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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of report (Date of earliest event reported): February 14, 2000
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CHARTER COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or Other Jurisdiction of Incorporation or Organization)
000-27927 43-1857213
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(Commission File Number) (Federal Employer
Identification Number)
12444 Powerscourt Drive - Suite 400
St. Louis, Missouri 63131
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(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (314) 965-0555
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ITEM 2. ACQUISITION OF ASSETS.
On February 14, 2000, Charter Communications Holding Company, LLC
(Charter Holdco) and Charter Communications Holdings, LLC (Charter Holdings),
each managed by Charter Communications, Inc. (the "Company"), completed the
acquisition (the "Bresnan Acquisition") of Bresnan Communications Company
Limited Partnership (Bresnan Communications Company), pursuant to a Purchase and
Contribution Agreement, entered into as of June 29, 1999, by and among BCI
(USA), LLC, William J. Bresnan, Blackstone BC Capital Partners L.P., Blackstone
BC Offshore Capital Partners L.P., Blackstone Family Media III L.P. (as assignee
of Blackstone Family Investment III L.P.), TCID of Michigan, Inc., TCI Bresnan
LLC and Charter Holdco, as amended by the first amendment. Immediately prior to
the Bresnan Acquisition, Charter Holdco was 40.6% owned by the Company and
Charter Holdings was 100% owned by Charter Holdco. Prior to the Bresnan
Acquisition, Charter Holdco assigned a portion of its rights to purchase Bresnan
Communications Company to Charter Holdings.
As part of the transactions described above, Charter Holdco and Charter
Holdings purchased approximately 52% of Bresnan Communications Company from
certain of the Bresnan sellers for cash, and certain of the Bresnan sellers
contributed approximately 18% of Bresnan Communications Company to Charter
Holdco in exchange for approximately 14.8 million Class C common membership
units of Charter Holdco, an approximate 2.6% equity interest in Charter Holdco.
Charter Holdco then transferred its purchased interests in Bresnan
Communications Company to Charter Holdings. Thereafter, Charter Holdings and
certain of the Bresnan sellers, TCID of Michigan, Inc. and TCI Bresnan LLC,
contributed all of the outstanding interests in Bresnan Communications Company
to CC VIII, LLC (CC VIII), a subsidiary of Charter Holdings, and Bresnan
Communications Company was dissolved. In exchange for the contribution of their
interests in Bresnan Communications Company to CC VIII, TCID of Michigan, Inc.
and TCI Bresnan LLC received approximately 24.2 million Class A preferred
membership units in CC VIII representing approximately 30.0% of the equity of CC
VIII and are entitled to a 2% annual return on their preferred membership units.
As a result of the dissolution of Bresnan Communications Company, CC VIII
succeeded to all of the rights and obligations of Bresnan Communications Company
and became the successor parent entity of the Bresnan subsidiaries, including
Bresnan Communications Group LLC (Bresnan Communications Group) and the Bresnan
cable systems. CC VIII is a Delaware limited liability company and is managed by
the Company. The members of CC VIII are Charter Holdings, TCID of Michigan, Inc.
and TCI Bresnan LLC.
The purchase price for Bresnan Communications Company was approximately
$3.1 billion, subject to adjustment, and was comprised of approximately $1.1
billion in cash, approximately $380.0 million and $630.0 million in equity in
Charter Holdco and CC VIII, respectively, and approximately $1.0 billion in
assumed debt. The cash portion of the purchase price was funded with a portion
of the proceeds from the Company's initial public offering of Class A common
stock and $30.0 million in additional borrowings under Bresnan's credit
facilities.
The membership units received by the Bresnan sellers are exchangeable
on a one for one basis for Class A common stock of the Company. Additionally,
beginning on February 14, 2002, the Bresnan sellers have the right to require
Paul G. Allen, the owner of all of the outstanding Class B common stock of the
Company, or his designee, to purchase their membership units or shares of Class
A common stock received in exchange for their membership units, for an aggregate
purchase price equal to approximately $1.0 billion increased at a rate of 4.5%
per annum. These rights terminate on April 15, 2002.
The Bresnan cable systems are located in Michigan, Minnesota, Wisconsin
and Nebraska and serve approximately 690,000 customers, including approximately
24,000 customers served by cable systems acquired by Bresnan Communications
Company since December 31, 1999 or in a pending acquisition. For the year ended
December 31, 1999, the revenues from the Bresnan cable systems were
approximately $283.6 million.
A copy of the Company's press release announcing the consummation of
the Bresnan Acquisition is being filed as Exhibit 99.1 with this report.
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ITEM 5. OTHER EVENTS.
After the transactions described above, the name of Bresnan
Communications Group was changed to CCG VIII, LLC (CCG). The acquisition of
Bresnan Communications Company constituted a change in control under the
indenture governing CCG's and its wholly owned subsidiary Bresnan Capital
Corporation's (Bresnan Capital) publicly held 8.00% senior notes due 2009 and
9.25% senior discount notes due 2009. The indenture governing these notes
provides that upon the occurrence of a change of control, the issuers shall make
an offer to repurchase each holder's 8.00% senior note at a cash offer price
equal to 101% of the senior note's principal amount plus accrued and unpaid
interest thereon, if any, on the change of control offer payment date and to
repurchase any and all of each holder's 9.25% senior discount note at a cash
offer price equal to 101% of the accreted value of the senior discount note on
the change of control offer payment date. Accordingly, as permitted under the
indenture, Charter Holdco, in place of CCG and Bresnan Capital made an offer to
repurchase the notes on February 15, 2000. The change of control offer expires
on March 20, 2000; the change of control offer payment date is anticipated to be
March 23, 2000.
In connection with the closing of the Bresnan Acquisition, Bresnan's
credit agreement was amended to increase the borrowing availability to $900.0
million.
In connection with the closing of the Bresnan Acquisition, Charter
Holdco's limited liability company agreement was amended and restated.
In addition, the Company now manages and operates the Bresnan cable
systems pursuant to a Management Agreement entered into with certain
subsidiaries of CC VIII. The term of the management agreement is ten years,
commencing on February 14, 2000. The Company is entitled to reimbursement for
all expenses, costs, losses and liabilities or damages incurred by the Company
in connection with the performance of its services. Payment of the management
fee is permitted under Bresnan's credit agreement, but ranks below Bresnan's
senior debt and shall not be paid except to the extent permitted under the
Bresnan credit agreement.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of business acquired.
Unaudited financial statements for the nine months ended September
30, 1999 (incorporated by reference to the quarterly report on
Form 10-Q filed by Bresnan Communications Group LLC and Bresnan
Capital Corporation on November 12, 1999, File Nos. 333-77637 and
333-77637-01). Audited financial statements for each of the two
years in the period ended December 31, 1998 (incorporated by
reference to the Registration Statement of Charter Communications
Holdings, LLC filed on January 25, 2000, File No. 333-77499).
Pursuant to Regulation S-X, audited financial statements for the
year ended December 31, 1999, will be filed as an amendment to
this current report within 75 days of the event reported herein.
(b) Pro forma financial information.
Pursuant to Article 11 of Regulation S-X, pro forma unaudited
financial statements will be filed as an amendment to this current
report within 75 days of the event reported herein.
(c) Exhibits.
2.11 Purchase and Contribution Agreement, entered into as of
June 1999, by and among BCI (USA), LLC, William J.
Bresnan, Blackstone BC Capital Partners L.P., Blackstone
BC Offshore Capital Partners L.P., Blackstone Family Media
III L.P. (as assignee of Blackstone Family Investment III
L.P.), TCID of Michigan, Inc., TCI Bresnan LLC and Charter
Communications Holding Company, LLC (incorporated by
reference to the Registration Statement of Charter
Communications, Inc. filed on Form S-1 on September 28,
1999, File No. 333-83887).
2.11(a) First Amendment to Purchase and Contribution Agreement
dated as of February 14, 2000, by and among BCI (USA),
LLC, William J. Bresnan, Blackstone BC Capital Partners
L.P., Blackstone BC Offshore Capital Partners, L.P.,
Blackstone Family Media III L.P. (as assignee of
Blackstone Family Investment III, L.P.), TCID of Michigan,
Inc., TCI Bresnan, LLC and Charter Communications Holding
Company, LLC.*
10.2(c) Management Agreement, dated as of February 14, 2000,
between CC VIII Operating, LLC, Charter Telephone of
Michigan, LLC (formerly known as TCID of Michigan, Inc.,
Charter Telephone of Minnesota, LLC (formerly known as TCI
Bresnan LLC), Midwest Video Electronics, Inc. and Charter
Communications, Inc.*
10.12(c)Amended and Restated Limited Liability Company Agreement
for Charter Communications Holding Company, LLC, dated
February 14, 2000.*
10.40 Exchange Agreement, dated as of February 14, 2000, by and
among Charter Communications, Inc., BCI (USA), LLC,
William J. Bresnan, Blackstone BC Capital Partners L.P.,
Blackstone BC Offshore Capital Partners L.P., Blackstone
Family Media III L.P. (as assignee of Blackstone Family
Investment III L.P.), TCID of Michigan, Inc., and TCI
Bresnan LLC.*
10.41 Indenture, dated February 2, 1999, among Bresnan
Communications Group LLC (now known as CCG VIII, LLC),
Bresnan Capital Corporation and State Street Bank and
Trust Company, as trustee, relating to the Issuers'
$170,000,000 principal amount of 8% Senior Notes due 2009
and $275,000,000 aggregate principal amount at maturity of
9 1/4% Senior Discount Notes due 2009 (incorporated by
reference to the Registration Statement of Bresnan
Communications Group LLC and Bresnan
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Capital Corporation filed on Form S-4 on May 3, 1999,
File Nos. 333-77637 and 333-77637-01).
99.1 Press release dated February 14, 2000.*
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* - filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Charter Communications, Inc. has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CHARTER COMMUNICATIONS, INC.,
registrant
Dated February 28, 2000 By: /s/ KENT D. KALKWARF
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Name: Kent D. Kalkwarf
Title: Senior Vice President
and Chief Financial
Officer (Principal
Financial Officer and
Principal Accounting
Officer)
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EXHIBIT INDEX
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2.11 Purchase and Contribution Agreement, entered into as of June 1999, by
and among BCI (USA), LLC, William J. Bresnan, Blackstone BC Capital
Partners L.P., Blackstone BC Offshore Capital Partners L.P., Blackstone
Family Media III L.P. (as assignee of Blackstone Family Investment III
L.P.), TCID of Michigan, Inc., TCI Bresnan LLC and Charter
Communications Holding Company, LLC (incorporated by reference to the
Registration Statement of Charter Communications, Inc. filed on Form
S-1 on September 28, 1999, File No. 333-83887).
2.11(a) First Amendment to Purchase and Contribution Agreement dated as of
February 14, 2000, by and among BCI (USA), LLC, William J. Bresnan,
Blackstone BC Capital Partners, L.P., Blackstone BC Offshore Capital
Partners L.P., Blackstone Family Media III L.P. (as assignee of
Blackstone Family Investment III L.P.), TCID of Michigan, Inc., TCI
Bresnan, LLC and Charter Communications Holding Company, LLC.
10.2(c) Management Agreement, dated as of February 14, 2000, between CC VIII
Operating, LLC, Charter Telephone of Michigan, LLC (formerly known as
TCID of Michigan, Inc., Charter Telephone of Minnesota, LLC (formerly
known as TCI Bresnan LLC), Midwest Video Electronics, Inc. and Charter
Communications, Inc.
10.12(c) Amended and Restated Limited Liability Company Agreement for Charter
Communications Holding Company, LLC, dated February 14, 2000.
10.40 Exchange Agreement, dated as of February 14, 2000, by and among Charter
Communications, Inc., BCI (USA), LLC, William J. Bresnan, Blackstone BC
Capital Partners L.P., Blackstone BC Offshore Capital Partners L.P.,
Blackstone Family Media III L.P. (as assignee of Blackstone Family
Investment III L.P.), TCID of Michigan, Inc., and TCI Bresnan LLC.
10.41 Indenture, dated February 2, 1999, among Bresnan Communications Group
LLC (now known as CCG VIII, LLC), Bresnan Capital Corporation and State
Street Bank and Trust Company, as trustee, relating to the Issuers'
$170,000,000 principal amount of 8% Senior Notes due 2009 and
$275,000,000 aggregate principal amount at maturity of 9 1/4% Senior
Discount Notes due 2009 (incorporated by reference to the Registration
Statement of Bresnan Communications Group LLC and Bresnan Capital
Corporation filed on Form S-4 on May 3, 1999, File Nos. 333-77637 and
333-77637-01).
99.1 Press release dated February 14, 2000.
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EXHIBIT 2.11(a)
FIRST AMENDMENT TO
PURCHASE AND CONTRIBUTION AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND CONTRIBUTION AGREEMENT (this
"Amendment") is made and entered into as of February 14, 2000 by and among BCI
(USA), LLC, a Delaware limited liability company (the "General Partner"),
William J. Bresnan ("WBresnan"), Blackstone BC Capital Partners L.P., a Delaware
limited partnership ("BBC"), Blackstone BC Offshore Capital Partners, L.P., a
Cayman Islands exempted limited partnership ("BBCO"), Blackstone Family Media
Partnership III L.P., a Delaware limited partnership (as assignee of Blackstone
Family Investment Partnership III L.P., "BFM"), TCID of Michigan, Inc., a Nevada
corporation ("TCID-MI") and TCI Bresnan LLC, a Delaware limited liability
company ("TCI LLC" and collectively with the General Partner, WBresnan, BBC,
BBCO, BFM, TCID-MI, are sometimes referred to herein as "Sellers"), and Charter
Communications Holding Company, LLC, a Delaware limited liability company
("Buyer").
RECITALS
As of June 29, 1999, the General Partner, WBresnan, BBC, BBCO,
Blackstone Family Investment Partnership III L.P. ("BFI"), TCID-MI, TCI LLC and
Buyer entered into a Purchase and Contribution Agreement (the "Purchase and
Contribution Agreement"). Prior to the date of this Agreement, BFI assigned all
of its interests in the Partnership and all of its rights under the Purchase and
Contribution Agreement to BFM.
The Buyer and Sellers wish to amend the Purchase and Contribution
Agreement to reflect a modification of the purchase, sale and contribution
transactions set forth in the Purchase and Contribution Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Except as otherwise provided in this 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.
2. Section 1.1 of the Purchase and Contribution Agreement is amended by
adding the following new definitions:
"Amendment" means the First Amendment to Purchase and Contribution
Agreement entered into as of February 14, 2000, among the General Partner,
WBresnan, BBC, BBCO, Blackstone Family Media Partnership III L.P., TCID-MI,
TCI LLC, Buyer and CC VIII.
"CC VIII" means CC VIII, LLC, a Delaware limited liability company.
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"CC VIII Contribution" means the contribution at the Closing by
Holdings of the Purchased Interests and the Contributed Interests and by TCI
LLC and TCID-MI of the Retained Interests to CC VIII in exchange for limited
liability company interests in CC VIII, as contemplated in this Agreement.
"CC VIII Limited Liability Company Agreement" means the CC VIII Limited
Liability Company Agreement attached as Exhibit K.
"Holdings" means Charter Communications Holdings, LLC, a
Delaware limited liability company.
3. Article 1 of the Purchase and Contribution Agreement is amended by
amending and restating in their entirety the following definitions:
"Closing" means the consummation of the purchase and sale of the
Purchased Interests, the contribution of the Contributed Interests and the
CC VIII Contribution pursuant to this Agreement in accordance with the
provisions of Article 7.
"PublicCo" means Charter Communications, Inc., a Delaware
corporation.
"Required Consents" means the consents, permits, approvals and
authorizations of Governmental Authorities and other Persons, and filings,
notices, and applications with Governmental Authorities and other Persons,
necessary to transfer lawfully the Purchased Interests and the Contributed
Interests to Buyer, consummate the CC VIII Contribution or otherwise to
consummate lawfully the transactions contemplated by this Agreement.
"Subsidiary" means Bresnan Telecommunications Company LLC, Bresnan
Public Corporation, Bresnan Telephone of Michigan L.L.C., Bresnan Telephone
of Minnesota, L.L.C., Bresnan Communications Group LLC, Bresnan Capital
Corporation or Midwest Video Electronics, Inc., as the context may require.
4. Section 2.1 of the Purchase and Contribution Agreement is amended
and restated in its entirety to read as follows:
2.1 Sale and Purchase of Purchased Interests; Contribution of
Contributed Interests; CC VIII Contribution .
(a) Subject to the terms and conditions set forth in this
Agreement, each Seller hereby agrees to sell, transfer, and deliver to Buyer
at the Closing, and Buyer hereby agrees to purchase at the Closing, the
partnership interests specified below (the "Purchased Interests"), free and
clear of all Liens:
(1) from the General Partner, the entire General
Partnership Interest; and
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(2) from each Seller, that portion of its Limited
Partnership Interest that is not represented by either a Contributed
Interest or a Retained Interest.
(b) Each Seller (other than TCI LLC and TCID-MI) agrees to
contribute to Buyer a portion of its respective Limited Partnership
Interest, in each case free and clear of all Liens and subject to the Legal
Requirements (each such contributed Limited Partnership Interest, a
"Contributed Interest"). The percentage of each contributing Seller's
Limited Partnership Interest represented by a Contributed Interest and such
Seller's share of Units in Buyer to be issued by Buyer in exchange for such
Contributed Interests (the "Equity Consideration") is reflected as a
percentage of the aggregate of the Equity Consideration and the Lower Tier
Equity Consideration in Schedule 2.1. The number of Units that comprise the
Equity Consideration will be calculated and may be adjusted in accordance
with Exhibit I.
(c) Immediately following the purchase and contribution steps
described in Section 2.1(a) and (b), TCI LLC will retain all of its Limited
Partnership Interest and TCID-MI will retain a portion of its original
Limited Partnership Interest (each, a "Retained Interest"). The percentage
of each of TCI LLC's and TCID-MI's Limited Partnership Interest represented
by a Retained Interest and TCI LLC's and TCID-MI's share of Class A
Preferred Units in CC VIII to be issued by CC VIII in exchange for such
Retained Interests (the "Lower Tier Equity Consideration") is reflected as a
percentage of the aggregate of the Equity Consideration and the Lower Tier
Equity Consideration in Schedule 2.1. The number of Class A Preferred Units
in CC VIII that comprise the Lower Tier Equity Consideration will be
calculated and may be adjusted in accordance with Exhibit I. At the Closing,
and immediately following the purchase and contribution steps described in
Section 2.1(a) and (b),
(i) Buyer will cause Holdings and PublicCo to,
and TCI LLC and TCID-MI will, execute and deliver the CC VIII Limited
Liability Company Agreement in the form attached as Exhibit K,
(ii) Buyer will contribute the Contributed
Interests to Holdings,
(iii) Holdings will contribute the Purchased
Interests and Contributed Interests to CC VIII in exchange for Class B Units
in CC VIII, and
(iv) TCI LLC and TCID-MI will contribute the
Retained Interests to CC VIII in exchange for the Lower Tier Equity
Consideration.
In connection with the CC VIII Contribution, Buyer, TCI LLC and TCID-MI will
deliver or cause to be delivered such documents and agreements as
contemplated by this Agreement and the Amendment.
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5. Section 2.2 of the Purchase and Contribution Agreement is amended
and restated in its entirety to read as follows:
2.2 Purchase Price for Purchased Interests . Buyer shall pay and
deliver to the Sellers, by wire transfer of immediately available funds to
one or more accounts of the Sellers, as designated in writing by the Sellers
not later than the Business Day before Closing, as consideration for the
sale of the Purchased Interests an aggregate amount in cash equal to
$2,100,000,000, subject to adjustment as provided in Section 2.3 (the
"Purchase Price") and subject to the provisions of Sections 2.4 and 2.5.
Buyer shall have no liability or obligation arising from its allocation of
the Purchase Price among the Sellers, provided that Buyer complies with the
written instructions of the Sellers provided under the preceding sentence.
At its option Buyer may cause Holdings, its wholly owned subsidiary, to pay
the Purchase Price for and receive the Purchased Interests and to pay or
receive any post-Closing adjustments as determined under this Agreement.
6. Section 2.3 of the Purchase and Contribution Agreement is amended to
add the following new subsection (e):
(e) The Purchase Price shall be decreased by $1,500,000 to
reflect certain purchase price adjustments made with respect to the
Acquisition Agreements.
