the Company ending December 31, 1999; PROVIDED, HOWEVER, that such acquisitions shall be subject to each other provision of Section 7.9.7 and shall be treated for all purposes of the Credit Agreement as acquisitions made pursuant to Section 7.9.7. This consent is based on the representation by the Company that, after giving effect to this consent and the acquisitions described above, no Default will exist. This consent is a Credit Document and shall not be construed as a waiver of any right or remedy on any future occasion. Terms defined in the Credit Agreement are used herein with the meanings so defined. Dated: July 19, 1999 BANKBOSTON, N.A., as Documentation Agent By /s/ MATTHEW E. MURPHY ---------------------- Title: Director The foregoing is hereby consented and agreed to: TORONTO DOMINION (TEXAS) INC. By /s/ JEFFERY R. LENTS --------------------- Title: Vice President Toronto Dominion (Texas) Inc. 909 Fannin Street, 17th Floor Houston, TX 77010 Telecopy: (713) 951-9921 NATIONSBANK, N.A. By --------------------- Title: Bank of America National Trust & Savings Association Communications Finance Unit 9048 555 California Street, 41st Floor San Francisco, CA 94104 Attn: Doug Meckelnburg Telecopy: (415) 622-0632 with a copy to: NationsBank, N.A. 901 Main Street, 64th Floor Dallas, TX 75202 Attn: Tom Carter Telecopy: (214) 209-9390 THE CHASE MANHATTAN BANK By --------------------- Title: The Chase Manhattan Bank 270 Park Avenue, 37th Floor New York, NY 10017 Telecopy: (212) 270-4584 BANK OF AMERICA, N.A. (f/k/a BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION) By /s/ JENNIFER ZYDNEY --------------------- Title: Managing Director Bank of America, N.A. Communications Finance Division 901 Main St., 64th Floor Dallas, TX 75202 Attn: Jennifer Zydney Rich Peck Telecopy: (214) 209-9390 ABN AMRO BANK N.V. By /s/ THOMAS M. TOERPE --------------------- Title: Vice President By /s/ SANG W. LEE --------------------- Title: Assistant Vice President ABN AMRO Bank N.V. 135 South LaSalle, Suite 640 Chicago, ILL 60603 AG CAPITAL FUNDING PARTNERS, L.P. By Angelo, Gordon & Co., as Investment Advisor By --------------------- Title: AG Capital Funding Partners, L.P. c/o Angelo, Gordon & Co. 245 Park Avenue, 26th Floor New York, NY 10167 Telecopy: (212) 867-1388 ALLSTATE LIFE INSURANCE COMPANY By --------------------- Title: By --------------------- Title: Its Authorized Signatories Allstate Life Insurance Company 3075 Sanders Road, Suite G5A Northbrook, IL 60062 Telecopy: (847) 402-9882 BANQUE NATIONALE DE PARIS By /s/ CLIVE BETTLES --------------------- Title: Senior Vice President By /s/ JANICE HO --------------------- Title: Vice President Banque Nationale de Paris 725 South Figueroa, Suite 2090 Los Angeles, CA 90017 Telecopy: (213) 488-9602 BARCLAYS BANK PLC By /s/ DANIEL IACOVONE --------------------- Title: Associate Director Barclays Bank PLC 388 Market Street, Suite 1700 San Francisco, CA 94111 Telecopy: (415) 765-4760 B.D.C. FINANCE L.L.C. By --------------------- Title: Black Diamond Capital Management One Conway Park 100 Field Drive, Suite 100 Lake Forest, IL 60045 Attn: D.M. Brown, CFO Telecopy: (847) 615-9064 CIBC INC. By /s/ LAURA HORN --------------------- Title: Executive Director CIBC Inc. 425 Lexington Avenue New York, NY 10017 Telecopy: (212) 856-3558 CITIZENS BANK OF RHODE ISLAND By --------------------- Title: Citizens Bank of Rhode Island One Citizens Plaza, 4th