7. Buyer hereby notifies each Seller that Buyer has delegated and assigned
to Holdings, Buyer's obligations and rights to pay the Purchase Price for and
receive the Purchased Interests and to pay or receive any post-Closing
adjustments as determined under the Purchase and Contribution Agreement.
8. Section 3.19 of the Purchase and Contribution Agreement is
amended and restated in its entirety to read as follows:
3.19 Securities Law Matters . Such Seller understands and acknowledges
that the Equity Consideration and the Lower Tier Equity Consideration have
not been registered or qualified under the federal or applicable state
securities laws and the Equity Consideration is being transferred to BBC,
BBCO, BFM, WBresnan and the General Partner, and the Lower Tier Equity
Consideration is being transferred to TCI LLC and TCID-MI, in reliance upon
applicable exemptions from such registration and qualification requirements.
Such Seller is an "accredited investor" within the meaning of the federal
securities laws and acknowledges it has been furnished with or afforded
access to, and has had the opportunity to ask questions and receive answers
concerning, all information pertaining to the Equity Consideration and the
Lower Tier Equity Consideration. The Equity Consideration is being acquired
by BBC, BBCO, BFM, WBresnan and the General Partner, and the Lower Tier
Equity Consideration is being acquired by TCI LLC and TCID-MI, for
investment only and not with a view to any public distribution thereof. Such
Seller understands that the Equity Consideration and the Lower Tier Equity
Consideration represent "restricted securities" within the meaning of the
federal securities laws and agrees that it will not offer to sell or
otherwise dispose of the
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Equity Consideration or the Lower Tier Equity Consideration in violation of
the registration and qualification requirements of the federal and
applicable state securities laws.
9. Section 4.5 of the Purchase and Contribution Agreement is amended and
restated in its entirety to read as follows:
4.5 Securities Law Matters . Buyer understands and acknowledges that
the Purchased Interests, the Contributed Interests and the Retained
Interests have not been registered or qualified under the federal or
applicable state securities laws and the Purchased Interests are being sold
to and purchased by Buyer, the Contributed Interests are being contributed
to Buyer and the Retained Interests are being contributed to CC VIII in
reliance upon applicable exemptions from such registration and qualification
requirements. Buyer is an "accredited investor" within the meaning of the
federal securities laws and acknowledges it has been furnished with or
afforded access to, and has had the opportunity to ask questions and receive
answers concerning, all information pertaining to the Purchased Interests,
the Contributed Interests and the Retained Interests. The Purchased
Interests, the Contributed Interests and the Retained Interests are being
acquired by Buyer for investment only and not with a view to any public
distribution thereof. Buyer understands that the Purchased Interests, the
Contributed Interests and the Retained Interests are "restricted securities"
within the meaning of the federal securities laws and agrees that it will
not offer to sell or otherwise dispose of the Purchased Interests and the
Contributed Interests in violation of the registration and qualification
requirements of the federal and applicable state securities laws.
10. Section 5.9(a) of the Purchase and Contribution Agreement is amended
and restated in its entirety to read as follows:
(a) Each Seller consents to the execution, delivery, and
performance of this Agreement by each Seller and to the taking by each
Seller and the Partnership of all actions contemplated by this Agreement to
be taken by such Person, including the sale of the Purchased Interests, the
contribution of the Contributed Interests by each Seller to Buyer and the CC
VIII Contribution.
11. Section 5.9 of the Purchase and Contribution Agreement is amended to
add the following new subsection (g):
(g) The Platinum Accounting System software and platform owned
and used by the Partnership, any software license or service agreements
related solely to such software, all system and user data utilized by such
software and any ancillary systems that may have Partnership financial data
benefit, in existence as of the Closing (collectively, the "Platinum
Accounting System") shall constitute Excluded Assets that may be transferred
to the General Partner at the time of the Closing for such consideration or
no consideration and on such terms as the Sellers may determine; provided,
however, that the Sellers shall cause the Partnership, its Subsidiaries and
the Partnership Systems to have no obligations or liabilities after the
Closing Date with respect to the related transferred license or services
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agreements and provided further that Buyer and the General Partner agree and
covenant that for a period of 180 days after the date of the Closing, (i)
the General Partner shall use commercially reasonable efforts to retain the
Platinum Accounting System and not to alter or otherwise delete the Platinum
Accounting System in any manner that would prevent or impair Buyer from
obtaining any information and data relating to the Partnership or any of its
Subsidiaries prior to the Closing Date; but shall in no event dispose of the
Platinum Accounting System for a period of 180 days after the date of the
Closing, (ii) Buyer shall be entitled to access any and all modules of the
Platinum Accounting System relating to the Partnership or any of its
Subsidiaries prior to the Closing Date, including without limitation, the
accounts payable module, the general ledger module and the fixed asset
module, and to receive or obtain downloads of data from the Platinum
Accounting System relating the Partnership or any of its Subsidiaries in a
format reasonably acceptable to Buyer, (iii) the General Partner shall
provide Buyer with reasonable access to the Platinum Accounting System as it
relates to the Partnership or any of its Subsidiaries, including access to
the property where such system, or any part thereof is stored, to facilitate
the transfer or download of any information or data being transferred
pursuant to clause (ii) above and (iv) shall assist and cooperate with Buyer
in the process of transferring any such requested information or data from
the Platinum Accounting System.
12. At Closing, and immediately following the consummation of the purchase and
sale of the Purchased Interests and the contribution by Sellers of the
Contributed Interests, the parties will deliver or cause to be delivered the
following, in the order and subject to such intermediate steps as described in
the Bresnan Closing Memorandum, a copy of which is attached to this Amendment:
1.Buyer will deliver to Holdings duly executed assignment
agreements providing for the assignment of the Contributed
Interests to Holdings, in a form reasonably satisfactory to TCI.
2.Buyer will cause Holdings to deliver to CC VIII a duly executed
assignment agreement providing for the assignment of the Purchased
Interests and the Contributed Interests to CC VIII, in a form
reasonably satisfactory to TCI.
3.TCI LLC and TCID-MI will deliver to CC VIII a duly executed
assignment agreement providing for the assignment of the Retained
Interests to CC VIII, in a form reasonably satisfactory to CC VIII
(which assignment agreement may be the same instrument delivered by
Holdings under Section 12(b) and such assignments, whether by the
same or separate instruments, are referred to as the "Multiparty
Assignment").
4.TCI LLC and TCID-MI will deliver to Holdings and CC VIII a duly
executed CC VIII limited liability company agreement in the form
attached as Exhibit K.
5.Buyer will cause Holdings and PublicCo to deliver to TCI LLC and
TCID-MI a
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duly executed CC VIII limited liability company agreement in the
form attached as Exhibit K.
6.Buyer will cause CC VIII to issue and deliver to Holdings
80,778,116 Class B Units of CC VIII, each having the rights,
preferences and obligations set forth in the CC VIII Limited
Liability Company Agreement attached as Exhibit K.
7.Buyer will cause CC VIII to issue and deliver to TCI LLC and
TCID-MI 24,215,749 Class A Preferred Units of CC VIII, each having
the rights, preferences and obligations set forth in the CC VIII
Limited Liability Company Agreement attached as Exhibit K.
13. TCI LLC, TCID-MI and Buyer will, and Buyer will cause CC VIII and
Holdings to, enter into and deliver such documents and take such other actions
as may be reasonably requested by any of TCI LLC, TCID-MI or Buyer to authorize,
consummate or evidence the CC VIII Contribution.
14. Pursuant to Section 5.16(d) of the Purchase and Contribution Agreement,
Paul G. Allen has delivered into escrow held by Sherman & Howard L.L.C. a Put
Agreement with respect to each Seller (the "Original Allen Puts"). At Closing,
Buyer shall cause Paul G. Allen to deliver Put Agreements with respect to each
Seller in the form attached as Exhibit H, in each case duly executed by Paul G.
Allen. Upon such delivery, Section 7.3(g) of the Purchase and Contribution
Agreement shall have no further force or effect, the Original Allen Puts shall
be terminated and of no further force and effect, and Buyer and Sellers will
execute and deliver at Closing a joint instruction to Sherman & Howard L.L.C.
designating Irell & Manella LLP as the successor escrow agent and directing
Sherman & Howard L.L.C. to deliver the Original Allen Puts to Irell & Manella
LLP for destruction upon receipt of Paul G. Allen's consent to such destruction.
15. Section 5.17 of the Purchase and Contribution Agreement is amended to
delete the last sentence of such Section and replace it with the following
sentence:
Buyer will not cause, and will not permit any of its Affiliates to cause,
the Partnership to be merged, consolidated or otherwise converted into an
entity that is taxed as a corporation under the Code.
16. The General Partner represents and warrants to Buyer, TCI LLC and
TCID-MI as follows:
1.Bresnan Public Corporation is a corporation, validly existing and
in good standing under the laws of the State of Delaware. At no
time prior to Closing will Bresnan Public Corporation have
conducted any business activities or other operations of any kind,
or hold any asset, or become liable for any obligation.
-7-
<PAGE> 8
2.CC VIII was duly formed as a limited liability company under the
laws of the State of Delaware. At no time prior to Closing will CC
VIII have conducted any business activities or other operations of
any kind, or hold any asset, or become liable for any obligation
other than its obligations under the Purchase and Contribution
Agreement and this Amendment.
17. Buyer represents and warrants to the Sellers as follows:
1.CC VIII is validly existing and in good standing under the laws
of the State of Delaware. To Buyer's Knowledge, at no time prior to
Closing will CC VIII have conducted any business activities or
other operations of any kind, or hold any asset, or become liable
for any obligation other than its obligations under the Purchase
and Contribution Agreement and this Amendment.
2.Subject to the due execution and delivery of the CC VIII Limited
Liability Company Agreement and the Multiparty Assignment, (i) the
execution, delivery, and performance by CC VIII of the Transaction
Documents to which CC VIII will be a party and to be delivered at
Closing will be duly authorized by all necessary action on the part
of CC VIII and (ii) the Transaction Documents to which CC VIII will
be a party, when executed and delivered will be duly executed and
delivered and will constitute the legal, valid, and binding
obligation of CC VIII, enforceable against CC VIII in accordance
with their terms, except as the enforceability of such Transaction
Documents may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally or by judicial discretion in the
enforcement of equitable remedies and except as may be affected by
any breach by TCID-MI or TCI LLC of the Purchase and Contribution
Agreement or this Amendment.
3.Subject to the due execution and delivery of the CC VIII Limited
Liability Company Agreement and the Multiparty Assignment, the
execution and delivery by CC VIII, the performance by CC VIII
under, and the consummation of the transactions contemplated by,
this Amendment and the Transaction Documents to which CC VIII will
be a party will not: (a) conflict with or violate any provision of
the Charter Documents of CC VIII; (b) violate any provision of any
Legal Requirement; (c) require any material consent, approval or
authorization of, or filing of any certificate, notice,
application, report or other document with, any Governmental
Authority or other Person; or (d) (i) result in a material breach
of or constitute a material default under (without regard to
requirements of notice, lapse of time or elections of other Persons
or any combination thereof), (ii) permit or result in the
termination, suspension or material modification of, or (iii)
result in the material acceleration of (or give any Person the
right to accelerate) the performance of CC VIII under, any Contract
or other instrument by which Buyer or its Affiliates has caused CC
VIII or any of its assets to be bound or affected or, to Buyer's
Knowledge, any other Contract or instrument by which CC VIII is
bound or affected, except for
-8-
<PAGE> 9
any of the foregoing that (x) would not materially adversely affect
CC VIII's ability to perform its obligations under the Transaction
Documents, (y) that result from or are caused by any breach by
TCID-MI or TCI LLC of the Purchase and Contribution Agreement or
this Amendment or (z) result from any act or omission by the
General Partner taken with respect to CC VIII without the consent
of Buyer.
4.Neither Buyer nor any of its Affiliates (including CC VIII) have
granted any preemptive rights, whether at law or otherwise, to
purchase any securities of CC VIII; any outstanding options,
warrants, subscriptions, agreements, plans, rights or other
commitments pursuant to which CC VIII is or may become obligated to
sell or issue any Class A Preferred Units or any other equity
security; or any outstanding securities convertible into such Class
A Preferred Units or any other equity security of CC VIII.
5.Subject to the due execution and delivery of the CC VIII Limited
Liability Company Agreement and the Multiparty Assignment, the
Class A Preferred Units being issued hereunder, when issued and
delivered in accordance with the terms of the Purchase and
Contribution Agreement and this Amendment for the consideration
expressed herein, will be duly authorized and validly issued. The
delivery of such Class A Preferred Units pursuant to the Purchase
and Contribution Agreement and this Amendment will transfer to TCI
LLC and TCID-MI good and valid title to such Class A Preferred
Units, free and clear of all Liens and any other limitations or
restrictions (including any restrictions on the right to vote, sell
or otherwise dispose of such interest), other than the transfer
restrictions created by the CC VIII Limited Liability Company
Agreement or imposed by the Exchange Agreement or applicable Legal
Requirements.
18. The representations and warranties of the General Partner contained in
Section 16 of this Agreement shall expire as of the Closing Date and shall not
survive the Closing. The representations and warranties of Buyer contained in
Section 17 of this Agreement (other than the representations and warranties
contained in subparagraph (b) which shall survive the Closing until the
expiration of the applicable statute of limitations) shall expire as of the
Closing Date and shall not survive the Closing.
19. In connection with the assignment by BFI of all of its right, title and
interest in the Partnership to BFM, the admission of BFM as a substituted
limited partner under the Partnership Agreement and the consent of each of the
Sellers to the assignment of BFI's rights and obligations under the Purchase and
Contribution Agreement pursuant to the First Amendment to Amended and Restated
Limited Partnership Agreement, Buyer hereby consents to the assignment of all of
BFI's rights and obligations under the Purchase and Contribution Agreement to
BFM and the agreements contemplated therein. BFM hereby accepts the
aforementioned assignment and undertakes to discharge, satisfy and perform all
obligations of BFI under the Purchase and Contribution Agreement and the
agreements contemplated therein. All references to BFI in the Purchase and
Contribution Agreement shall be deemed references
-9-
<PAGE> 10
to BFM.
20. As of the date hereof, all notices to be delivered to TCID-MI or TCI
LLC in accordance with Section 9.2 of the Purchase and Contribution Agreement
shall be delivered to the following (and such Section 9.2 is hereby amended to
reflect such change):
c/o AT&T Broadband
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Carol O'Keeffe
Telecopier: (720) 875-5396
with a copy (which Sherman & Howard, L.L.C.
shall not constitute 633 Seventeenth Street
notice) to: Suite 3000
Denver, Colorado 80202
Attention: Arlene S. Bobrow, Esq.
Telecopier: (303) 298-0940
21. 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 this 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.
22. Schedules 3.1 and 5.9 and Exhibits G, H, I and J are hereby amended and
restated in their entirety as attached to this Amendment. Buyer hereby consents
to the changes in the ownership of the Limited Partnership Interests set forth
in Schedule 3.1, as so amended and restated, to reflect the transfer of BFI's
Limited Partnership Interest from BFI to BFM. Exhibit A is attached to this
Amendment, and the Sellers may further amend Exhibit A at any time after the
Closing by giving written notice to Buyer, provided that the sum of the
Proportionate Interests for all Sellers shall equal 100% and further provided
that if any Seller's Proportionate Interest is changed by more than 500 basis
points, Buyer will have the right to consent to such change, which consent will
not unreasonably withheld. The following new Schedule and Exhibit are attached
to this Amendment and deemed attached to the Purchase and Contribution
Agreement:
-10-
<PAGE> 11
Schedule 2.1 Contributed Interests and Retained Interests
Exhibit K Form of CC VIII Limited Liability Company
Agreement
23. This Amendment shall be construed in accordance with the laws of the
State of New York, without giving effect to the choice of law principles.
24. This Amendment may be signed in counterparts with the same effect as if
the signature on each counterpart were the same instrument.
[The remainder of this page has intentionally been left blank]
-11-
<PAGE> 12
IN WITNESS WHEREOF, this Amendment has been executed by Buyer and each
the Sellers as of the date first written above.
BUYER:
CHARTER COMMUNICATIONS HOLDING COMPANY, LLC
By: /s/ Marcy Lifton
----------------------------------------------
Name: Marcy Lifton
Title: Vice President
SELLERS:
BCI(USA), LLC
By: Bresnan Communications, Inc., its Managing Member
By: /s/ William J. Bresnan
-------------------------------------------------
Name: William J. Bresnan
Title: President and Chief Executive Officer
/s/ William J. Bresnan
- ------------------------------------
William J. Bresnan, individually
TCID OF MICHIGAN, INC.
By: /s/ Carol O'Keeffe
- ------------------------------------
Name: Carol O'Keeffe
Title: Vice President
TCI BRESNAN LLC
By: /s/ Carol O'Keeffe
- ------------------------------------
Name: Carol O'Keeffe
Title: Vice President
[SIGNATURE PAGE TO FIRST AMENDMENT
TO PURCHASE AND CONTRIBUTION AGREEMENT]
-12-
<PAGE> 13
BLACKSTONE BC CAPITAL PARTNERS, L.P.
By: Blackstone Media Management Associates III
L.L.C., its General Partner
By: /s/ Mark T. Gallogly
- ------------------------------------
Name: Mark T. Gallogly
Title: Member
BLACKSTONE FAMILY MEDIA PARTNERSHIP III L.P.
By: Blackstone Media Management Associates
III L.L.C., its General Partner
By: /s/ Mark T. Gallogly
- ------------------------------------
Name: Mark T. Gallogly
Title: Member
BLACKSTONE BC OFFSHORE CAPITAL PARTNERS L.P.
By: Blackstone Media Management Associates III L.L.C.,
its Investment General Partner
By: /s/ Mark T. Gallogly
- ------------------------------------
Name: Mark T. Gallogly
Title: Member
[SIGNATURE PAGE TO FIRST AMENDMENT
TO PURCHASE AND CONTRIBUTION AGREEMENT]
-13-
<PAGE> 14
SCHEDULE 2.1
CONTRIBUTED INTERESTS AND RETAINED INTERESTS
<TABLE>
<CAPTION>
Seller Portion of Limited Portion of Limited Limited Partnership Share of Aggregate
Partnership Interest Partnership Interest Interest Represented Units to be Issued
to be Contributed to be Retained by Contributed as Equity
Interest Interest Interest or Retained Consideration or
Interest Lower Tier Equity
Consideration
<S> <C> <C> <C> <C>
BBC 33.5811% 0% 11.2929% 20.7449%
(Class C Common
Units)
BBCO 33.5811% 0% 1.2663% 2.3262%
(Class C Common
Units)
BFM 33.5811% 0% 0.8017% 1.4726%
(Class C Common
Units)
WBresnan 33.5811% 0% 0.3358% 0.6169%
(Class C Common
Units)
BCI (USA), LLC 37.6699% 0% 3.0938% 12.7664%
(Class C Common
Units)
TCI LLC 0% 100.0000% 12.9309% 23.3212%
(CC VIII Class A
Preferred Units)
TCID-MI 0% 50.1051% 18.5735% 38.7518%
(CC VIII Class A
Preferred Units)
</TABLE>
-14-
<PAGE> 15
SCHEDULE 3.1
ORGANIZATION AND OWNERSHIP OF THE PARTNERSHIP
1. General Partner
BCI (USA), LLC 1.0000%
Limited Partners
Blackstone BC Capital Partners L.P. 33.6289%
Blackstone BC Offshore Capital Partners L.P. 3.7710%
Blackstone Family Media Partnership III L.P. 2.3872%
TCI Bresnan LLC 12.9309%
TCID of Michigan, Inc. 37.0691%
William J. Bresnan 1.0000%
BCI (USA), LLC 8.2129%
2. Bresnan Telecommunications Company LLC ("BTC") has pledged its interest in
its subsidiaries (other than Midwest Video Electronics, Inc.) and Bresnan
Communications Group LLC has pledged its interest in BTC, each pursuant to
the Credit Facility.
-15-
<PAGE> 16
SCHEDULE 5.9
EXCLUDED ASSETS
1. All rights to the use of the Bresnan name and other marks.
2. Two warrants for 110,000 shares each of ICTV, Inc., common stock.
3. Warrant for 70,162 shares of Online System Services, Inc., common
stock.
4. All furniture and fixtures, including, without limitation, desks, cubicles,
computers and computer equipment (other than the accounting, billing
system/network and any organizational documents related to the Partnership
and the Subsidiaries and the Human Resources system/network), phone system,
office supplies, vehicles and artwork located at 709 Westchester Avenue,
White Plains, New York.
5. The Split Dollar Life Insurance Policy for William J. Bresnan.
6. The Platinum Accounting System.
7. All right, title and interest in and to the following marks:
YOUR LINK TO TOMORROW Reg. No. 2,284,563
BRESNANLINK Reg. No. 2,301,017
BRESNAN COMMUNICATIONS Reg. No. 2,284,565
BRESNAN (stylized) Reg. No. 2,284,564
-16-
<PAGE> 17
EXHIBIT A
PROPORTIONATE INTERESTS
Blackstone BC Capital Partners L.P. 28.7527%
Blackstone BC Offshore Capital Partners L.P. 3.2242%
Blackstone Family Media Partnership III L.P. 2.0411%
TCI Bresnan LLC 11.0559%
TCID of Michigan, Inc. 31.6941%
William J. Bresnan 0.8550%
BCI (USA), LLC 22.3770%
-17-
<PAGE> 1
EXHIBIT 10.2(c)
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made as of the
fourteenth day of February, 2000, by and among each of CC VIII Operating, LLC, a
Delaware limited liability company ("CC VIII Operating"), Charter Telephone of
Michigan, LLC, a Delaware limited liability company ("Charter Michigan"),
Charter Telephone of Minnesota, LLC, a Delaware limited liability company
("Charter Minnesota") and Midwest Video Electronics, Inc., a Minnesota
corporation ("Midwest" and collectively with CC VIII Operating, Charter
Michigan, and Charter Minnesota, the "Company"), and Charter Communications,
Inc., a Delaware corporation (the "Manager").
A. The Company desires to retain the Manager to manage and operate the
cable television systems owned by the Company and its subsidiaries
and any cable television systems subsequently acquired by the
Company and its subsidiaries (the "Cable Systems").
B. The Manager has agreed to manage and operate the Cable Systems, all
upon the terms and conditions hereinafter set forth.
In consideration of the mutual covenants and agreements contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Retention of the Manager. The Company hereby appoints the Manager as a
manager for the Cable Systems, and the Manager hereby agrees to serve the
Company as a manager for the Cable Systems, pursuant to the terms and conditions
hereinafter set forth.
2. Authority and Duties of the Manager.
(a) The Company agrees to seek the advice of the Manager regarding the
business, properties and activities of the Cable Systems during the term hereof,
and subject to the direction, control and general supervision of the Company,
the Manager agrees to provide such advice. The Manager shall give such advice in
a businesslike, efficient, lawful and professional manner in accordance with
this Agreement.
(b) Without limiting the generality of the foregoing, the Manager shall
provide all management services with respect to the operation of the Cable
Systems, including, but not limited to, the following:
(i) advice concerning the hiring, termination,
performance and training of personnel;
(ii) review, consultation and advice concerning personnel,
operations, engineering and other management and operating policies and
procedures;
(iii) review, consultation and advice concerning maintenance
standards for plant and equipment of the Cable Systems, advice as to the Cable
<PAGE> 2
Systems' normal repairs, replacements, maintenance and plant upgrades, and
provide for periodic inspections;
(iv) recommendations on all necessary action to keep the
operation of the Cable Systems in compliance, in all material respects, with
the conditions of the Company's franchises and all applicable rules,
regulations and orders of any federal, state, county or municipal authority
having jurisdiction over the Cable Systems;
(v) assistance in the negotiation of, or directly negotiate,
on behalf of the Company, operating agreements (including, but not limited to,
pole attachment agreements, office and headend leases, easements and right-of-
way agreements), contracts for the purchase, lease, license or use of
properties, equipment and rights as may be necessary or desirable in connection
with the operation or maintenance of the Cable Systems and such other agreements
on behalf of the Company as are necessary or advisable for the Cable Systems and
assistance in the procuring, or directly procuring, on behalf of the Company,
such programming, billing and other services and equipment deemed necessary and
advisable for the Cable Systems;
(vi) development of recommendations for, and negotiate the
acquisition and maintenance of, such insurance coverage with respect to the
Cable Systems as the Company may determine upon advice and consultation of the
Manager;
(vii) guidance on all marketing, sales promotions and
advertising for the Cable Systems;
(viii) assistance in the financial budgeting process and the
implementation of appropriate accounting, financial, administrative and
managerial controls for the Cable Systems;
(ix) preparation for use by the Company of financial reports
and maintenance of books of accounts and other records reflecting the results of
operation of each Cable System and/or subsidiary; and
(x) advice and consultation with the Company in connection
with any and all aspects of the Cable Systems and the day to day operation
thereof and consultation with the Company with respect to the selection of
attorneys, consultants and accountants.
3. Management Expenses.
(a) The Manager shall charge to, or be reimbursed by the Company
for, all expenses, costs, losses, liabilities or damages incurred by the Manager
attributable to the ownership or operation of the Cable Systems, including,
where applicable, pro rata allocation for services and purchases made by the
Manager on behalf of the Cable Systems and other companies and cable systems
managed by the Manager, subject to the limitations set forth in Section 6 (the
"Company Expenses"). In addition to reimbursement for Company Expenses, the
Manager shall be reimbursed for all other expenses, costs, losses, liabilities
or damages incurred by the Manager in connection with the performance of its
-2-
<PAGE> 3
duties hereunder, including, without limitation, the Manager's costs for
overhead, administration and salaries (collectively, the "Management Fee"),
provided that the Management Fee shall not include expenses incurred by Manager
that are in the nature of the "Company Expenses" and are paid to the Manager by
another company or cable system managed by Manager. Management Fees shall only
be paid to the Manager by the Company to the extent permitted by the Credit
Agreement (as defined below) and any other material agreement applicable to the
Company or the Manager.
Notwithstanding the foregoing, the Management Fees
(but not other Company Expenses) due and payable as provided in the preceding
paragraph of this Section 3 shall be subordinated and junior in right of payment
to the prior payment in full in cash of all of the Senior Debt (as defined
below) and shall not be paid except to the extent allowed under the Credit
Agreement (as defined below). In the event of any bankruptcy or similar
proceeding relative to the Company (a "Reorganization"), then all of the Senior
Debt shall first be paid in full in cash before any payment of the Management
Fees is made, and in any Reorganization any amount payable in respect of the
Management Fees shall be paid directly to the Administrative Agent referred to
below, unless all the Senior Debt has been paid in full in cash. The Manager
hereby irrevocably authorizes the Administrative Agent (under and as defined in
the Credit Agreement), as attorney-in-fact for the Manager, to vote, file or
prove any claim or proof of claim in any Reorganization in respect of the
Management Fees and to demand, sue for, collect and receive any such payment.
The Manager shall take any actions requested by the Administrative Agent in
order to accomplish any of the foregoing. If the Manager receives any payment
hereunder in violation of the terms hereof or in connection with any
Reorganization (prior to the payment in full in cash of the Senior Debt), the
Manager shall hold such payment in trust for the benefit of the holders of the
Senior Debt and forthwith pay it over to the Administrative Agent. Amounts
payable to the Manager in accordance with this Section 3 which remain unpaid by
reason of the foregoing shall be accrued as a liability of the Company and shall
be payable as soon as the conditions to payment are fulfilled. The deferred
portion of the Management Fees will bear interest at the rate of ten percent
(10%) per annum, compounded annually, from the date otherwise due and payable
until the payment thereof.
As used herein, (i) "Credit Agreement" means the
Credit Agreement, dated as of February 2, 1999, as amended and restated as of
February ___, 2000 among CC VIII Holdings, LLC, a Delaware limited liability
company, CC VIII Operating, as borrower thereunder, the Lenders parties thereto
and the Documentation Agents, Syndication Agents and Administrative Agent named
therein, as amended, restated, supplemented or otherwise modified from time to
time, and (ii) "Senior Debt" means the principal amount of all loans and
guarantee obligations from time to time outstanding or owing under the Credit
Agreement and the other loan documents executed and delivered by the Company
pursuant thereto, together with interest thereon (including any interest
subsequent to any filing for Reorganization, whether or not such interest would
constitute an allowed claim, calculated at the rate set forth for overdue loans
in the Credit Agreement) and all other obligations of the Company under the
Credit Agreement and such other loan documents.
(b) Notwithstanding any termination of this Agreement pursuant to
Section 4, the Manager shall, subject to the limitations set forth in the
preceding paragraphs
-3-
<PAGE> 4
above, remain entitled (i) to receive the Management Fees set forth in Section
3(a) incurred prior to the date of termination which have not been paid to the
Company; and (ii) to receive payment of the deferred Management Fees at the time
of such termination if, and to the extent that, payment thereof is otherwise
permitted under Section 3(a).
4. Term of Agreement. The term of this Agreement shall be ten years
commencing on the date hereof, unless sooner terminated pursuant to the terms of
this Agreement. This Agreement may be terminated as follows: (a) by the Company
immediately upon written notice to the Manager for Cause (as defined below) or
(b) automatically on the consummation of the sale of all or substantially all of
the Company's assets. For purposes hereof, "Cause" shall exist if the Manager
has engaged in gross negligence or willful misconduct in the performance of its
duties hereunder which could have a material adverse effect on the Company.
5. Liability. The Company shall bear any and all expenses, liabilities,
losses or damages resulting from the operation of the Cable Systems, and the
Manager, its partners, officers, directors and employees shall not, under any
circumstances, be held liable therefor, except that the Manager shall be liable
for any loss or damage which results from its own gross negligence or willful
misconduct. Neither the Manager nor any of its partners, members, officers,
directors and employees shall be held to have incurred any liability to the
Company, the Cable Systems or any third party by virtue of any action not
constituting gross negligence or willful misconduct taken in good faith by it in
discharge of its duties hereunder, and the Company agrees to indemnify the
manager and its shareholders, partners, directors, officers and employees and
hold the Manager and its partners, directors, officers and employees harmless
with respect of the foregoing, including, but not limited to, reasonable
attorneys' fees.
6. Notices. All notices, demands, requests or other communications which
may be or are required to be given, served or sent by a party pursuant to this
Agreement shall be in writing and shall be deemed given upon receipt if
personally delivered (including by messenger or recognized delivery or courier
service) or on the date of receipt on the return receipt if mailed by registered
or certified mail, return receipt requested, postage prepaid, delivered or
addressed as set forth below. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed receipt of the notice:
(a) If to the Company:
c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131
Attention: Jerald L. Kent
-4-
<PAGE> 5
(b) If to the Manager:
Charter Communications, Inc.
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131
Attention: Jerald L. Kent
7. Governing Law. This Agreement and the rights and obligations of
the parties hereunder and the persons subject hereto shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York,
without giving effect to the choice of law principles thereof.
8. Miscellaneous. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by and against the parties hereto and their
respective successors and assigns. This Agreement embodies the entire agreement
and understanding among the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof. This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument. This
Agreement is not transferable or assignable by any of the parties hereto except
as may be expressly provided herein. This Agreement may not be amended,
supplemented or otherwise modified except in accordance with the Credit
Agreement.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written and effective as of the
Effective Date.
"Company"
CC VIII OPERATING, LLC
a Delaware limited liability company
By: /s/ Marcy Lifton
----------------
Name: Marcy Lifton
Title: Vice President
CHARTER TELEPHONE OF MICHIGAN, LLC,
a Delaware limited liability company
By: /s/ Marcy Lifton
----------------
Name: Marcy Lifton
Title: Vice President
CHARTER TELEPHONE OF MINNESOTA, LLC,
a Delaware limited liability company
By: /s/ Marcy Lifton
----------------
Name: Marcy Lifton
Title: Vice President
MIDWEST VIDEO ELECTRONICS, INC.
a Minnesota corporation
By: /s/ Marcy Lifton
----------------
Name: Marcy Lifton
Title: Vice President
CHARTER COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Marcy Lifton
----------------
Name: Marcy Lifton
Title: Vice President
-6-
<PAGE> 1
EXHIBIT 10.12(c)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
FOR
CHARTER COMMUNICATIONS HOLDING COMPANY, LLC
A DELAWARE LIMITED LIABILITY COMPANY
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, OR REGISTERED OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS. SUCH MEMBERSHIP INTERESTS MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THEY ARE
QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH
QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE MEMBERSHIP
INTERESTS REPRESENTED BY THIS AGREEMENT IS FURTHER SUBJECT TO OTHER
RESTRICTIONS, TERMS, AND CONDITIONS WHICH ARE SET FORTH HEREIN.
<PAGE> 2
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
FOR
CHARTER COMMUNICATIONS HOLDING COMPANY, LLC
A DELAWARE LIMITED LIABILITY COMPANY
This Amended and Restated Limited Liability Company Agreement for
Charter Communications Holding Company, LLC, a Delaware limited liability
company ("COMPANY"), is made and entered into effective as of February 14, 2000
("EFFECTIVE DATE"), by and among the individuals and entities listed on Schedule
A attached hereto, with reference to the following facts:
A. A Certificate of Formation of the Company was filed with the
Delaware Secretary of State on May 25, 1999. The Company was formed and has been
heretofore operated pursuant to the Limited Liability Company Agreement entered
into and made effective as of May 25, 1999 by Charter Investment, Inc. (formerly
known as Charter Communications, Inc.), a Delaware corporation ("CII"), as
amended and restated by (i) that certain Amended and Restated Limited Liability
Company Agreement entered into and made effective as of August 10, 1999, by and
between CII and Vulcan Cable III Inc., a Delaware corporation ("VULCAN CABLE"),
(ii) that certain Amended and Restated Limited Liability Company Agreement
entered into and made effective as of September 14, 1999, by and among CII,
Vulcan Cable, and certain other investors, (iii) that certain Amended and
Restated Limited Liability Company Agreement entered into and made effective as
of November 8, 1999, by and among CII, Vulcan Cable, Charter Communications,
Inc., a Delaware corporation ("PUBLICCO"), and certain other investors, and (iv)
that certain Amended and Restated Limited Liability Company Agreement entered
into and made effective as of November 12, 1999, by and among CII, Vulcan Cable,
PublicCo, Falcon Holding Group, L.P., a Delaware limited partnership ("FHGLP"),
and certain other investors (the "EXISTING LLC AGREEMENT").
B. On May 25, 1999, CII contributed its entire one hundred percent
(100%) limited liability company interest in Charter Communications Holdings,
LLC, a Delaware limited liability company, to the Company and became the sole
Member of the Company. In August and September 1999, Vulcan Cable contributed to
the Company cash and assets valued in the aggregate, at the time of the
contributions, at One Billion Three Hundred Twenty-Five Million Dollars
($1,325,000,000) and became a Member of the Company.
C. On September 14, 1999, pursuant to (i) that certain Purchase and
Sale Agreement dated as of April 26, 1999 by and among the sellers listed on the
signature pages thereto, Rifkin Acquisition Partners, L.L.L.P., and CII, (ii)
that certain Purchase and Sale Agreement dated as of April 26, 1999 by and among
the sellers listed on the signature pages thereto, InterLink Communications
Partners, LLLP, and CII (the agreements described in clauses (i) and (ii) are
collectively referred to herein as the "RIFKIN PURCHASE AGREEMENT," and all
signatories to the Rifkin Purchase Agreement other than CII, Rifkin Acquisition
Partners, L.L.L.P., and InterLink Communications Partners, LLLP are collectively
referred to herein as the "RIFKIN SELLERS"), and (iii) that certain Contribution
Agreement dated as of September 14, 1999, by and among Charter Communications
Operating, LLC, the
<PAGE> 3
Company, and the persons listed on the signature pages thereto (the "RIFKIN
CONTRIBUTION AGREEMENT"), some of the Rifkin Sellers contributed certain assets
to the Company and became Members of the Company. On November 12, 1999, some of
these Rifkin Sellers contributed their Membership Interests to PublicCo.
D. On November 12, 1999, PublicCo effected an initial public offering
of its stock (the "IPO") and contributed or agreed to contribute to the Company
(i) certain assets acquired utilizing certain proceeds of the IPO and (ii) the
remaining net proceeds of the IPO, and became a Member of the Company. In
connection with the IPO, Vulcan Cable contributed an additional Seven Hundred
Fifty Million Dollars ($750,000,000) in cash to the Company.
E. On November 12, 1999, pursuant to that certain Purchase and
Contribution Agreement dated as of May 26, 1999, by and among CII, Falcon
Communications, L.P., FHGLP, TCI Falcon Holdings, LLC, Falcon Cable Trust,
Falcon Holding Group, Inc., and DHN Inc., as amended (the "FALCON PURCHASE
AGREEMENT"), FHGLP contributed certain assets to the Company and became a Member
of the Company. On the same day, FHGLP distributed all of its Membership
Interests in the Company to its partners, and (i) the FHGLP partners (other than
Belo Ventures, Inc.) contributed all of their Membership Interests in the
Company to PublicCo, and (ii) Belo Ventures, Inc., an FHGLP partner, sold its
entire Membership Interest in the Company to Vulcan Cable.
F. On the Effective Date, pursuant to that certain Purchase and
Contribution Agreement dated as of June 29, 1999, by and among BCI (USA), LLC,
William J. Bresnan, Blackstone BC Capital Partners, L.P., Blackstone BC Offshore
Capital Partners, L.P., Blackstone Family Media Partnership III L.P., TCI
Bresnan LLC, TCID of Michigan, Inc., and the Company, as amended (the "BRESNAN
PURCHASE AGREEMENT") (all such signatories to the Bresnan Purchase Agreement
other than the Company are collectively referred to herein as the "BRESNAN
SELLERS"), some of the Bresnan Sellers are contributing certain assets to the
Company and becoming Members of the Company. This Agreement is intended to
replace Exhibit E of the Bresnan Purchase Agreement.
G. The parties desire to adopt and approve this Agreement, as the
limited liability company agreement for the Company, to establish their rights
and responsibilities and to govern their relationships.
H. Section 10.11 of the Existing LLC Agreement provides that an
amendment to the Existing LLC Agreement to incorporate the changes made by this
Agreement shall be effective as an amendment only upon the approval of Members
holding more than fifty percent (50%) of the Class B Common Units, and Section
4.2 of the Existing LLC Agreement provides that no Person may be admitted as a
Member unless approved by the Company's Manager and Members holding more than
fifty percent (50%) of the Class B Common Units. Immediately prior to the
Effective Date, PublicCo was the Company's Manager and owned all outstanding
Class B Common Units. PublicCo desires to approve the amendment to the Existing
LLC Agreement made by this Agreement and the admission of some of the Bresnan
Sellers as Members.
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NOW, THEREFORE, the Existing LLC Agreement is hereby being amended and
restated in its entirety as follows:
ARTICLE I
DEFINITIONS
When used in this Agreement, unless the context otherwise requires, the
following terms shall have the meanings set forth below (all terms used in this
Agreement that are not defined in this Article I shall have the meanings set
forth elsewhere in this Agreement):
1.1 "Act" means the Delaware Limited Liability Company Act, 6 Del. C.
ss. 18-01 et seq., as the same may be amended from time to time.
1.2 "Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Allocation Period, after giving effect to the following
adjustments:
1.2.1 Credit to such Capital Account any amounts that such Member
is obligated to restore pursuant to any provision of this Agreement or is deemed
to be obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5);
1.2.2 Credit to such Capital Account the amount of the deductions
and losses referable to any outstanding recourse liabilities of the Company owed
to or guaranteed by such Member (or a related person within the meaning of
Regulations Section 1.752-4(b)) to the extent that no other Member bears any
economic risk of loss and the amount of the deductions and losses referable to
such Member's share (determined in accordance with the Member's Percentage
Interest) of outstanding recourse liabilities owed by the Company to non-Members
to the extent that no Member bears any economic risk of loss; and
1.2.3 Debit to such Capital Account the items described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
1.3 "Affiliate" of any Person shall mean any other Person that,
directly or indirectly, controls, is under common control with or is controlled
by that Person. For purposes of this definition, "control" (including, with its
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.
1.4 "Agreement" means this Amended and Restated Limited Liability
Company Agreement, as originally executed and as amended and/or restated from
time to time.
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1.5 "Allocated Tax Deductions" has the meaning set forth in Section
6.5.2(c).
1.6 "Allocation Period" means the Company's fiscal year, which shall be
the calendar year, or any portion of such period for which the Company is
required to allocate Net Profits, Net Losses, or other items of Company income,
gain, loss, or deduction pursuant hereto.
1.7 "Approval of the Class A Common Members" means the affirmative
vote, approval or consent of Members holding more than fifty percent (50%) of
the Class A Common Units.