Floor Providence, RI 02903 Telecopy: (401) 455-5404 CITY NATIONAL BANK By --------------------- Title: Vice President City National Bank 400 N. Roxbury Drive, 3rd Floor Beverly Hills, CA 90210 Telecopy: (310) 888-6152 COOPERATIVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By /s/ MICHIEL V.M. VAN DER VOORT --------------------- Title: Vice President By /s/ IAN REECE --------------------- Title: Senior Credit Officer Rabobank Nederland Media & Telecommunications 300 South Wacker Drive, Suite 3500 Chicago, IL 60606 Telecopy: (312) 786-0052 GOLDMAN SACHS CREDIT PARTNERS LP By /s/ STEPHEN J. MCGUINNESS --------------------- Title: Authorized Signatory Goldman Sachs Credit Partners LP 85 Broad Street New York, NY 10022 Attn: Susan Lancaster Telecopy: (212) 357-8068 CREDIT LOCAL DE FRANCE By /s/ ROBERT N. SLOAN --------------------- Title: Vice President By /s/ JAMES R. MILLER --------------------- Title: General Manager Credit Local de France 450 Park Avenue, 3rd Floor New York, NY 10022 Telecopy: (212) 753-5522 CREDIT LYONNAIS NEW YORK BRANCH By /s/ MARK D. THORSHEIM --------------------- Title: Vice President Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, NY 10019 Telecopy: (212) 261-3288 CYPRESSTREE INVESTMENT FUND LLC By --------------------- Title: Cypresstree Investment Fund LLC 125 High Street Boston, MA 02110 Telecopy: (617) 946-5880 DEEP ROCK AND COMPANY By: Eaton Vance Management, as Investment Advisor By /s/ PAYSON F. SWAFFIELD --------------------- Title: Vice President Eaton Vance Management Attn: Prime Rate Reserves 24 Federal Street, 6th Floor Boston, MA 02110 Telecopy: (617) 695-9594 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By --------------------- Title: Dresdner Bank AG, New York and Grand Cayman Branches 75 Wall Street New York, NY 10005 Telecopy: (212) 429-2374 EATON VANCE SENIOR INCOME TRUST By: Eaton Vance Management, as Investment Advisor By /s/ PAYSON F. SWAFFIELD --------------------- Title: Vice President Eaton Vance Management Attn: Prime Rate Reserves 24 Federal Street, 6th Floor Boston, MA 02110 Telecopy: (617) 695-9594 FIRST DOMINION FUNDING I By --------------------- Title: Texas Commerce Bank, N.A. 600 Travis, 8th Floor Houston, TX 77002 Attn: Crystal Williams Telecopy: (713) 216-8299 with a copy to: First Dominion Funding I 1330 Avenue of the Americas, 10th Floor New York, NY 10019 Attn: Shashi Srikantan Telecopy: (212) 603-8505 FLEET NATIONAL BANK By --------------------- Title: Fleet National Bank Media & Communications Group 1185 Avenue of the Americas, 16th Floor New York, NY 10036 Telecopy: (212) 819-6202 THE FUJI BANK, LIMITED, LOS ANGELES AGENCY By --------------------- Title: The Fuji Bank, Limited, Los Angeles Agency 333 South Hope Street, 39th Floor Los Angeles, CA 90071 Telecopy: (213) 253-4178 HARCH CAPITAL MANAGEMENT By --------------------- Title: Harch Capital Management One Park Place 621 NW 53rd Street, Suite 620 Boca Raton, FL 33487 Telecopy: (561) 995-4955 INDOSUEZ CAPITAL FUNDING IV, L.P. By: Indosuez Capital Luxembourg, as Collateral Manager By --------------------- Title: Indosuez Capital 1211 Avenue of the Americas, 7th Floor New York, NY 10036-8701 Attn: Francoise Berthelot Telecopy: (212) 278-2254 THE INDUSTRIAL BANK OF JAPAN, LIMITED LOS ANGELES AGENCY By /s/KAZUTOSHI KUWAHARA --------------------- Title: General Manager The Industrial Bank of Japan, Limited Los Angeles Agency 350 Grand South