1.8 "Approval of the Members" means the affirmative vote, approval or
consent of Members holding more than fifty percent (50%) of the Class B Common
Units, provided that if at any time a court of competent jurisdiction shall hold
that the Class B Common Stock of PublicCo is not entitled to vote, or shall
enjoin the holders of the Class B Common Stock of PublicCo from exercising
voting rights, (a) to elect solely all but one of the directors of PublicCo
(except for any director(s) elected separately by the holders of one or more
series of preferred stock of PublicCo), (b) on any other matter subject to a
PublicCo shareholder vote, on the basis of (x) ten (10) votes for each share of
Class B Common Stock of PublicCo held by the holders of Class B Common Stock,
and for each share of Class B Common Stock for which any Units held directly or
indirectly by such Persons are exchangeable, divided by (y) the number of shares
of Class B Common Stock owned by such Persons, or (c) as a separate class, as to
certain specified matters in the PublicCo's certificate of incorporation, as
amended from time to time, that adversely affect the Class B Common Stock
relating to issuance of Class B Common Stock and other equity securities other
than Class A Common Stock or affecting the voting power of the Class B Common
Stock, "Approval of the Members" means the affirmative vote, approval or consent
of Members holding more than fifty percent (50%) of the Common Units. The
conversion of all outstanding shares of Class B Common Stock into shares of
Class A Common Stock in accordance with Clause (b)(viii) of Article Fourth of
PublicCo's certificate of incorporation as constituted as of the Class B Common
Measuring Date shall not constitute an event described in the proviso of the
preceding sentence.
1.9 "Attribution Rules" has the meaning set forth in Section 4.7.1 of
this Agreement.
1.10 "Baseline Tax Deductions" has the meaning set forth in Section
6.5.2(c).
1.11 "Basis" means the adjusted basis of an asset for federal income
tax purposes.
1.12 "Board" has the meaning set forth in Section 5.2.1 of this
Agreement.
1.13 "Bresnan Contributed Interest" has the meaning ascribed to the
term "Contributed Interest" in Section 2.1(b) of the Bresnan Purchase Agreement.
1.14 "Bresnan Exchange Agreement" means the Exchange Agreement entered
into as of the Class C Common Measuring Date by and among PublicCo and Bresnan
Holders.
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1.15 "Bresnan Holder" means each of the Bresnan Sellers who receives
Class C Common Units on the Class C Common Measuring Date pursuant to the
Bresnan Purchase Agreement.
1.16 "Bresnan Permitted Transferee" means (i) with respect to BCI
(USA), LLC and William J. Bresnan, (x) any affiliate of William J. Bresnan that
is, directly or indirectly, at least eighty percent (80%) owned or controlled by
William J. Bresnan, or (y) William J. Bresnan, William J. Bresnan's spouse, or
William J. Bresnan's descendants (including spouses of his descendants), any
trust established solely for the benefit of any of the foregoing individuals,
any private foundation of which only the foregoing individuals, Myles W.
Schumer, Jeffrey DeMond, and/or Priscilla O'Clock serve as trustees, or any
partnership or other entity at least eighty percent (80%) owned or controlled
directly or indirectly by any of the foregoing Persons, and (ii) with respect to
Blackstone BC Capital Partners L.P., Blackstone BC Offshore Capital Partners,
L.P., and Blackstone Family Media Partnership III L.P. (collectively, the
"Initial Blackstone Members"), as long as the proposed Transfer does not result
in more than five (5) Persons owning the Class C Common Units issued to the
Initial Blackstone Members under the Bresnan Purchase Agreement, Blackstone
Capital Partners III Merchant Banking Fund L.P., Blackstone Offshore Capital
Partners III Merchant Banking Fund L.P. and Blackstone Family Investment
Partnership III, L.P. (collectively, the "Blackstone Funds") or any other
limited partnership the general partner of which is at least eighty percent
(80%) owned or controlled by the Persons that own or control the general partner
of each of the Blackstone Funds; provided, however, that "Bresnan Permitted
Transferee" shall not include the partners in such partnerships.
1.17 "Bresnan Purchase Agreement" has the meaning set forth in the
recitals to this Agreement.
1.18 "Bresnan Put Agreement" means the Put Agreement entered into as of
the Class C Common Measuring Date by and among Bresnan Holders and Paul G.
Allen.
1.19 "Bresnan Sellers" has the meaning set forth in the recitals to
this Agreement.
1.20 "Cable Transmission Business" has the meaning set forth in Section
2.5 of this Agreement.
1.21 "Capital Account" means with respect to any Member the capital
account that the Company establishes and maintains for such Member pursuant to
Section 3.3 herein.
1.22 "Capital Contribution" means, with respect to any Member, the
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Company with respect to the interest in the Company
held by such Person. The principal amount of a promissory note which is not
readily traded on an established securities market and which is contributed to
the Company by the maker of the note (or a Person related to the maker of the
note within the meaning of Regulations Section 1.704-1(b)(2)(ii)(c)) shall not
be included in the Capital Account of any Person until the Company makes a
taxable disposition of the note or until (and to the extent) principal payments
are made on the note, all in accordance with Regulations Section
1.704-1(b)(2)(iv)(d)(2).
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1.23 "Certificate" means the Certificate of Formation of the Company
originally filed with the Delaware Secretary of State, as amended and/or
restated from time to time.
1.24 "CII" has the meaning set forth in the recitals to this Agreement.
1.25 "CII Exchange Agreement" means the Exchange Agreement dated as of
the Class B Common Measuring Date by and among PublicCo, CII, Vulcan Cable, and
Paul G. Allen, including, to the extent provided thereunder, the Tax Agreement
attached as Exhibit A thereto.
1.26 "Class A Common Member" means any Member holding and to the extent
it holds Class A Common Units.
1.27 "Class A Common Stock" means any common stock of PublicCo
denominated "Class A Common."
1.28 "Class A Common Units" means any Unit denominated "Class A Common
1.29 "Class A Preferred Contributed Amount" means, with respect to each
Class A Preferred Member, the sum of the net values of all of the Class A
Preferred Contributed Properties contributed by such Class A Preferred Member on
the Class A Preferred Measuring Date, as set forth on Schedule A attached
hereto.
1.30 "Class A Preferred Contributed Property" means each property
(other than cash) contributed to the Company by Class A Preferred Members, in
exchange for Class A Preferred Units.
1.31 "Class A Preferred Measuring Date" means September 14, 1999.
1.32 "Class A Preferred Member" means any Member holding and to the
extent it holds Class A Preferred Units.
1.33 "Class A Preferred Return Amount" means with respect to any Class
A Preferred Unit the amount determined by applying an eight percent (8%) per
annum simple rate to the Class A Preferred Contributed Amount represented by
such Class A Preferred Unit set forth on Schedule A attached hereto for the
period beginning on the Class A Preferred Measuring Date and ending on the date
(i) on which any such Unit is redeemed by the Company, (ii) on which any such
Unit is Transferred to PublicCo or another Person pursuant to the Rifkin Put
Agreement or this Agreement, or (iii) on which liquidating distributions are
made with respect to such Unit pursuant to Article IX; provided, however, that
the Class A Preferred Return Amount shall not accrue for any days for which an
interest payment accrues under the Rifkin Put Agreement.
1.34 "Class A Preferred Units" means any Unit denominated "Class A
Preferred."
1.35 "Class B Common Change Date" means January 1, 2004.
1.36 "Class B Common Measuring Date" means November 12, 1999.
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1.37 "Class B Common Member" means any Member holding and to the extent
it holds Class B Common Units.
1.38 "Class B Common Stock" means any common stock of PublicCo
denominated "Class B Common."
1.39 "Class B Common Units" means any Unit denominated "Class B
Common."
1.40 "Class C Common Change Date" means January 1, 2005.
1.41 "Class C Common Contributed Property" means each property (other
than cash) contributed by the Class C Common Members, in exchange for Class C
Common Units.
1.42 "Class C Common Measuring Date" means the date on which the Class
C Common Contributed Property and cash, if any, are contributed to the Company
and Class C Common Units are issued by the Company to the Bresnan Holders
pursuant to the Bresnan Purchase Agreement.
1.43 "Class C Common Member" means any Member holding and to the extent
it holds Class C Common Units.
1.44 "Class C Common Units" means any Unit denominated "Class C
Common."
1.45 "Class D Common Units" means any Unit denominated "Class D
Common," which was initially issued to FHGLP on the Class B Common Measuring
Date and was subsequently converted into a Class A Common Unit or a Class B
Common Unit.
1.46 "Code" means the Internal Revenue Code of 1986, as amended from
time to time, the provisions of succeeding law, and to the extent applicable,
the Regulations.
1.47 "Combined Book Profits" and "Combined Book Losses" mean, for any
Allocation Period, an amount equal to the Company's Net Profits or Net Losses
for such Allocation Period, with the following adjustment: all items of Company
deduction for Depreciation that are specially allocated pursuant to Section
6.3.7 hereof shall be taken into account in computing Combined Book Profits or
Combined Book Losses.
1.48 "Common Members" means Members holding and to the extent they hold
Common Units.
1.49 "Common Units" means any Unit denominated "Common," including
Class A Common Units, Class B Common Units, Class C Common Units, and any Units
so designated that may be hereafter issued by the Company.
1.50 "Company" has the meaning set forth in the preamble to this
Agreement.
1.51 "Company Minimum Gain" has the meaning ascribed to the term
"Partnership Minimum Gain" in Regulations Section 1.704-2(d).
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1.52 "Depreciation" means, for each Allocation Period, an amount equal
to the federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such Allocation Period, except
that if the Gross Asset Value of an asset differs from its Basis at the
beginning of such Allocation Period, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Allocation
Period bears to such beginning Basis; provided, however, that if the Basis of an
asset at the beginning of such Allocation Period is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Manager.
1.53 "Depreciation Allocations" has the meaning set forth in Section
6.5.1 of this Agreement.
1.54 "Effective Date" has the meaning set forth in the preamble to this
Agreement.
1.55 "Existing LLC Agreement" has the meaning set forth in the recitals
to this Agreement.
1.56 "Falcon Contributed Interest" has the meaning ascribed to the term
"Contributed Interest" in Section 2.1(b) of the Falcon Purchase Agreement.
1.57 "Falcon Purchase Agreement" has the meaning set forth in the
recitals to this Agreement.
1.58 "FHGLP" has the meaning set forth in the recitals to this
Agreement.
1.59 "Gross Asset Value" means, with respect to any asset, the asset's
Basis, except as follows:
1.59.1 Except as otherwise provided in the Rifkin Contribution
Agreement, the Falcon Purchase Agreement, or Section 5.7(f) of the Bresnan
Purchase Agreement, the initial Gross Asset Value of any asset contributed by a
Member (or a former member) to the Company shall be the gross fair market value
of such asset, as determined by the contributing Person and the Manager;
1.59.2 The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as determined by
the Manager, as of the following times: (a) the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more than
a de minimis Capital Contribution; (b) the distribution by the Company to a
Member of more than a de minimis amount of Property as consideration for an
interest in the Company; and (c) the liquidation of the Company within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (a) and (b) above shall be made only if the
Manager reasonably determines that such adjustments are necessary or appropriate
to reflect the relative economic interests of the Members in the Company.
Without limiting the generality of the foregoing, in connection with the
admission of the Bresnan Holders as Members, the Gross Asset Values of all
Company assets shall be adjusted as of immediately before the Effective Date so
that, following such adjustment and the admission of the Bresnan Holders as
Members, the amount of each Common Member's Capital Account balance as of the
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Class C Common Measuring Date shall equal an amount such that the following
ratio is the same for each Common Member: the amount of such Member's Capital
Account balance with respect to such Member's Common Units as of the Class C
Common Measuring Date, divided by the number of Common Units held by such Member
as of the Class C Common Measuring Date;
1.59.3 The Gross Asset Value of any Company asset distributed to
any Member shall be adjusted to equal the gross fair market value of such asset
on the date of distribution as determined by the distributee and the Manager;
and
1.59.4 The Gross Asset Values of Company assets shall be increased
(or decreased) to reflect any adjustments to the Basis of such assets pursuant
to Code Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulation Section 1.704-1(b)(2)(iv)(m) and Section 1.70.6 hereof; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this Section
1.59.4 to the extent the Manager determines that an adjustment pursuant to
Section 1.59.2 hereof is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
Section 1.59.4.
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.59.1, Section 1.59.2, or Section 1.59.4 hereof, such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Net Profits and Net Losses
1.60 "Incidental Business" has the meaning set forth in Section 2.5 of
this Agreement.
1.61 "IPO" has the meaning set forth in the recitals to this Agreement.
1.62 "Manager" has the meaning set forth in Section 5.1.1 of this
Agreement.
1.63 "Member" means each Person who is listed on Schedule A attached
hereto as a Member and any additional or substitute Member admitted to the
Company as a member of the Company in accordance with the terms of this
Agreement (so long as such Person holds a Membership Interest in the Company).
1.64 "Member Nonrecourse Debt" has the meaning ascribed to the term
"Partner Nonrecourse Debt" in Regulations Section 1.704-2(b)(4).
1.65 "Member Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that
would result if such Member Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Regulations Section 1.704-2(i)(3).
1.66 "Member Nonrecourse Deductions" means items of Company loss,
deduction, or Code Section 705(a)(2)(B) expenditures that are attributable to
Member Nonrecourse Debt or to other liabilities of the Company owed to or
guaranteed by a Member (or a related person within the meaning of Regulations
Section 1.752-4(b)) to the extent that no other Member bears the economic risk
of loss.
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1.67 "Membership Interest" means a Member's entire limited liability
company interest in the Company including the Member's right to share in income,
gains, losses, deductions, credits, or similar items of, and to receive
distributions from, the Company pursuant to this Agreement and the Act.
1.68 "Net Cash From Operations" means the gross cash proceeds from
Company operations (including sales and dispositions of Property in the ordinary
course of business) less the portion thereof used to pay or establish reasonable
reserves for all Company expenses, debt payments, capital improvements,
replacements, and contingencies, all as determined by the Manager. "Net Cash
From Operations" shall not be reduced by depreciation, amortization, cost
recovery deductions, or similar allowances, but shall be increased by any
reductions of reserves previously established pursuant to the first sentence of
this Section 1.68 and Section 1.69 hereof.
1.69 "Net Cash From Sales or Refinancings" means the net cash proceeds
from all sales and other dispositions (other than in the ordinary course of
business) and all refinancings of Property, less any portion thereof used to
establish reasonable reserves, all as determined by the Manager. "Net Cash From
Sales or Refinancings" shall include all principal and interest payments with
respect to any note or other obligation received by the Company in connection
with sales and other dispositions (other than in the ordinary course of
business) of Property.
1.70 "Net Profits" and "Net Losses" mean, for each Allocation Period,
an amount equal to the Company's taxable income or loss for such Allocation
Period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
1.70.1 Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Profits or Net
Losses pursuant to this definition shall be added to such taxable income or
loss;
1.70.2 Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Net Profits or Net Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
1.70.3 In the event the Gross Asset Value of any Company asset is
adjusted as a result of the application of Regulations Section
1.704-1(b)(2)(iv)(e) or Regulations Section 1.704-1(b)(2)(iv)(f), the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Profits or Net Losses;
1.70.4 Gain or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the Basis of such Property differs from its Gross Asset
Value;
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1.70.5 In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation in accordance with Section 1.52
hereof;
1.70.6 To the extent an adjustment to the Basis of any Company
asset pursuant to Code Section 734(b) or Code Section 743(b) is required
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account
in determining Capital Accounts, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the Basis of the asset) or loss
(if the adjustment decreases the Basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing Net Profits or
Net Losses; and
1.70.7 Notwithstanding any other provision of this definition, any
items that are specially allocated pursuant to Section 6.3 or 6.5 hereof shall
not be taken into account in computing Net Profits or Net Losses (the amounts of
the items of Company income, gain, loss, or deduction available to be specially
allocated pursuant to any provision of this Agreement shall be determined by
applying rules analogous to those set forth in Sections 1.70.1 through 1.70.6
above).
The foregoing definition of Net Profits and Net Losses is intended
to comply with the provisions of Regulations Section 1.704-1(b) and shall be
interpreted consistently therewith. In the event the Manager determines that it
is prudent to modify the manner in which Net Profits and Net Losses are computed
in order to comply with such Regulations, the Manager may make such
modification.
1.71 "Non-Attributable Status" has the meaning set forth in Section
4.7.1 of this Agreement.
1.72 "Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1).
1.73 "Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.704-2(b)(3).
1.74 "Non-Recognition Transaction" means an exchange to which Code
Section 351 applies or a transaction which qualifies as a "reorganization" under
Code Section 368(a), as described in Sections 2.1(a) and 2.1(b) of the CII
Exchange Agreement.
1.75 "Ownership Rules" has the meaning set forth in Section 4.7.2 of
this Agreement.
1.76 "Percentage Interest" means, with respect to each Common Member as
of any date, the percentage equal to the number of Common Units then held by
such Common Member divided by the total number of Common Units then held by all
Common Members.
1.77 "Person" means any individual, general partnership, limited
partnership, limited liability company, limited liability partnership,
corporation, trust, estate, real estate investment trust, association, or other
entity.
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1.78 "Property" means all real and personal property acquired by the
Company and any improvements thereto, and shall include both tangible and
intangible property.
1.79 "PublicCo" has the meaning set forth in the recitals to this
Agreement.
1.80 "Regulations" means the regulations currently in force from time
to time as final or temporary that have been issued by the U.S. Department of
the Treasury pursuant to its authority under the Code. If a word or phrase is
defined in this Agreement by cross-referencing the Regulations, then to the
extent the context of this Agreement and the Regulations require, the term
"Member" shall be substituted in the Regulations for the term "partner", the
term "Company" shall be substituted in the Regulations for the term
"partnership", and other similar conforming changes shall be deemed to have been
made for purposes of applying the Regulations.
1.81 "Regulatory Allocations" has the meaning set forth in Section
6.5.1.
1.82 "Remedial Method" means the "remedial allocation method" described
in Regulations Section 1.704-3(d).
1.83 "Rifkin Contributed Interest" has the meaning ascribed to the term
"Contributed Interest" in the recitals to the Rifkin Contribution Agreement.
1.84 "Rifkin Contribution Agreement" has the meaning set forth in the
recitals to this Agreement.
1.85 "Rifkin Holder" means each Rifkin Seller who elected to receive
Class A Preferred Units pursuant to the Rifkin Contribution Agreement.
1.86 "Rifkin Purchase Agreement" has the meaning set forth in the
recitals to this Agreement.
1.87 "Rifkin Put Agreement" means the Redemption and Put Agreement
dated as of September 14, 1999 by and among the Company, Paul G. Allen, and each
Rifkin Holder.
1.88 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the U.S. Securities and Exchange Commission or any
successor agency thereto promulgated thereunder, as in effect from time to time.
1.89 "Special Allocation Amount" means an amount equal to (i) the
aggregate amount of the items previously allocated to the Class A Common Members
pursuant to Sections 6.3.7(a)(y) and 6.3.7(c)(y), plus (ii) the aggregate amount
of Net Losses previously allocated to the Class A Common Members pursuant to
Section 6.2.1(b), minus (iii) the aggregate amount of Net Profits previously
allocated to the Class A Common Members pursuant to Sections 6.1.1(b) and
6.1.3(b).
1.90 "Special Allocation Amount Ratio" means, for any Allocation
Period, an amount equal to (i) the Special Allocation Amount as of the beginning
of such Allocation Period, divided by (ii) Combined Book Profits for such
Allocation Period times the Class B Common Members' aggregate Percentage
Interests; provided, however, that if the Special
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Allocation Amount Ratio is greater than one (1), then it shall be deemed to be
one (1) for purposes of this Agreement.
1.91 "Special Loss Allocations" has the meaning set forth in Section
6.4.1.
1.92 "Special Profit Allocations" has the meaning set forth in Section
6.4.1.
1.93 "Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association, joint venture or other
business entity of which (i) if a corporation, (x) ten percent (10%) or more of
the total voting power of shares of stock entitled to vote in the election of
directors thereof or (y) ten percent (10%) or more of the value of the equity
interests is at the time owned or controlled, directly or indirectly, by the
Person or one or more of its Subsidiaries, or (ii) if a limited liability
company, partnership, association or other business entity, ten percent (10%) or
more of the partnership or other similar ownership interests thereof is at the
time owned or controlled, directly or indirectly, by the Person or one or more
of its subsidiaries. The Person shall be deemed to have a ten percent (10%) or
greater ownership interest in a limited liability company, partnership,
association or other business entity if the Person is allocated ten percent
(10%) or more of the limited liability company, partnership, association or
other business entity gains or losses or shall be or control the Person managing
such limited liability company, partnership, association or other business
entity.
1.94 "Target Capital Account" has the meaning set forth in Section
6.5.1.
1.95 "Tax Loan" has the meaning set forth in Section 4.8.1.
1.96 "Tax Loan Amount" has the meaning set forth in Section 4.8.1
1.97 "Tentative Taxable Income" and "Tentative Tax Loss" have the
meanings set forth in Section 6.3.7(e) of this Agreement.
1.98 "Traditional Method" means the "traditional method" of making Code
Section 704(c) allocations described in Regulations Section 1.704-3(b).
1.99 "Transaction Documents" has the meaning set forth in Section 10.1
of this Agreement.
1.100 "Transfer" means any direct or indirect sale, transfer,
assignment, hypothecation, encumbrance or other disposition, whether voluntary
or involuntary, whether by gift, bequest or otherwise. In the case of a
hypothecation, the Transfer shall be deemed to occur both at the time of the
initial pledge and at any pledgee's sale or a sale by any secured creditor.
1.101 "Transferring Member" means, with regard to any transaction, any
Member who attempts to Transfer any of its Membership Interest or with regard to
whose Membership Interest an option is exercised pursuant to this Agreement.
1.102 "Units" means the units of Membership Interest issued by the
Company to its Members, which entitle the Members to certain rights as set forth
in this Agreement.
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1.103 "VCOC" means "Venture Capital Operating Company" as defined in
Section 2501.3-101(d) of the regulations promulgated by the United States
Department of Labor under the Employee Retirement Income Security Act of 1974,
as amended.
1.104 "VCOC Exception" means the exception for which an entity
qualifies under Section 2510.3-101(a)(2)(i) of the regulations promulgated by
the United States Department of Labor under the Employee Retirement Income
Security Act of 1974, as amended, by reason of being a VCOC so that the
underlying assets of that entity do not constitute "plan assets" within the
meaning of Section 2510.3-101(a) of such regulations.
1.105 "Vulcan Cable" has the meaning set forth in the recitals to this
Agreement.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. Pursuant to the Act, the Company has been formed as a
Delaware limited liability company under the laws of the State of Delaware. The
rights and liabilities of the Members shall be determined pursuant to the Act
and this Agreement. To the extent that the rights or obligations of any Member
are different by reason of any provision of this Agreement than they would be in
the absence of such provision, this Agreement shall, to the extent permitted by
the Act, control.
2.2 Name. The name of the Company shall be "Charter Communications
Holding Company, LLC." The business and affairs of the Company may be conducted
under that name or, upon compliance with applicable laws, any other name that
the Manager may deem appropriate or advisable. The Manager shall file any
fictitious name certificates and similar filings, and any amendments thereto,
that may be appropriate or advisable.
2.3 Term. The term of the Company shall commence on the date of the
filing of the Certificate with the Delaware Secretary of State and shall
continue until the Company is dissolved in accordance with the provisions of
this Agreement.
2.4 Principal Office; Registered Agent. The principal office of the
Company shall be as determined by the Manager. The Company shall continuously
maintain a registered agent and office in the State of Delaware as required by
the Act. The registered agent and office shall be as stated in the Certificate
or as otherwise determined by the Manager.
2.5 Purpose of Company. The Company may carry on any lawful business,
purpose, or activity that may be carried on by a limited liability company under
applicable law; (i) provided, however, that, until all outstanding shares of
Class B Common Stock have been converted into shares of Class A Common Stock in
accordance with Clause (b)(viii) of Article Fourth of PublicCo's certificate of
incorporation as constituted as of the Class B Common Measuring Date, without
the Approval of the Class A Common Members, the Company shall not engage
directly or indirectly, including without limitation through any Subsidiary, in
any business other than the Cable Transmission Business (as defined below) and
as a member of, and subscriber to, the portal joint venture with Broadband
Partners; (ii) provided further, that to the extent that, as of the Class B
Common Measuring Date, the Company was directly or indirectly engaged in or had
agreed to acquire directly or indirectly
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<PAGE> 16
any business other than the Cable Transmission Business or as a member of, and
subscriber to, the portal joint venture with Broadband Partners (any such other
business, an "INCIDENTAL BUSINESS," and collectively, "INCIDENTAL BUSINESSES"),
so long as (a) such Incidental Businesses so engaged in by the Company on the
Class B Common Measuring Date in the aggregate on such date accounted for less
than ten percent (10%) of the consolidated revenues of the total business
engaged in by the Company or (b) such Incidental Businesses which on the Class B
Common Measuring Date the Company had agreed to acquire in the aggregate on such
date accounted for less than ten percent (10%) of the consolidated revenues of
the total businesses to be acquired, as applicable, the Company may, directly or
indirectly, including through any Subsidiary, continue to conduct any such
Incidental Business and the foregoing limitation on the business and purpose of
the Company shall not require that any such Incidental Business be divested by
the Company, but the Company shall not, directly or indirectly, expand any such
Incidental Business by means of any acquisition or any commitment of the Company
or its Subsidiaries' resources or financial support. "CABLE TRANSMISSION
BUSINESS" means the transmission of video, audio (including telephony) and data
over cable television systems owned, operated or managed by the Company or its
Subsidiaries; provided, that the businesses of RCN Corporation and its
Subsidiaries shall not be deemed to be a Cable Transmission Business.
ARTICLE III
CAPITAL CONTRIBUTIONS AND UNITS
3.1 Capital Contributions and Certain Transfers of Units
3.1.1 CII or an Affiliate of CII.
(a) On May 25, 1999, CII contributed its entire one hundred
percent (100%) limited liability company interest in Charter Communications
Holdings, LLC, a Delaware limited liability company, to the Company in exchange
for Two Hundred Seventeen Million Five Hundred Eighty-Five Thousand Two Hundred
Forty-Six (217,585,246) Class A Common Units.
(b) In August and September 1999, Vulcan Cable contributed
cash and assets valued in the aggregate (net of liabilities), at the time of the
contributions, at One Billion Three Hundred Twenty-Five Million Dollars
($1,325,000,000) in exchange for Sixty-Three Million Nine Hundred Seventeen
Thousand Twenty-Eight (63,917,028) Class A Common Units.
(c) On the Class B Common Measuring Date, Vulcan Cable
contributed an additional Seven Hundred Fifty Million Dollars ($750,000,000) in
cash to the Company in exchange for Forty-One Million One Hundred Eighteen
Thousand Four Hundred Twenty-One (41,118,421) additional Class A Common Units.
(d) Upon a Rifkin Holder's exercise of its put right under
the Rifkin Put Agreement pursuant to which the Company is required to redeem
Class A Preferred Units from such Rifkin Holder, if requested by the Manager in
a prompt written notice to CII, CII or, at CII's discretion, its Affiliate
(other than PublicCo) shall contribute to the
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Company, in exchange for additional Class A Common Units, an amount of cash
equal to the amount that the Company is required to pay such Rifkin Holder for
its Class A Preferred Units being redeemed and all Common Units will be diluted
on a proportional basis. In return for CII or its Affiliate's Capital
Contribution under this Section 3.1.1(d), the Company is authorized, without the
need for additional act or consent of any Person, to issue additional Class A
Common Units to CII or its Affiliate pursuant to Section 3.6.2(c).
3.1.2 Rifkin Holders. On the Class A Preferred Measuring Date,
pursuant to the Rifkin Contribution Agreement, Rifkin Holders contributed the
Rifkin Contributed Interest to the Company in exchange for One Hundred
Thirty-Three Million Three Hundred Twelve Thousand One Hundred Eighteen
(133,312,118) Class A Preferred Units. On the Class B Common Measuring Date,
Rifkin Holders contributed One Hundred Thirty Million Three Hundred Five
Thousand Nine Hundred Sixteen (130,305,916) Class A Preferred Units to PublicCo,
and these Preferred Units converted into Six Million Nine Hundred Forty-Six
Thousand Eight Hundred Ninety-Three (6,946,893) Class B Common Units.
3.1.3 PublicCo.
(a) On the Class B Common Measuring Date, PublicCo contributed the
net proceeds of the IPO and the net proceeds from the underwriters' exercise of
their over-allotment option in connection with the IPO (less certain proceeds
retained to acquire certain assets) and agreed to contribute the assets acquired
with the retained proceeds to the Company (valued in the aggregate at Three
Billion Five Hundred Sixty-Six Million Eight Hundred Seventy Thousand Dollars
($3,566,870,000)) in exchange for One Hundred Ninety-Five Million Five Hundred
Fifty Thousand (195,550,000) Class B Common Units.
(b) Upon PublicCo's issuance of shares of common stock other than
in exchange for Units, PublicCo shall contribute the net cash proceeds and
assets received in respect of such issuance to the Company in exchange for a
number of Class B Common Units equal to the number of shares of common stock so
issued by PublicCo.
(c) Upon PublicCo's issuance of capital stock, other than common
stock, PublicCo shall contribute the net cash proceeds and assets received in
respect of any such issuance in exchange for Units that mirror to the extent
practicable the terms and conditions of such capital stock of PublicCo, as
reasonably determined by the Manager.
3.1.4 FHGLP. On the Class B Common Measuring Date, FHGLP
contributed the Falcon Contributed Interest to the Company in exchange for
Twenty Million Eight Hundred Ninety-Three Thousand Five Hundred Thirty-Nine
(20,893,539) Class D Common Units. On the same day, FHGLP distributed all such
Class D Common Units to its partners who, in turn, contributed Nineteen Million
Two Hundred Forty-Three Thousand Six Hundred Ninety-One (19,243,691) Class D
Common Units to PublicCo and sold One Million Six Hundred Forty-Nine Thousand
Eight Hundred Forty-Eight (1,649,848) Class D Common Units to Vulcan Cable. The
Class D Common Units contributed to PublicCo converted into Class B Common
Units, and the Class D Common Units sold to Vulcan Cable converted into Class A
Common Units.
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3.1.5 Bresnan Holders. On the Effective Date, Bresnan Holders are
contributing the Bresnan Contributed Interest to the Company in exchange for
Class C Common Units pursuant to the Bresnan Purchase Agreement.
3.1.6 Outstanding Units. Schedule A attached hereto describes all
of the outstanding Units as of the Effective Date.
3.2 Additional Capital Contributions. No Member shall be required to
make any Capital Contributions other than the Capital Contributions required by
Section 3.1. Subject to the approval of the Manager, the Members may be
permitted from time to time to make additional Capital Contributions if it is
determined that such additional Capital Contributions are necessary or
appropriate for the conduct of the Company's business and affairs, including
without limitation expansion or diversification. The Manager shall approve all
aspects of any such additional Capital Contribution, such as the amount and
nature of the consideration to be contributed to the Company, the resulting
increase in interest to be received by the contributing Member, the resulting
dilution of interest to be incurred by the other Members, and the extent to
which Members will participate in the allocations and distributions of the
Company as a result thereof.
3.3 Capital Accounts. The Company shall establish an individual Capital
Account for each Member. The Company shall determine and maintain each Capital
Account in accordance with Regulations Section 1.704-1(b)(2)(iv) and, in
pursuance thereof, the following provisions shall apply:
3.3.1 To each Member's Capital Account there shall be credited
such Member's Capital Contributions, such Member's allocated share of Net
Profits and any items in the nature of income or gain that are specially
allocated pursuant to Section 6.3, 6.4, or 6.5 hereof, and the amount of any
Company liabilities assumed by such Member or which are secured by any property
distributed to such Member;
3.3.2 To each Member's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property distributed to such
Member pursuant to any provision of this Agreement, such Member's allocated
share of Net Losses and any items in the nature of expenses or losses that are
specially allocated pursuant to Section 6.3, 6.4, or 6.5 hereof, and the amount
of any liabilities of such Member assumed by the Company or which are secured by
any property contributed by such Member to the Company;
3.3.3 In the event all or a portion of a Membership Interest in
the Company is transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
it relates to the transferred Membership Interest; and
3.3.4 In determining the amount of any liability for purposes of
Sections 3.3.1 and 3.3.2 hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section
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1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Manager determines that it is prudent to
modify the manner in which the Capital Accounts, or any debits or credits
thereto, are computed in order to comply with such Regulations, the Manager may
make such modification.
3.4 No Interest. No Member shall be entitled to receive any interest on
such Member's Capital Contributions.
3.5 Limited Withdrawal Rights of Members; Redemption Rights of the
Company.
3.5.1 No Withdrawal in General. No Member shall have the right to
withdraw such Member's Capital Contributions or to demand and receive property
of the Company or any distribution in return for such Member's Capital
Contributions, except as may be specifically provided in this Agreement or
required by law.
3.5.2 Redemption of Class A Preferred Units.
(a) Upon a Rifkin Holder's exercise of its put right under the
Rifkin Put Agreement pursuant to which the Company is required to redeem Class A
Preferred Units, the Company shall redeem in cash from such Rifkin Holder the
number of Class A Preferred Units specified in the notice of exercise. The
redemption price for such Class A Preferred Units shall be the sum of (i) the
Class A Preferred Contributed Amount in respect of such Class A Preferred Units
and (ii) the Class A Preferred Return Amount in respect of such redeemed Class A
Preferred Units. The redemption of Class A Preferred Units shall be effectuated
as of the last day of the calendar quarter following the date of a Rifkin
Holder's exercise of its put right. The Class A Preferred Units redeemed
pursuant to this Section 3.5.2(a) shall be deemed cancelled.
(b) All Class A Preferred Units outstanding on the fifteenth
(15th) anniversary of the Class A Preferred Measuring Date shall be redeemed by
the Company on such date at a redemption price equal to the sum of (i) the Class
A Preferred Contributed Amount in respect of such Class A Preferred Units and
(ii) the Class A Preferred Return Amount in respect of such redeemed Class A
Preferred Units. The Class A Preferred Units redeemed pursuant to this Section
3.5.2(b) shall be deemed cancelled.
3.5.3 Right to Redeem Class A Preferred Units. At any time after
the third anniversary of the Class A Preferred Measuring Date, the Company shall
have the right to redeem the Class A Preferred Units at a redemption price equal
to the sum of (i) the Class A Preferred Contributed Amount in respect of such
redeemed Class A Preferred Units and (ii) the Class A Preferred Return Amount in
respect of such redeemed Class A Preferred Units. The Class A Preferred Units
redeemed pursuant to this Section 3.5.3 shall be deemed cancelled.
3.5.4 Redemption of Class B Common Units. Upon PublicCo's request,
the Company is required and is hereby authorized to redeem Class B Common Units
held by PublicCo to the extent reasonably practicable as determined by the
Manager. The redemption price for such Class B Common Units shall be determined
in good faith by the Manager and PublicCo. The Class B Common Units redeemed
pursuant to this Section 3.5.4 shall be deemed cancelled.
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3.6 Units.
3.6.1 Classes and Number of Units. Units shall consist of the
following: (i) Class A Preferred Units, (ii) Class A Common Units, (iii) Class B
Common Units, (iv) Class C Common Units, and (v) any other classes of common or
preferred Units upon the Approval of the Members. Subject to the terms of this
Agreement, the Company may issue as many as one hundred billion
(100,000,000,000) units of each class of Units. Notwithstanding any provision of
this Agreement to the contrary, upon PublicCo's request, the Company is required
and is hereby authorized to subdivide (by any split, distribution,
reclassification, recapitalization or otherwise) or combine (by reverse split,
reclassification, recapitalization or otherwise) the outstanding Units so that
the number of outstanding shares of PublicCo's common stock will equal on a
one-for-one basis the number of Common Units owned by PublicCo. The Manager is
authorized to take any action necessary, desirable, or convenient to effectuate
the foregoing.
3.6.2 Class A Common Units.
(a) As of the beginning of the Effective Date, the number of Class
A Common Units issued to CII was Two Hundred Seventeen Million Five Hundred
Eighty-Five Thousand Two Hundred Forty-Six (217,585,246), and the number of
Class A Common Units issued to Vulcan Cable was One Hundred Six Million Six
Hundred Eighty-Five Thousand Two Hundred Ninety-Seven (106,685,297). On the
Effective Date, in connection with the closing of the asset acquisition
contemplated by the Bresnan Purchase Agreement and pursuant to Section 3.6.6(c)
of the Existing LLC Agreement, the Company shall issue Twenty-Nine Thousand Nine
Hundred Thirty-Six (29,936) additional Class A Common Units to Vulcan Cable (as
a successor in interest of FHGLP).
(b) After the Effective Date, if CII or any Affiliate of CII
(other than PublicCo) contributes any assets to the Company, the Members'
Membership Interests will be adjusted, additional Class A Common Units will be
issued to CII or such Affiliate, and Common Units will be diluted on a
proportional basis with Class B Common Units.
(c) Notwithstanding any other provision of this Section 3.6, upon
contribution of cash by CII or its Affiliate (other than PublicCo) to the
Company pursuant to Section 3.1.1(d), the number of Class A Common Units to be
issued to CII or such Affiliate will be (i) the amount of cash contributed by
CII or such Affiliate, divided by (ii) nineteen dollars ($19) (subject to an
appropriate adjustment if the Company's Common Units are split, subdivided or
combined after the Effective Date).
(d) Upon the acquisition of Class A Preferred Units pursuant to
the Rifkin Put Agreement by CII or its Affiliate (other than PublicCo), such
Class A Preferred Units will be converted into Class A Common Units. CII or such
Affiliate will be deemed to have made a Capital Contribution of cash to the
Company in the amount paid to a Class A Preferred Member pursuant to the Rifkin
Put Agreement, and the Company will be deemed to have issued Class A Common
Units to CII or its Affiliate. The number of Class A Common Units acquired by
CII or such Affiliate pursuant to this Section 3.6.2(e) will be (i) the net
purchase price paid by CII or such Affiliate for the Class A Preferred Units,
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divided by (ii) nineteen dollars ($19) (subject to an appropriate adjustment if
the Company's Common Units are split, subdivided or combined after the Effective
Date).
3.6.3 Class A Preferred Units. As of the Effective Date, the
aggregate number of outstanding Class A Preferred Units is Three Million Six
Thousand Two Hundred Two (3,006,202).
3.6.4 Class B Common Units.
(a) As of the beginning of the Effective Date, the aggregate
number of Class B Common Units issued to PublicCo was Two Hundred Twenty-One
Million Seven Hundred Forty Thousand Five Hundred Eighty-Four (221,740,584). On
the Effective Date, in connection with the closing of the asset acquisition
contemplated by the Bresnan Purchase Agreement and pursuant to Section 3.6.6(c)
of the Existing LLC Agreement, the Company shall issue Three Hundred Forty-Nine
Thousand One Hundred Sixty-Two (349,162) additional Class B Common Units to
PublicCo (as a successor in interest of FHGLP).
(b) Upon PublicCo's contribution of cash and/or assets to the
Company pursuant to Section 3.1.3(b), the Company will issue to PublicCo that
number of additional Class B Common Units equal to the number of shares of
common stock issued by PublicCo in such transaction.
(c) Upon PublicCo's contribution of cash and/or assets to the
Company pursuant to Sections 3.1.3(c), the Company will issue to PublicCo Units
that mirror to the extent practicable the terms and conditions of the capital
stock issued by PublicCo, as reasonably determined by the Manager.
(d) The Company may and is authorized to issue Class B Common
Units to certain Persons pursuant to the terms of the Company's employee
option/compensatory plans and agreements (as adopted or entered into from time
to time).
3.6.5 Class C Common Units. On the Class C Common Measuring Date,
the Company shall issue to Bresnan Holders the number of Class C Common Units
set forth on Schedule A attached hereto. In accordance with Paragraphs E and F
of Exhibit I of the Bresnan Purchase Agreement, (i) the Company may issue
additional Class C Common Units to the Bresnan Holders and their transferees or
(ii) the Bresnan Holders and their transferees may surrender to the Company some
of the Class C Common Units issued on the Class C Common Measuring Date. The
Manager shall make such adjustments as it deems necessary or appropriate so that
Bresnan Holders and their transferees are treated as having received all of the
Class C Common Units required to be issued pursuant to the Bresnan Purchase
Agreement on the Class C Common Measuring Date.