Avenue, Suite 1500 Los Angeles, CA 90071 Telecopy: (213) 488-9840 KZH PONDVIEW LLC By /s/PETER CHIN --------------------- Title: Authorized Agent KZH III LLC c/o The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, NY 10001 Attention: Virginia Conway Telecopy: (212) 946-7776 KZH CYPRESSTREE-1 LLC By /s/PETER CHIN --------------------- Title: Authorized Agent KZH CypressTree-1 LLC c/o The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, NY 10001 Attention: Virginia Conway Telecopy: (212) 946-7776 KZH SOLEIL-2 LLC By /s/PETER CHIN --------------------- Title: Authorized Agent KZH Soleil-2 LLC c/o The Chase Manhattan Bank 450 West 33rd Street New York, NY 10001 Attention: Virginia Conway Telecopy: (212) 946-7776 THE LONG TERM CREDIT BANK OF JAPAN LIMITED, LOS ANGELES AGENCY By --------------------- Title: The Long Term Credit Bank of Japan Limited, Los Angeles Agency 350 South Grand Avenue, Suite 3000 Los Angeles, CA 90071 Telecopy: (213) 622-6908 MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By /s/ WALTER T. DWYER --------------------- Title: Managing Director Massachusetts Mutual Life Insurance Company 1295 State Street, First Floor Springfield, MA 01111 Telecopy: (413) 744-6127 MASSMUTUAL HIGH YIELD PARTNERS II, LLC By /s/ WALTER T. DWYER --------------------- Title: Managing Director MassMutual High Yield Partners II, LLC c/o Massachusetts Mutual Life 1295 Spring Street, First Floor Springfield, MA 01111 Telecopy: (413) 744-6127 MELLON BANK, N.A., AS TRUSTEE FOR THE GENERAL MOTORS CASH MANAGEMENT MASTER TRUST By Mellon Bank, N.A., solely in its capacity as Trustee for the General Motors Cash Management Master Trust (as directed by Shenkman Capital Management, Inc.) and not in its individual capacity, as Assignee By --------------------- Title: Mellon Bank, N.A., as Trustee for General Motors Cash Management Master Trust c/o Mellon Trust Investment Manager Relations One Mellon Bank Center, Mail Stop #151-3346 Pittsburgh, PA 15258-0001 Attn: Laurie Adams with a copy to: Shenkman Capital Management 461 Fifth Avenue New York, NY 10017 Attn: Niall Rosenzweig Telecopy: (212) 867-9106 MERRILL LYNCH DEBT STRATEGIES PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By --------------------- Title: Merrill Lynch Debt Strategies Portfolio c/o Merrill Lynch Asset Management, L.P. 800 Scudders Mill Road, Area 1B Plainsboro, NJ 08536 Telecopy: (609) 282-3542 MERRILL LYNCH GLOBAL INVESTMENT SERIES: INCOME STRATEGIES PORTFOLIO By: Merrill Lynch Asset Management, L.P. By --------------------- Title: Merrill Lynch Global Investment Series: Income Strategies Portfolio c/o Merrill Lynch Asset Management, L.P. 800 Scudders Mill Road, Area 1B Plainsboro, NJ 08536 Telecopy: (609) 282-3542 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By --------------------- Title: Morgan Guaranty Trust Company of New York 60 Wall Street New York, New York 10260 Telecopy: (212) 648-5197 MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST By --------------------- Title: Vice President Prime Income Trust c/o Dean Witter InterCapital, Inc. Two World Trade Center, 72nd Floor New York, NY 10048 Telecopy: (212) 392-5345 NATEXIS By /s/EVAN B. KRAUS --------------------- Title: Assistant Vice President By /s/CYNTHIA E. BACHS --------------------- Title: VP Group Manager Natexis 645 Fifth Avenue New York, NY 10022 Telecopy: (212) 872-5045 OAK HILL SECURITIES FUND, L.P. By: Oak Hill