3.6.6 Dilution of Common Units. Upon the issuance of Common Units
to an entity that is not an Affiliate of CII, and upon the issuance of Common
Units to employees of the Company in their capacity as employees, all Common
Units will be diluted on a proportional basis with the existing Class A Common
Units.
3.7 Equal Treatment. In any transaction involving issuance, redemption,
or Transfer of Units (except as set forth in Section 3.1.1(d), 3.6.2(c),
3.6.2(d), 7.1, or 7.2) between
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(i) the Company and (ii) any Member that is an Affiliate of Paul G. Allen (other
than PublicCo) with respect to such Member's Common Units, such Members and the
Class C Common Members will be treated in a nondiscriminatory manner. For
instance, any proposed redemption from CII (as long as it is an Affiliate of
Paul G. Allen) of its Common Units shall be offered to the Class C Common
Members with respect to their Class C Common Units on the same proportionate
terms and conditions. Notwithstanding anything to the contrary in this
Agreement, if an Affiliate of Paul G. Allen contributes cash or assets to the
Company and the Company issues Units to such Person, the Class C Common Members
shall not have any preemptive right to purchase any of the newly-issued Units.
3.8 Limited Liability Company Certificates. The Manager may, in its
sole discretion, provide that certain Units are to be evidenced by certificates
of limited liability company interest executed by the Manager or any officers of
the Company in such form as the Manager may approve.
ARTICLE IV
MEMBERS
4.1 Limited Liability. Except as required under the Act or as expressly
set forth in this Agreement, no Member shall be personally liable for any debt,
obligation, or liability of the Company, whether that debt, obligation, or
liability arises in contract, tort or otherwise.
4.2 Admission of Members. Without the need for any additional act or
consent of any Person, (i) CII, Vulcan Cable, the Rifkin Holders listed on
Schedule A, and PublicCo shall continue to be members of the Company, and (ii)
the Bresnan Holders shall be admitted as members of the Company on the Class C
Common Measuring Date. Except as set forth in Article VII, no Person shall be
admitted as an additional Member unless approved by the Manager and the Approval
of the Members. No Person shall be admitted as an additional Member until such
additional Member has made any required Capital Contribution and has become a
party to this Agreement. Substitute Members may be admitted only in accordance
with Article VII. The Members acknowledge that the admission of such new Members
or the issuance of additional Membership Interests to pre-existing Members may
dilute the Percentage Interests of the Members.
4.3 Meetings of Members.
4.3.1 No annual or regular meetings of the Members as such shall
be required; if convened, however, meetings of the Members may be held at such
date, time, and place as the Manager or as the Member or Members who properly
noticed such meeting, as the case may be, may fix from time to time. At any
meeting of the Members, the Chairman of the Board (or, if there is no Chairman
or the Chairman so elects, a person appointed by the Manager) shall preside at
the meeting and shall appoint another person to act as secretary of the meeting.
The secretary of the meeting shall prepare written minutes of the meeting, which
shall be maintained in the books and records of the Company.
4.3.2 A meeting of the Members for the purpose of addressing any
matter on which the vote, consent, or approval of the Members is required or
permitted under this
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Agreement may be called at any time by the Manager, or by any Member or Members
holding more than twenty percent (20%) of all issued and outstanding Units
entitled to vote on, consent to or approve such matter.
4.3.3 Notice of any meeting of the Members shall be sent or
otherwise given by the Manager to the Members in accordance with this Agreement
not less than ten (10) nor more than sixty (60) days before the date of the
meeting. The notice shall specify the place, date, and hour of the meeting and
the general nature of the business to be transacted. Except as the Members may
otherwise agree, no business other than that described in the notice may be
transacted at the meeting.
4.3.4 Attendance in person of a Member at a meeting shall
constitute a waiver of notice of that meeting, except when the Member objects,
at the beginning of the meeting, to the transaction of any business because the
meeting is not duly called or convened, and except that attendance at a meeting
is not a waiver of any right to object to the consideration of matters not
included in the notice of the meeting if that objection is expressly made at the
meeting. Neither the business to be transacted nor the purpose of any meeting of
Members need be specified in any written waiver of notice. The Members may
participate in any meeting of the Members by means of conference telephone or
similar means as long as all Members can hear one another. A Member so
participating shall be deemed to be present in person at the meeting.
4.3.5 Any action that can be taken at a meeting of the Members may
be taken without a meeting and without prior notice if a consent in writing
setting forth the action so taken is signed and delivered to the Company by
Members representing not less than the minimum number of Units necessary under
this Agreement or the Act to approve the action. The Manager shall notify
Members holding Units entitled to vote on, consent to or approve such actions of
all actions taken by such consents, and all such consents shall be maintained in
the books and records of the Company.
4.4 Voting by Members. The Members, acting solely in their capacities
as Members, shall have the right to vote on, consent to, or otherwise approve
only those matters as to which this Agreement or the Act specifically requires
such approval. A Member may vote in person or by proxy executed in writing by
the Member or by a duly authorized attorney-in-fact. Except as otherwise
specifically provided in this Agreement, the Approval of the Members shall be
all that is required as to all matters, including merger, consolidation, and
conversion, as to which the vote, consent, or approval of the Members is
required or permitted under this Agreement or the Act.
4.5 Members Are Not Agents. No Member acting solely in the capacity of
a Member is an agent of the Company, nor can any Member acting solely in the
capacity of a Member bind the Company or execute any instrument on behalf of the
Company.
4.6 No Withdrawal. Except as provided in Articles III, VII and IX
hereof, no Member may withdraw, retire, or resign from the Company without the
prior Approval of the Members.
4.7 FCC Regulations.
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4.7.1 Notwithstanding any other provision of this Agreement to the
contrary, no Class C Common Member, including any officer, director, partner,
Affiliate or equivalent non-corporate official of such Class C Common Member,
shall:
(a) act as an employee of the Company if his or her
functions, directly or indirectly, relate to the media enterprises of the
Company;
(b) serve, in any material capacity, as an independent
contractor or agent with respect to the Company's media enterprises;
(c) communicate with the Manager or any management committee
of the Company on matters pertaining to the day-to-day operations of the
Company's business;
(d) perform any services for the Company materially relating
to its media activities; provided, however, that such Class C Common Member may
make loans to, or act as a surety for, the Company;
(e) become actively involved in the management or operation
of the media business of the Company;
(f) vote on the admission of additional Members, unless such
admission is subject to the veto of the Manager; or
(g) vote on the removal of a Member, except where such
Member is (A) subject to bankruptcy proceedings, as described in Section
402(4)-(5) of the Revised Uniform Limited Partnership Act; (B) is adjudicated
incompetent by a court of competent jurisdiction; or (C) is removed for cause,
as determined by an independent party.
The foregoing language is designed to ensure that the Class
C Common Members' ownership of Class C Common Units in the Company will be
deemed non-attributable for purposes of those FCC rules and regulations (as
amended and any successor laws thereto, the "Attribution Rules") that require
members of a limited liability company to certify that they are not materially
involved in the Company in order to obtain non-attributable status
("Non-Attributable Status"). (Notwithstanding, anything to the contrary
contained herein, in the event of any amendment of the Attribution Rules (or the
promulgation of any successor rules or regulations), the Manager shall have the
authority to amend this Section 4.7.1 as necessary for the Class C Common
Members to maintain, or obtain, Non-Attributable Status.) Although the foregoing
language should be read to preclude a Class C Common Member from taking any
actions with respect to the Company or any entity in which the Company holds an
attributable interest that would prevent the Company from certifying that such
Class C Common Member is "insulated" from material involvement in the Company
under applicable FCC rules, it is not intended to preclude any Class C Common
Member from engaging in any activities that are consistent with such FCC rules
and would not cause the Class C Common Member to be deemed to hold an
attributable interest in the Company. The Company's sole remedy for a breach of
this Section 4.7.1, except in the event of an intentional breach by a Class C
Common Member, is the exercise of its rights set forth in Section 4.7.2 below.
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4.7.2 In the event that (i) the ownership by any Class C Common
Member of Class C Common Units is reasonably deemed by the Manager to be
attributable for purposes of the Attribution Rules, including without limitation
either as a result of (A) any breach by a Class C Common Member of Section 4.7.1
or (B) a determination by the Federal Communications Commission ("FCC") that
would reasonably be considered to result in such Class C Common Member's
ownership of Class C Common Units being deemed attributable notwithstanding the
provisions of Section 4.7.1 and (ii) such attribution (A) results in a violation
of any cross or multiple-ownership rule or regulation promulgated by the FCC
(the "Ownership Rules"), including without limitation the Cable/Broadcast
Television Ownership Rules (ss. 47 C.F.R. 76.501(a)), the Cable Television
Horizontal Ownership Rules, if applicable (ss. 47 C.F.R. 76.503), or the
Cable/MMDS Cross Ownership Rules (ss. 47 C.F.R. 21.912) or (B) would prevent the
Company from engaging in the Cable Transmission Business in any area within the
United States as a result of a potential violation of the Ownership Rules,
whether by acquisition of an existing system or original construction, if, at
the time of the determination, the Company is actively pursuing (including
making internal evaluations) engaging in the Cable Transmission Business in such
area, such Class C Common Member and the Manager shall cooperate in good faith
to remedy any violation of the Ownership Rules by seeking appropriate relief
from the FCC with respect to such Class C Common Member's ownership of the Class
C Common Units or at such Class C Common Member's option through the divestment
by the Class C Common Member of the interest or property (with the exception of
the Class C Member Units) that causes, or would cause, the violation of the
Ownership Rules; provided that in no event shall the Company, any of its
Subsidiaries, or such Class C Common Member be required to divest any of its
properties or assets or to cease any of its business activities or to forego any
opportunity to acquire or expand any properties, assets or business activities
or take any action that would otherwise adversely affect the Company's or such
Class C Common Member's business, operations or financial condition in any way
or result in any significant financial expense or tax disadvantage to the
Company, PublicCo or the Class C Common Member, respectively, except as
specifically provided for herein. The Company and Class C Common Member shall
attempt to remedy any Ownership Rule violation or potential violation as soon a
practicable. In the event that such Ownership Rule violation (in the case of
clause (A) above) or potential violation (in the case of clause (B) above) is
not remedied within the shorter of either (i) six (6) months or such longer
period of time as agreed to by mutual consent of the Company and the Class C
Common Member; or (ii) such period as may be mandated by the FCC, such Class C
Common Member shall exercise its right to exchange its Class C Common Units for
shares of Publicly Traded Stock (as defined in the Bresnan Exchange Agreement)
of PublicCo pursuant to the terms of the Bresnan Exchange Agreement. In the
event the Company becomes aware of a violation of the Ownership Rules (in the
case of clause (A) above) or potential violation (in the case of clause (B)
above) the Company shall provide such Class C Common Member with prompt written
notice. If such an exchange would result in a violation of the ownership
restrictions of the Communications Act of 1934, as amended, or Ownership Rules,
such violation shall be remedied, as determined by the Company in its sole
discretion, by (i) the Class C Common Member selling a sufficient number of
shares of Publicly Traded Stock to cure the violation; (ii) the Company taking
such actions with respect to its business or operations as are necessary to cure
the violation, provided that in no event shall the Company be obligated to take
such actions; or (iii) if proposed by a Class C Common Member, such Class C
Common Member taking actions with respect to its business or operations as are
necessary
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to cure the violation; provided, however, that the Company shall not
unreasonably withhold its consent to any remedy proposed by a Class C Common
Member that would adequately and promptly address the violation and would not
require the Company or any of its Subsidiaries to divest any of its properties
or assets or to cease any of its business activities or to forego any
opportunity to acquire or expand any properties, assets or business activities
or otherwise adversely affect the Company's business, operations or financial
condition in any way or result in any significant financial expense or tax
disadvantage to the Company or PublicCo. In the event that the FCC lowers the
permissible attribution percentages under its Ownership Rules, if requested by
the Class C Common Member, PublicCo will reasonably cooperate in good faith to
assist the Class C Common Members in taking appropriate and timely action to
seek to insulate the Class C Common Member's interest in PublicCo to the extent
required (including, subject to the qualification set forth below, issuing
preferred non-voting stock on substantially the same terms as the Class A Common
Stock to the Class C Common Member in exchange for its Class A Common Stock or
permitting the Class C Common Member to form a special purpose corporation), or
the Class C Common Member, at its option, may take any other actions with
respect to its business necessary to comply with the new rules; provided that in
no event shall PublicCo or any of its Subsidiaries be required to divest any of
its properties or assets or to cease any of its business activities or to forego
any opportunity to acquire or expand any properties, assets or business
activities or otherwise adversely affect PublicCo's or the Company's business,
operations or financial condition in any way or result in any significant
financial expense or tax disadvantage to PublicCo or the Company in order to
achieve such insulation; provided that if such insulation is not achieved, the
Class C Common Member shall divest the number of shares of Publicly Traded Stock
(as defined in the Bresnan Exchange Agreement) as is necessary to remedy the
applicable FCC rule or regulation at issue.
4.8 Loans to Members.
4.8.1 General. If a Common Member is, or reasonably expects to be,
allocated taxable income described in Section 4.8.2 or 4.8.3, then upon such
Member's request, the Company, subject to the provisions of this Section 4.8,
shall make a loan ("TAX LOAN") to such Member in an amount ("TAX LOAN AMOUNT")
no greater than the amount reasonably sufficient to enable such Member to fund
its tax liability, or estimated tax payments, resulting from the allocation of
such taxable income on the later of (i) five days before each of April 15, June
15, September 15 and January 15 for estimated tax payments and April 15 for
final tax payments, and (ii) the date such Member requests the funding of such
Tax Loan, which date shall be no later than one hundred fifty (150) days after
the end of the taxable year in which the taxable income arises; provided,
however, that in the case of Tax Loans made with respect to estimated income tax
payments, the Tax Loan Amount shall be no greater than the amount of estimated
taxes actually paid by the Common Member receiving the loan and that such Member
shall provide to the Company reasonable documentation of the portion of its
actual estimated tax payment attributable to the taxable income described above.
The Tax Loan shall be secured by a first priority security interest in all of
such Member-creditor's Common Units and may be prepaid at any time prior to the
due date. The Members acknowledge (i) that many of the partners in Blackstone BC
Capital Partners, L.P., Blackstone BC Offshore Capital Partners, L.P., and
Blackstone Family Media Partnership III L.P. are residents of New York City and
that tax liability for such Blackstone entities must be calculated using the
highest nominal, marginal federal, state, and local
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income tax rates then imposed on such income of individual taxpayers residing in
New York City, with appropriate adjustments for the federal tax benefits from
the deduction for state and local taxes and (ii) that for each year, the
Blackstone entities' tax liability shall be equal to the greater of the regular
or alternative minimum tax liability taking into account alternative minimum tax
adjustments and carryfoward items arising from such entities' Membership
Interests in the Company. With respect to a Tax Loan to BCI (USA), LLC, the Tax
Loan Amount shall be determined as follows: based upon the certification of the
tax return preparer(s) of beneficial holders of membership interests in BCI
(USA), LLC to whom BCI (USA), LLC allocates at least seventy-five percent (75%)
of the taxable income allocated to it by the Company, BCI (USA), LLC shall
certify to the Company (i) the tax liability (estimated or actual) of such
beneficial holders attributable to the taxable income described in Section 4.8.2
or 4.8.3 that is allocated to such beneficial holders, and (ii) the percentage
of the taxable income allocated to BCI (USA), LLC by the Company that is
allocated by BCI (USA), LLC to such beneficial holders. The Tax Loan Amount
shall be equal to the amount of such certified tax liability, increased
proportionately to account for the beneficial holders of membership interests in
BCI (USA), LLC whose allocable shares of taxable income are not reflected in
such certified amount. For example, if BCI (USA), LLC certifies to the Company
that the applicable tax liability is Nine Million Dollars ($9,000,000) with
respect to beneficial holders to whom BCI (USA), LLC allocates ninety percent
(90%) of the taxable income allocated to it by the Company, then the Tax Loan
Amount shall be Ten Million Dollars ($10,000,000).
4.8.2 Interest-Free Loan. With respect to any taxable year ending
prior to the second (2nd) anniversary of the Class C Common Measuring Date, if a
Common Member is allocated any taxable income arising from a sale or other
disposition (other than in the ordinary course of business) of the Property
contributed by such Member pursuant to Code Section 704(c) other than taxable
income arising from a fully taxable sale or disposition for which such Member
has elected to receive an interest-bearing Tax Loan under Section 4.8.3, then
(i) the Tax Loan for such tax liability shall be due and payable to the Company
no later than ninety (90) days after the second (2nd) anniversary of the Class C
Common Measuring Date (or if a Common Member exercises its put option pursuant
to the Bresnan Put Agreement, then the date of closing thereunder) and shall be
interest-free, and (ii) the Tax Loan Amount due shall be reduced by the amount
of income taxes paid by the Member attributable to its recognition of imputed
income under the interest-free Tax Loan.
4.8.3 Interest-Bearing Loan. With respect to any taxable year
ending prior to the tenth (10th) anniversary of the Class C Common Measuring
Date, if a Common Member is allocated (i) any taxable income other than, in the
case of a Class C Common Member, an amount of taxable income equal to the amount
of the hypothetical remedial item of taxable income required to be taken into
account in determining the allocation of items of Depreciation to such Member
under Section 6.3.7(f), or (ii) any taxable income arising from a fully taxable
sale or disposition (other than in the ordinary course of business) of the
Property contributed by such Member pursuant to Section 704(c) other than an
amount for which the Member has elected to receive an interest-free Tax Loan
pursuant to Section 4.8.2, then the Tax Loan for such tax liability shall be due
and payable to the Company no later than the tenth (10th) anniversary of the
Class C Common Measuring Date and shall bear interest, compounded annually at a
rate per annum equal to the applicable federal rate under
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Code Section 1274(d) for a loan due on the tenth (10th) anniversary of the Class
C Common Measuring Date plus 100 basis points.
4.8.4 Acceleration of Repayment. Notwithstanding anything to the
contrary in this Section 4.8, (i) if the Company makes any distributions to the
Common Members pursuant to Section 6.9 or otherwise, the amount of each Common
Member's outstanding Tax Loan Amount equal to the amount of distributions made
to such Member pursuant to Section 6.9 or otherwise shall become due and payable
to the Company immediately, and (ii) if any Class C Common Member sells,
transfers, or exchanges any of its Class C Common Units (other than pursuant to
Section 7.2.3), the amount of such Member's outstanding Tax Loan Amount up to
the fair market value of the Units sold, transferred, or exchanged shall become
due and payable to the Company immediately; provided, however, that in the event
that a Class C Common Member exchanges its Class C Common Units for PublicCo
common stock pursuant to the Bresnan Exchange Agreement and not all shares of
PublicCo common stock received in such exchange are permitted by PublicCo to be
sold pursuant to a securities registration, only the amount of such Member's
outstanding Tax Loan Amount up to the excess, if any, of (i) the fair market
value of PublicCo common stock received by such Member that are permitted to be
sold, over (ii) forty-six percent (46%) of the fair market value of all PublicCo
common stock received by such Member in the exchange shall become due and
payable immediately. In the case described in the proviso of the preceding
sentence, the Company shall receive a security interest in the unsold PublicCo
common stock held by the Member, and as soon as any shares of PublicCo common
stock not permitted to be sold at the time of the exchange become eligible for
sale pursuant to a securities registration, such Member's outstanding Tax Loan
Amount equal to the fair market value of such shares shall become immediately
due and payable to the Company.
4.8.5 Loan Documentation; Miscellaneous. A Member receiving a Tax
Loan shall cooperate with the Company to document the respective parties' rights
and obligations under the Tax Loan including, without limitation, loan
documentation providing for and perfecting a security interest as contemplated
by Section 4.8.1. Notwithstanding any provision to the contrary in Section 4.8,
(i) the Company shall not make a Tax Loan to any Member if the loan would
breach, or with the passage of time or the giving of notice result in a breach
of, any contractual covenants of the Company or its Subsidiaries, and (ii) a
Common Member entitled to receive a Tax Loan from the Company may waive its
right to receive the loan.
ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 Management of the Company by Manager.
5.1.1 The Members hereby unanimously confirm the election of
PublicCo, or its successor-in-interest which acquires directly or indirectly
substantially all of the assets or businesses of PublicCo, as the manager of the
Company (the "MANAGER") for the period on and after November 8, 1999. At such
time as the Approval of the Members means the affirmative vote, approval or
consent of Members holding more than fifty percent (50%) of
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the Common Units, CII, or its successor-in-interest which acquires directly or
indirectly substantially all of the assets or businesses of CII, shall be the
Manager in place of PublicCo without further action of the Members and each of
the Members hereby consents to such election of CII. No Person may be elected as
Manager in addition to or in substitution of CII or PublicCo, other than an
Affiliate of CII or PublicCo or any of their successors-in-interest which
acquire directly or indirectly substantially all of the assets or businesses of
any Affiliate of CII or PublicCo, without the approval of the Common Members
owning a majority of each class of Common Units; provided, however, that no
approval of the Class C Common Members shall be required if there are fewer than
Two Million (2,000,000) Class C Common Units outstanding. Except as otherwise
required by applicable law and as provided in Section 5.2 with respect to the
Board, the powers of the Company shall at all times be exercised by or under the
authority of, and the business, property and affairs of the Company shall be
managed by, or under the direction of, the Manager.
5.1.2 The Manager shall be authorized to elect, remove or replace
directors and officers of the Company, who, subject to the direction of the
Manager, shall have such authority with respect to the management of the
business and affairs of the Company as set forth herein or as otherwise
specified by the Manager in a resolution or resolutions of the Manager.
5.1.3 Except as otherwise required by applicable law, the Manager
shall be authorized to execute or endorse any check, draft, evidence of
indebtedness, instrument, obligation, note, mortgage, contract, agreement,
certificate or other document on behalf of the Company. The Manager may delegate
its authority under this Section 5.1.3 to the officers of the Company.
5.1.4 No annual or regular meetings of the Manager are required.
The Manager may, by written consent and without prior notice (provided that
prompt subsequent notice is given to the Members), take any action which it is
otherwise required to take at a meeting.
5.1.5 Except as provided in this Agreement, the Manager's duty of
care in the discharge of its duties to the Company and the Members is limited to
discharging its duties pursuant to this Agreement in good faith, with the care a
corporate director of like position would exercise under similar circumstances,
in the manner it reasonably believes to be in the best interests of the Company.
In discharging its duties, the Manager shall not be liable to the Company or to
any Member for any act or omission performed or omitted by such Person in good
faith on behalf of, or in connection with the business and affairs of, the
Company and in a manner reasonably believed to be within the scope of authority
conferred on such Person by this Agreement, except that such Person shall be
liable in respect of any loss, damage, or claim incurred by such Person by
reason of such Person's fraud, deceit, reckless or intentional misconduct, gross
negligence, or a knowing violation of law with respect to such acts or
omissions.
5.1.6 Notwithstanding the other provisions of this Section 5.1 but
subject to the provisions of Section 4.7, the Manager shall provide the Bresnan
Holders that are Affiliates of Blackstone Group L.P. consultative rights
reasonably acceptable to the
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Manager so that such Bresnan Holders may maintain their VCOC status as long as
they hold Class C Common Units and qualify under the VCOC Exception.
5.1.7 Notwithstanding the other provisions of this Section 5.1, in
connection with PublicCo's contribution to the Company of the net cash proceeds
and assets received in respect of (i) the issuance of securities or incurrence
of indebtedness for borrowed money or for acquisition of assets by PublicCo or
(ii) the incurrence of any obligation by PublicCo under a capital lease, the
Manager shall issue securities or indebtedness of the Company to PublicCo that
mirrors to the extent practicable the terms and conditions of such securities,
indebtedness or capital lease obligation of PublicCo, as reasonably determined
by the Manager.
5.2 Board of Directors.
5.2.1 Notwithstanding Section 5.1, the Manager may delegate its
power to manage the business of the Company to a Board of Directors (the
"BOARD") which, subject to the resolutions adopted by the Manager from time to
time, shall have the authority to exercise all such powers of the Company and do
all such lawful acts and things as may be done by the Manager and as are not by
statute or by this Agreement required to be exercised or done only by the
Manager. The rights and duties of the members of the Board may not be assigned
or delegated to any Person; provided that the officers specified in Section 5.4
shall act in accordance with the directions and authorizations of the Board;
provided further that the Board may create committees, having such powers and
performing such duties as may be assigned to it by the Board, to assist the
Board and the officers in the governance of areas of importance to the Company.
5.2.2 Except as otherwise provided herein and to the extent that
there has been a delegation of authority under Section 5.1.2, members of the
Board shall possess and may exercise all the powers and privileges and shall
have all of the obligations and duties to the Company and the Members granted to
or imposed on directors of a corporation organized under the laws of the State
of Delaware.
5.2.3 The number of directors shall be determined by the Manager
and may be changed from time to time by the Manager. Each director shall be
appointed by the Manager and shall serve in such capacity until the earlier of
his or her resignation or removal (with or without cause) or replacement by the
Manager.
5.2.4 In the event that any action of the Manager conflicts with
any action of the Board or any other Person, the action of the Manager shall
control.
5.3 Board of Director Meetings.
5.3.1 Regular Meetings. Regular meetings of the Board may be held
without notice at such time and at such place as shall from time to time be
determined by the Board, but not less often than annually.
5.3.2 Special Meetings. Special meetings of the Board may be
called by the Chief Executive Officer or any member of the Board on twenty-four
(24) hours' notice to each director. Notice of a special meeting may be given by
facsimile.
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5.3.3 Telephonic Meetings. Members of the Board may participate in
any regular or special meetings of the Board, by means of conference telephone
or similar communications equipment, by means of which all persons participating
in the meeting can hear each other. Participation in a meeting pursuant to this
Section 5.3.3 will constitute presence in person at such meeting.
5.3.4 Quorum. At all meetings of the Board, a majority of the
directors shall constitute a quorum for the transaction of business, and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board, except as may be otherwise specifically provided
by statute or this Agreement. If a quorum is not present at any meeting of the
Board, the directors present thereat may adjourn the meeting from time to time
until a quorum shall be present. Notice of such adjournment shall be given to
any director not present at such meeting.
5.3.5 Action Without Meeting. Unless otherwise restricted by this
Agreement, any action required or permitted to be taken at any meeting of the
Board may be taken without a meeting and without prior notice if all members of
the Board consent thereto in writing and such written consent is filed with the
minutes of proceedings of the Board.
5.3.6 Board's Duty of Care. Except as provided in this Agreement,
the director's duty of care in the discharge of his duties to the Company and
the Members is limited to discharging his duties pursuant to this Agreement in
good faith, with the care a corporate director of like position would exercise
under similar circumstances, in the manner he reasonably believes to be in the
best interests of the Company. In discharging his duties, the director shall not
be liable to the Company or to any Member for any act or omission performed or
omitted by such director in good faith on behalf of, or in connection with the
business and affairs of, the Company and in a manner reasonably believed to be
within the scope of authority conferred on such director by this Agreement,
except that such director shall be liable in respect of any loss, damage, or
claim incurred by such director by reason of such Person's fraud, deceit,
reckless or intentional misconduct, gross negligence, or a knowing violation of
law with respect to such acts or omissions.
5.4 Officers.
5.4.1 Number, Titles, and Qualification. The Company shall have
such officers as may be necessary or desirable for the business of the Company.
The officers of the Company may include a Chairman of the Board, a Chief
Executive Officer, a President, one or more Vice Presidents, a Chief Financial
Officer, a Secretary, one or more Assistant Secretaries, a Treasurer, and one or
more Assistant Treasurers. The Chairman of the Board, Chief Executive Officer,
President, Executive Vice Presidents, Senior Vice Presidents, and Chief
Financial Officer shall be elected by the Manager or the Board. The Company
shall have such other officers as may from time to time be appointed by the
Manager, the Board, or the Chief Executive Officer. Each officer shall hold
office until his or her successor is elected or appointed, as the case may be,
and qualified or until his or her resignation or removal. Any number of offices
may be held by the same person.
5.4.2 Removal. Any officer of the Company may be removed at any
time, with or without cause, by the Manager, by the Chairman of the Board, by
the Board, or,
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except as to the Chairman of the Board, President, Executive Vice Presidents,
Senior Vice Presidents, and Chief Financial Officer, by the Chief Executive
Officer.
5.4.3 Resignations. Any officer may resign at any time by giving
written notice to the Company; provided, however, that notice to the Chairman of
the Board, the Chief Executive Officer or the Secretary shall be deemed to
constitute notice to the Company. Such resignation shall take effect upon
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
5.4.4 Vacancies. Any vacancy among the officers, whether caused by
death, resignation, removal or any other cause, shall be filled in the manner
prescribed for election or appointment to such office.
5.4.5 Action with Respect to Securities of Other Entities. Unless
otherwise directed by the Manager, the Board, the Chairman of the Board, the
Chief Executive Officer or any other officer of the Company authorized by the
Manager, the Chairman of the Board, or the Chief Executive Officer shall have
power to vote and otherwise act on behalf of the Company, in person or by proxy,
at any meeting of stockholders or equity holders of or with respect to any
action of stockholders or equity holders of any Person in which the Company may
hold securities and otherwise to exercise any and all rights and powers which
this Company may possess by reason of its ownership of securities in such
Person.
5.4.6 Bonds of Officers. If required by the Manager, the Chairman
of the Board, the Board, or the Chief Executive Officer, any officer of the
Company shall give a bond for the faithful discharge of his or her duties in
such amount and with such surety or sureties as the Manager, the Chairman of the
Board, the Board, or the Chief Executive Officer may require.
5.4.7 Compensation. The salaries of the officers shall be fixed
from time to time by the Board, unless and until the Board appoints a
Compensation Committee.
5.4.8 Officers of Operating Companies, Regions or Divisions. The
Chief Executive Officer shall have the power to appoint, remove and prescribe
the terms of office, responsibilities and duties of the officers of the
operating companies, regions or divisions of the Company, other than those who
are officers of the Company appointed by the Manager or the Board.
5.4.9 Duties and Authority of Officers.
(a) Chairman of the Board. The Chairman of the Board shall
have general and active responsibility for the management of the business of the
Company and shall be responsible for implementing all orders and resolutions of
the Manager or the Board. The Chairman of the Board shall be elected from among
the directors, and the Chairman of the Board or, at the election of the Chairman
of the Board, the Chief Executive Officer shall preside at all meetings of the
Members and directors. The Chief Executive Officer shall report to the Chairman
of the Board.
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(b) Chief Executive Officer. The Chief Executive Officer
shall supervise the daily operations of the business of the Company, and shall
report to the Chairman of the Board. Subject to the provisions of this Agreement
and to the direction of the Manager, the Chairman of the Board, or the Board, he
or she shall perform all duties which are commonly incident to the office of
chief executive officer of a corporation organized under the laws of the State
of Delaware or which are delegated to him or her by the Manager, the Chairman of
the Board, or the Board. To the fullest extent permitted by law, he or she shall
have power to sign all contracts and other instruments of the Company which are
authorized and shall have general supervision and direction of all of the other
officers, employees and agents of the Company. The Chief Executive Officer shall
perform the duties and exercise the powers of the Chairman of the Board in the
event of the Chairman of the Board's absence or disability.
(c) President. The President shall have such powers and
duties as may be delegated to him or her by the Manager, the Chairman of the
Board, the Board, or the Chief Executive Officer. The President shall perform
the duties and exercise the powers of the Chief Executive Officer in the event
of the Chief Executive Officer's absence or disability.
(d) Vice President. Each Vice President shall have such
powers and duties as may be delegated to him or her by the Manager, the Chairman
of the Board, the Board, or the Chief Executive Officer.
(e) Chief Financial Officer. The Chief Financial Officer
shall have responsibility for maintaining the financial records of the Company.
He or she shall render from time to time an account of all such transactions and
of the financial condition of the Company. The Chief Financial Officer shall
also perform such other duties as the Manager, the Board, or the Chief Executive
Officer may from time to time prescribe.
(f) Treasurer. The Treasurer shall have the responsibility
for investments and disbursements of the funds of the Company as are authorized
and shall render from time to time an account of all such transactions. The
Treasurer shall also perform such other duties as the Manager, the Board, or the
Chief Executive Officer may from time to time prescribe.
(g) The Secretary. The Secretary shall issue all authorized
notices for, and shall keep minutes of, all meetings of the Members and the
Board. He or she shall have charge of the corporate books and shall perform such
other duties as the Manager, the Board, or the Chief Executive Officer may from
time to time prescribe.
(h) Delegation of Authority. The Manager, the Chairman of
the Board, the Board, or the Chief Executive Officer may from time to time
delegate the powers or duties of any officer to any other officers or agents,
notwithstanding any provision hereof.
5.5 Indemnification.
5.5.1 Indemnification. To the extent permitted by applicable law,
a Member (and its respective officers, directors, agents, shareholders, members,
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partners, and Affiliates), Manager (and its respective officers, directors,
agents, shareholders, members, partners, and Affiliates), director of the
Company, or officer of the Company shall be entitled to indemnification from the
Company for any loss, damage, or claim incurred by such Person by reason of any
act or omission performed or omitted by such Person in good faith on behalf of,
or in connection with the business and affairs of, the Company and in a manner
reasonably believed to be within the scope of authority conferred on such Person
by this Agreement and, if applicable, the Approval of the Members or
authorizations of the Manager or the Board, except that no such Person shall be
entitled to be indemnified in respect of any loss, damage, or claim incurred by
such Person by reason of such Person's fraud, deceit, reckless or intentional
misconduct, gross negligence, or a knowing violation of law with respect to such
acts or omissions; provided, however, that any indemnity under this Section
5.5.1 shall be provided out of and to the extent of Company assets only, no debt
shall be incurred by the Members in order to provide a source of funds for any
indemnity, and no Member shall have any personal liability (or any liability to
make any additional Capital Contributions) on account thereof.
5.5.2 Expenses. To the extent permitted by applicable law,
expenses (including reasonable legal fees) incurred by a Member (and its
respective officers, directors, agents, shareholders, members, partners or
Affiliates), Manager (and its respective officers, directors, agents,
shareholders, members, partners or Affiliates), director of the Company, or
officer of the Company in such Person's capacity as such in defending any claim,
demand, action, suit, or proceeding shall, from time to time, be advanced by the
Company prior to the final disposition of such claim, demand, action, suit, or
proceeding upon receipt by the Company of an undertaking by or on behalf of the
Member (or its respective officers, directors, agents, shareholders, members,
partners or Affiliates, as applicable), Manager (or its respective officers,
directors, agents, shareholders, members, partners or Affiliates, as
applicable), director or officer to repay such amount if it shall be determined
that such Person is not entitled to be indemnified as authorized in Section
5.5.1 hereof.
5.6 Devotion of Time. Except as required by any individual contract and
notwithstanding any provision to the contrary in this Agreement, no Manager,
director of the Company, or officer of the Company is obligated to devote all of
such Person's time or business efforts to the affairs of the Company, but shall
devote such time, effort, and skill as such Person deems appropriate for the
operation of the Company.
5.7 Competing Activities. Except as provided by any individual contract:
(i) any Manager or Member (and their respective officers, directors, agents,
shareholders, members, partners or Affiliates) may engage or invest in,
independently or with others, any business activity of any type or description,
including without limitation those that might be the same as or similar to the
Company's business or the business of any Subsidiary and that might be in direct
or indirect competition with the Company or any Subsidiary; (ii) neither the
Company or any Subsidiary nor any Member shall have any right in or to such
other ventures or activities or to the income or proceeds derived therefrom;
(iii) no Manager or Member (and their respective officers, directors, agents,
shareholders, members, partners or Affiliates) shall be obligated to present any
investment opportunity or prospective economic advantage to the Company or any
Subsidiary, even if the opportunity is of the character that, if presented to
the Company or any Subsidiary, could be taken by the Company or any Subsidiary;
and (iv) any Manager or Member (and their respective officers, directors,
agents,
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shareholders, members, partners or Affiliates) shall have the right to hold any
investment opportunity or prospective economic advantage for such Manager's or
Member's (and their respective officers', directors', agents', shareholders',
members', partners' or Affiliates') own account or to recommend such opportunity
to Persons other than the Company or any Subsidiary; (i) provided that as a
condition to election as Manager and receiving a Membership Interest in the
Company upon consummation of the IPO, PublicCo agrees that until all outstanding
shares of Class B Common Stock have been converted into shares of Class A Common
Stock in accordance with Clause (b)(viii) of Article Fourth of PublicCo's
certificate of incorporation as constituted as of the Class B Common Measuring
Date, it shall not engage directly or indirectly, including without limitation
through any Subsidiary, in any business other than the Cable Transmission
Business and as a member of, and subscriber to, the portal joint venture with
Broadband Partners; (ii) provided further, that to the extent that, as of the
Class B Common Measuring Date, PublicCo was directly or indirectly engaged in,
or had agreed to acquire directly or indirectly, an Incidental Business, so long
as (a) such Incidental Businesses so engaged in by PublicCo on the Class B
Common Measuring Date in the aggregate on such date accounted for less than ten
percent (10%) of the consolidated revenues of the total business engaged in by
PublicCo, or (b) such Incidental Businesses which on the Class B Common
Measuring Date PublicCo had agreed to acquire in the aggregate on such date
accounted for less than ten percent (10%) of the consolidated revenues of the
total businesses to be acquired, as applicable, PublicCo may, directly or
indirectly, including through any Subsidiary, continue to conduct any such
Incidental Business and the foregoing limitation on the business and purpose of
PublicCo shall not require that any such Incidental Business be divested by
PublicCo, but PublicCo shall not, directly or indirectly, expand any such
Incidental Business by means of any acquisition or any commitment of PublicCo or
its Subsidiaries' resources or financial support. PublicCo also agrees that it
shall not (i) hold any assets, other than (a) working capital cash and cash
equivalents held for the payment of current obligations and receivables from the
Company; (b) Common Units; (c) back-to-back obligations and mirror equity
interests of the Company, consisting of obligations and equity securities (other
than Common Units, but including convertible securities), which are
substantially equivalent to liabilities or obligations or securities of PublicCo
to third parties; (d) assets subject to an existing obligation to contribute
such assets (or successor assets) to the Company in exchange for Units; (e)
assets acquired as a result of the issuance of (x) common stock of PublicCo
and/or preferred stock of PublicCo and/or (y) liabilities or obligations of
PublicCo, subject to an existing obligation to contribute such assets (or
successor assets) to the Company in exchange for Common Units (in respect of the
common stock of PublicCo issued) and/or for mirror equity securities (other than
Common Units, but including convertible securities, in respect of the mirror
equity securities issued) of the Company and/or liabilities or obligations of
the Company (in respect of the liabilities or obligations incurred), which are
substantially equivalent to the equity securities and/or liabilities and
obligations of PublicCo issued to acquire such assets; or (f) goodwill or
deferred tax assets, or (ii) incur any liabilities or obligations for borrowed
money, for acquisition of assets or under any capital lease, other than (a) in
connection with back-to-back obligations of the Company to PublicCo consisting
of liabilities or obligations of the Company which are substantially equivalent
to liabilities or obligations of PublicCo to a third party; (b) liabilities or
obligations incident to the acquisition of Units in exchange for common stock of
PublicCo; or (c) liabilities or obligations as contemplated by Clauses (i)(d)
and (e) immediately above. PublicCo further agrees (x) that it shall not issue,
transfer from treasury
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stock or repurchase shares of its common stock unless in connection with any
such issuance, transfer, or repurchase PublicCo takes all requisite action such
that, after giving effect to all such issuances, transfers or repurchases, the
number of outstanding shares of common stock will equal on a one-for-one basis
the number of Common Units owned by PublicCo; (y) that it shall not issue,
transfer from treasury stock or repurchase shares of preferred stock of PublicCo
unless in connection with any such issuance, transfer or repurchase PublicCo
takes all requisite action such that, after giving effect to all such issuances,
transfers or repurchases, PublicCo holds mirror equity interests of the Company
which are in the aggregate substantially equivalent to the outstanding preferred
stock of PublicCo; and (z) upon any reclassification of the Common Units,
whether by combination, division or otherwise, it shall take all requisite
action so that the number of outstanding shares of common stock will equal on a
one-for-one basis the number of Common Units owned by PublicCo.