Securities GenPar, L.P., its General Partner By: Oak Hill Securities MPG, Inc., its General Partner By --------------------- Title: Oak Hill Securities Fund, L.P. Park Avenue Tower 65 East 55th Street, 32nd Floor New York, NY 10022 Telecopy: (212) 593-3596 OSPREY INVESTMENTS PORTFOLIO By: Citibank, N.A., as Manager By --------------------- Title: Osprey Investments Portfolio 599 Lexington Avenue 26th Floor, Zone 10 New York, NY 10043 Telecopy: (212) 793-1871 PARIBAS By /s/ DARLYNN ERNST KITCHNER -------------------------- Title: Vice President By /s/ THOMAS G. BRANDT --------------------- Title: Director Paribas 2029 Century Park East, Suite 3900 Los Angeles, CA 90067 Telecopy: (310) 556-3762 PROTECTIVE By --------------------- Title: Protective 1150 Two Galleria Tower 12455 Noel Road, LB#45 Dallas, TX 76240 Telecopy: (972) 233-4343 SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By --------------------- Title: Senior Debt Portfolio c/o Boston Management and Research 24 Federal Street, 6th Floor Boston, MA 02110 STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE FOR GENERAL MOTORS WELFARE BENEFITS TRUST By --------------------- Title: State Street Bank and Trust Company Global Investment Manager Services Division One Enterprise Drive W6C North Quincy, MA 02171 Attn: Adam Antonik with a copy to: Shenkman Capital Management 461 Fifth Avenue New York, NY 10017 Attn: Niall Rosenzweig Telecopy: (212) 867-9106 SUMMIT BANK By --------------------- Title: Summit Bank 512 Township Line Road, Suite 280 Blue Bell, PA 19422 Telecopy: (215) 619-4820 SUNTRUST BANK, CENTRAL FLORIDA, N.A. By --------------------- Title: Suntrust Bank, Central Florida, N.A. 200 South Orange Ave. MC 1109 Orlando, FL 32801 Telecopy: (407) 237-5126 TRANSAMERICA By --------------------- Title: Transamerica 1100 South Olive Street, Suite 2700 Los Angeles, CA 90015 Telecopy: (213) 742-4160 THE TRAVELERS INSURANCE COMPANY By /s/ JORDAN M. STITZER --------------------- Title: Vice President Company The Travelers Insurance Company One Tower Square Hartford, CT 06183-2030 Telecopy: (860) 954-3730 UNION BANK OF CALIFORNIA By /s/ MICHAEL K. MCSHANE --------------------- Title: Senior Vice President Union Bank of California 445 South Figueroa Street Los Angeles, CA 90071 Telecopy: (213) 236-5747 VAN KAMPEN PRIME RATE INCOME TRUST By /s/ LISA M. MINCHESKI --------------------- Title: Vice President Van Kampen Prime Rate Income Trust One Parkview Plaza, 6th Floor Oakbrook Terrace, IL 60181 Telecopy: (630) 684-6740 VAN KAMPEN SENIOR INCOME TRUST By /s/ LISA M. MINCHESKI --------------------- Title: Vice President Van Kampen Senior Income Trust One Parkview Plaza, 6th Floor Oakbrook Terrace, IL 60181 Telecopy: (630) 684-6740 VAN KAMPEN CLO II, LIMITED By: Van Kampen Management, Inc., as Collateral Manager By /s/ LISA M. MINCHESKI --------------------- Title: Vice President Van Kampen CLO II, Limited One Parkview Plaza, 6th Floor Oakbrook Terrace, IL 60181 Telecopy: (630) 684-6740 EX-27.1 4 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT JUNE 30, 1999, AND THE STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000900346 FALCON COMMUNICATIONS 1,000 6-MOS DEC-31-1999 JUN-30-1999 11,852 0 26,750 699 0 0 871,903 349,316 1,436,842 147,522 1,665,676 0 0 0 0 1,436,842 0 212,205 0 264,653 (9,970) 2,552 64,852 (109,882) (2,459) (107,423) 0 0 0 (107,423) 0 0
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