The Company agrees that, until all outstanding shares of Class B Common
Stock have been converted into shares of Class A Common Stock in accordance with
Clause (b)(viii) of Article Fourth of PublicCo's certificate of incorporation as
constituted as of the Class B Common Measuring Date, without the Approval of the
Class A Common Members, (i) the Company shall not engage directly or indirectly,
including without limitation through any Subsidiary, in any business other than
the Cable Transmission Business and as a member of and subscriber to, the portal
joint venture with Broadband Partners; and (ii) to the extent that, as of the
Class B Common Measuring Date, the Company was directly or indirectly engaged
in, or had agreed to acquire directly or indirectly, an Incidental Business, so
long as (a) such Incidental Businesses so engaged in by the Company on the Class
B Common Measuring Date in the aggregate on such date accounted for less than
ten percent (10%) of the consolidated revenues of the total business engaged in
by the Company or (b) such Incidental Businesses which on the Class B Common
Measuring Date the Company had agreed to acquire in the aggregate on such date
accounted for less than ten percent (10%) of the consolidated revenues of the
total businesses to be acquired, as applicable, the Company may, directly or
indirectly, including through any Subsidiary, continue to conduct any such
Incidental Business and the foregoing limitation on the business and purpose of
the Company shall not require that any such Incidental Business be divested by
the Company, but the Company shall not, directly or indirectly, expand any such
Incidental Business by means of any acquisition or any commitment of the Company
or its Subsidiaries' resources or financial support.
The Company and each Member acknowledge that the other Members, the
Manager (and their respective officers, directors, agents, shareholders,
members, partners or Affiliates) and the officers or directors of the Company
(to the extent expressly permitted in their employment agreement) might own or
manage other businesses, including businesses that may compete with the Company
or any Subsidiary for the time of the Member or Manager. Without limiting the
generality of the foregoing, the Company and each Member acknowledge that Vulcan
Ventures Inc., an Affiliate of CII and Vulcan Cable, entered into an agreement
to purchase convertible preferred stock of RCN Corporation, which may be deemed
to be engaged in the cable transmission business. The Company and each Member
acknowledge that none of them shall have any interest in the securities of RCN
Corporation to be acquired by Vulcan Ventures Inc. or any RCN Corporation common
stock into which such securities are convertible, and that Vulcan Ventures Inc.
shall not have any obligation
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to them on account thereof. To the extent that, at law or at equity, any Member
or Manager (and their respective officers, directors, agents, shareholders,
members, partners or Affiliates) or officers or directors of the Company have
duties (including fiduciary duties) and liabilities relating to the Company and
the other Members, such Person shall not be liable to the Company or the other
Members for its good faith reliance on the provisions of this Agreement
including this Section 5.7. The Company and each Member hereby waive any and all
rights and claims that the Company or such Member may otherwise have against the
other Members and the Manager (and their respective officers, directors, agents,
shareholders, members, partners or Affiliates) or officers or directors of the
Company as a result of any such permitted activities. The provisions of this
Agreement, and any agreement between the Company and any Member entered into in
reliance on this Section 5.7, to the extent that they restrict the duties and
liabilities of a Manager or Member (and their respective officers, directors,
agents, shareholders, members, partners or Affiliates) or officers or directors
of the Company otherwise existing at law or in equity, are agreed by the Company
and the Members to replace such other duties and liabilities of such Person.
5.8 Remuneration for Management or Other Services. The Manager, directors,
and officers of the Company shall be entitled to reasonable remuneration for
providing management or other services to the Company, all as determined by the
Manager.
5.9 Reimbursement of Expenses. The Company shall reimburse the Manager,
directors of the Company, and officers of the Company for the actual and
reasonable costs, fees, and expenses paid or incurred by any Person for goods,
materials, services, and activities acquired or used by or for the benefit of
the Company, or performed or undertaken for the benefit of the Company. Without
limiting the generality of the foregoing, the Company shall reimburse PublicCo,
for all costs, fees, and expenses paid or incurred by PublicCo in connection
with the IPO and its compliance with the Securities Act, the Securities Exchange
Act of 1934, as amended, the Investment Company Act of 1940, as amended, and any
other applicable federal and state securities laws without duplication of any
expense paid.
ARTICLE VI
ALLOCATIONS OF NET PROFITS AND NET LOSSES
AND
DISTRIBUTIONS
6.1 Allocations of Net Profits. After giving effect to the special
allocations set forth in Sections 6.3 and 6.5 herein, Net Profits for any
Allocation Period shall be allocated to the Members as follows:
6.1.1 For any Allocation Period ending prior to the Class B Common
Change Date, if the Company has Combined Book Losses for such Allocation Period,
then:
(a) to each of the Common Members (including the Class A
Common Members) other than the Class B Common Members, in an amount equal to (i)
the amount of Net Profits, multiplied by (ii) such Common Member's Percentage
Interest; and
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(b) in addition to the amount allocated to the Class A
Common Members pursuant to Section 6.1.1(a), to the Class A Common Members, to
be allocated among them in proportion to their Percentage Interests, in an
amount equal to (i) the amount of Net Profits, multiplied by (ii) the Class B
Common Members' aggregate Percentage Interests.
6.1.2 For any Allocation Period ending after the Class B Common
Change Date, if the Company has Combined Book Losses for such Allocation Period,
then to each of the Common Members in accordance with such Common Member's
Percentage Interest.
6.1.3 For any Allocation Period ending after the Class B Common
Measuring Date, if the Company has Combined Book Profits for such Allocation
Period and if there is any Special Allocation Amount as of the beginning of such
Allocation Period, then:
(a) to each of the Common Members (including the Class A
Common Members) other than the Class B Common Members, in an amount equal to (i)
the amount of Net Profits, multiplied by (ii) such Common Member's Percentage
Interest;
(b) in addition to the amount allocated to the Class A
Common Members pursuant to Section 6.1.3(a), to the Class A Common Members, to
be allocated among them in proportion to their Percentage Interests, in an
amount equal to (i) the amount of Net Profits, multiplied by (ii) the product of
the Class B Common Members' aggregate Percentage Interests and the Special
Allocation Amount Ratio; provided, however, that the allocation of Net Profits
pursuant to this Section 6.1.3(b) shall be subject to Section 6.4; and
(c) to the Class B Common Members, to be allocated among
them in proportion to their Percentage Interests, in an amount equal to (i) the
amount of Net Profits multiplied by the Class B Common Members' aggregate
Percentage Interests, minus (ii) the amount of Net Profits allocated to the
Class A Common Members pursuant to Section 6.1.3(b) for such Allocation Period.
6.1.4 For any Allocation Period ending after the Class B Common
Measuring Date, if the Company has Combined Book Profits for such Allocation
Period and if there is no Special Allocation Amount as of the beginning of such
Allocation Period, then to each of the Common Members in accordance with such
Common Member's Percentage Interest.
6.2 Allocations of Net Losses. After giving effect to the special
allocations set forth in Sections 6.3 and 6.5 herein, Net Losses for any
Allocation Period shall be allocated to the Members as follows:
6.2.1 For any Allocation Period ending prior to the Class B Common
Change Date:
(a) to each of the Common Members (including the Class A
Common Members) other than the Class B Common Members, in an amount equal to (i)
the amount of Net Losses, multiplied by (ii) such Common Member's Percentage
Interest; and
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(b) in addition to the amount allocated to the Class A
Common Members pursuant to Section 6.2.1(a), to the Class A Common Members, to
be allocated among them in proportion to their Percentage Interests, in an
amount equal to (i) the amount of Net Losses, multiplied by (ii) the Class B
Common Members' aggregate Percentage Interests.
6.2.2 For any Allocation Period ending after the Class B Common
Change Date, to each of the Common Members in accordance with such Common
Member's Percentage Interest.
6.2.3 Notwithstanding Sections 6.2.1 and 6.2.2, an allocation of
Net Losses under Section 6.2.1 or 6.2.2 hereof shall not be made to the extent
it would create or increase an Adjusted Capital Account Deficit for a Member or
Members at the end of any Allocation Period. Any Net Losses not allocated
because of the preceding sentence shall be allocated to the other Member or
Members in proportion to such Member's or Members' respective Percentage
Interests; provided, however, that to the extent such allocation would create or
increase an Adjusted Capital Account Deficit for another Member or Members at
the end of any Allocation Period, such allocation shall be made to the remaining
Member or Members in proportion to the respective Percentage Interests of such
Member or Members.
6.3 Special Allocations. The following special allocations shall be made in
the following order:
6.3.1 Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding any other provision of this
Article VI, if there is a net decrease in Company Minimum Gain during any
Allocation Period, each Member shall be specially allocated items of Company
income and gain for such Allocation Period (and, if necessary, subsequent
Allocation Periods) in an amount equal to the portion of such Member's share of
the net decrease in Company Minimum Gain which share of such net decrease shall
be determined in accordance with Regulations Section 1.704-2(g)(2). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations Section
1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.1 is intended to comply with
the minimum gain chargeback requirement contained in Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
6.3.2 Member Minimum Gain Chargeback. Except as otherwise provided
in Regulation Section 1.704-2(i)(4), notwithstanding any other provision of this
Article VI, if there is a net decrease in Member Nonrecourse Debt Minimum Gain
attributable to a Member Nonrecourse Debt during any Allocation Period, each
Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt (which share shall be determined in accordance
with Regulations Section 1.704-2(i)(5)) shall be specially allocated items of
Company income and gain for such Allocation Period (and, if necessary,
subsequent Allocation Periods) in an amount equal to that portion of such
Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence
shall
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be made in proportion to the amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.2 is
intended to comply with the minimum gain chargeback requirement contained in
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
6.3.3 Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6) or any other event
creates an Adjusted Capital Account Deficit, items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this Section 6.3.3
shall be made only if and to the extent that such Member would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Article
VI have been tentatively made as if this Section 6.3.3 were not in the
Agreement.
6.3.4 Nonrecourse Deductions Referable to Liabilities Owed to
Non-Members. Any Nonrecourse Deductions for any Allocation Period and any other
deductions or losses for any Allocation Period referable to a liability owed by
the Company to a Person other than a Member to the extent that no Member bears
the economic risk of loss shall be specially allocated to the Members in
accordance with their Percentage Interests.
6.3.5 Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Allocation Period shall be specially allocated to the Member
who bears the economic risk of loss with respect to the Member Nonrecourse Debt
or other liability to which such Member Nonrecourse Deductions are attributable
in accordance with Regulations Section 1.704-2(i) and Regulations Section
1.704-1(b).
6.3.6 Section 754 Adjustments. To the extent an adjustment to the
Basis of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be
taken into account in determining Capital Accounts, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the Basis of the asset) or loss (if the adjustment
decreases such Basis) and such gain or loss shall be specially allocated to the
Members in accordance with Regulations Section 1.704-1(b)(2)(iv)(m).
6.3.7 Depreciation and Amortization. All of the remaining items of
Company deduction for Depreciation for any Allocation Period shall be specially
allocated to the Members as follows:
(a) For any Allocation Period ending prior to the Class B
Common Change Date, if the Company has Combined Book Losses for such Allocation
Period, then: (x) to each of the Common Members other than the Class A Common
Members, the Class B Common Members, and the Class C Common Members in an amount
equal to (i) the amount of the item to be allocated, multiplied by (ii) such
Member's Percentage Interest; and (y) to the Class A Common Members, to be
allocated among them in proportion to their Percentage Interests, in an amount
equal to (i) the amount of the item to be allocated, multiplied by (ii) the
Class B Common Members' aggregate Percentage Interests.
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(b) For any Allocation Period ending after the Class B
Common Change Date, if the Company has Combined Book Losses for such Allocation
Period, then to each of the Common Members other than the Class A Common Members
and the Class C Common Members in an amount equal to (i) the amount of the item
to be allocated, multiplied by (ii) such Member's Percentage Interest.
(c) For any Allocation Period ending after the Class B
Common Measuring Date, if the Company has Combined Book Profits for such
Allocation Period and if there is any Special Allocation Amount as of the
beginning of such Allocation Period, then: (x) to each of the Common Members
other than the Class A Common Members, the Class B Common Members, and the Class
C Common Members in an amount equal to (i) the amount of the item to be
allocated, multiplied by (ii) such Member's Percentage Interest; (y) to the
Class A Common Members, to be allocated among them in proportion to their
Percentage Interests, in an amount equal to (i) the amount of the item to be
allocated, multiplied by (ii) the product of the Class B Common Members'
aggregate Percentage Interests and the Special Allocation Amount Ratio;
provided, however, that the allocation of items pursuant to this Section
6.3.7(c)(y) shall be subject to Section 6.4; and (z) to the Class B Common
Members, to be allocated among them in proportion to their Percentage Interests,
in an amount equal to (i) the amount of the item to be allocated multiplied by
the Class B Common Members' aggregate Percentage Interests, minus (ii) the
amount of such item allocated to the Class A Common Members pursuant to Section
6.3.7(c)(y) for such Allocation Period.
(d) For any Allocation Period ending after the Class B
Common Measuring Date, if the Company has Combined Book Profits for such
Allocation Period and if there is no Special Allocation Amount as of the
beginning of such Allocation Period, then to each of the Common Members other
than the Class A Common Members and the Class C Common Members in an amount
equal to (i) the amount of the item to be allocated, multiplied by (ii) such
Member's Percentage Interest.
(e) For any Allocation Period ending prior to the Class C
Common Change Date, to each of the Class C Common Members in an amount
determined as follows: The allocation provisions in this Article VI shall first
be applied tentatively without taking into account any items of Depreciation,
other than items of Depreciation allocated under Sections 6.3.4 and 6.3.5. Such
tentative application of the allocation provisions shall result in a calculation
of the amount of the taxable income or loss ("Tentative Taxable Income" or
"Tentative Tax Loss," respectively) that would be allocated to each Class C
Common Member by the Company if such tentative application were final. Next,
items of Depreciation under this Section 6.3.7(e) shall be allocated to each
Class C Common Member with Tentative Taxable Income to the extent necessary to
cause the amount of the taxable income, excluding any taxable income arising
from a sale or other disposition (other than in the ordinary course of business)
of any Class C Common Contributed Property (to the extent that at the time of
its contribution to the Company its Gross Asset Value differs from its Basis),
allocated to such Member by the Company to be equal, or as nearly equal as
possible, to zero. In allocating items of Depreciation to each Class C Common
Member with Tentative Taxable Income pursuant to the preceding sentence, the
Company shall, to the extent possible, allocate to such Member a uniform
percentage of each item of Depreciation allocated under Section 6.3.7. If the
allocation of items of Depreciation under
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this Section 6.3.7(e) is insufficient to reduce to zero such taxable income for
each Class C Common Member, then such items shall be allocated to the Class C
Common Members in proportion to their respective Tentative Taxable Incomes. No
items of Deprecation under this Section 6.3.7(e) shall be allocated to any Class
C Common Member with a Tentative Tax Loss. For purposes of this Section 6.3.7,
the Company's taxable income or loss, as determined in accordance with Code
Section 703(a), shall include all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code Section 703(a)(1). With
respect to each of Blackstone BC Capital Partners, L.P., Blackstone BC Offshore
Capital Partners, L.P., Blackstone Family Media Partnership III L.P., William J.
Bresnan, and BCI (USA), LLC, if the allocation of items of Depreciation to such
Member under the foregoing provisions of this Section 6.3.7(e), for any
Allocation Period ending prior to the Class C Common Change Date, is
insufficient to cause the amount of such Member's Alternative Minimum Tax (as
hereinafter defined) to be equal, or as nearly equal as possible, to zero, then
additional items of Depreciation shall be allocated to such Member under this
Section 6.3.7(e) to the extent necessary to cause such result. To the extent
practicable, such allocation of additional items of Depreciation shall be made
in a manner consistent with the provisions governing the allocation of other
items of Depreciation under this Section 6.3.7(e). For purposes of this Section
6.3.7(e), "Alternative Minimum Tax" means, with respect to such a Member, the
amount of the tax imposed by Code Section 55(a) (as determined in accordance
with Code Sections 55 through 59, inclusive), excluding any such tax
attributable to a sale or other disposition (other than in the ordinary course
of business) of any Class C Common Contributed Property (to the extent that at
the time of its contribution to the Company its Gross Asset Value differs from
its Basis), assuming that such Member has no income, gain, loss, deduction, or
other item to be taken into account for federal income tax purposes other than
such Member's allocations from the Company.
(f) For any Allocation Period ending after the Class C
Common Change Date, to each of the Class C Common Members in an amount
determined as follows: The allocation provisions in this Article VI, excluding
the provisions of Section 6.5 calling for offsetting special allocations to be
made as a result of the operation of this Section 6.3.7(f), shall first be
applied tentatively and with two hypothetical modifications. First, all items of
Depreciation, other than items of Depreciation allocated under Section 6.3.5,
shall be hypothetically allocated to the Members in accordance with their
Percentage Interests. Second, tax allocations with respect to each Class C
Common Contributed Property and to each property (other than cash) contributed
by CII in exchange for Class A Common Units (in each case, to the extent that at
the time of its contribution to the Company its Gross Asset Value differs from
its Basis) shall be hypothetically made using the Remedial Method so as to
eliminate distortions caused by the ceiling rule described in Regulations
Section 1.704-3(b)(1), without changing the amount of the items of Depreciation
(as determined under the rules of Regulations Section 1.704-1(b)(2)(iv)(g)(3))
that are hypothetically allocated pursuant to the preceding sentence and that
are attributable to such Class C Common Contributed Property or to such property
contributed by CII (in each case, to the extent that at the time of its
contribution to the Company its Gross Asset Value differs from its Basis). Such
tentative application of the allocation provisions shall result in a calculation
of the amount of the Tentative Taxable Income or Tentative Tax Loss that would
be allocated to each Class C Common Member by the Company if such tentative
application, with the two hypothetical modifications described above, were
final. Next, in lieu of the two hypothetical modifications described above,
items of Depreciation under this
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Section 6.3.7(f) shall be allocated to each Class C Common Member so as to cause
the amount of the taxable income or loss allocated to such Member by the Company
(using the Traditional Method with respect to each Class C Common Contributed
Property and to each property (other than cash) contributed by CII in exchange
for Class A Common Units, in each case to the extent that at the time of its
contribution to the Company its Gross Asset Value differs from its Basis) to be
equal, or as nearly equal as possible, to that Member's Tentative Taxable Income
or Tentative Tax Loss, whichever is applicable. For purposes of this Section
6.3.7, Class C Common Contributed Property includes certain underlying assets
held directly or indirectly by the Company (e.g., the assets of CC VIII, LLC, a
Delaware limited liability company, or its successor) to the extent that, for
purposes of the application of Code Section 704(c) principles and Regulations
Section 1.704-3, a Class C Common Member is treated as a contributing partner or
its equivalent with respect to such assets.
(g) To the extent not allocated under (a), (b), (c), (d),
(e) or (f) above, to the Class A Common Members, to be allocated among them in
proportion to their Percentage Interests.
If the aggregate amount of the items of Depreciation available to
be allocated under this Section 6.3.7 for any Allocation Period is less than the
sum of the items of Depreciation provided for under Section 6.3.7(a), (b), (c),
or (d), on the one hand, and the items of Depreciation provided for under
Section 6.3.7(e) or (f), on the other, then the items of Depreciation available
to be allocated under this Section 6.3.7 for such Allocation Period shall be
divided between Section 6.3.7(a), (b), (c), or (d), on the one hand, and Section
6.3.7(e) or (f), on the other, in proportion to the respective amounts of the
items of Depreciation provided for under such Sections.
6.3.8 Preferred Return Allocations. All or a portion of the
remaining items of Company income and, to the extent income is insufficient,
gain shall be specially allocated to each Class A Preferred Member in an amount
equal to the cumulative Class A Preferred Return Amount (with respect to which
there has been no allocation under this Section 6.3.8) for any Class A Preferred
Units (i) redeemed from such Member during the Allocation Period pursuant to
Section 3.5.2 or 3.5.3, (ii) Transferred by such Member to PublicCo or any other
Person pursuant to the Rifkin Contribution Agreement, the Rifkin Put Agreement
or this Agreement, or (iii) with respect to which liquidating distributions are
made pursuant to Article IX. If, in addition to items of income, items of gain
are to be allocated pursuant to the foregoing sentence and the Company has items
of both short-term capital gain and long-term capital gain, all of the Company's
items of short-term capital gain shall be allocated before any items of
long-term capital gain are allocated.
6.4 Certain Allocations to the Class A Common Members and the Class B Common
Members. Notwithstanding any other provision of this Article VI (other than the
Regulatory Allocations), the allocations to the Class A Common Members and the
Class B Common Members shall be subject to the following provisions:
6.4.1 The allocations to the Class A Common Members of Net Profits
pursuant to Section 6.1.3(b) and of items of Depreciation pursuant to Section
6.3.7(c)(y) (collectively, the "Special Profit Allocations") shall be limited in
amount and made in a manner such that the total amount of the net taxable income
allocated to the Class A
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Common Members in respect of the aggregate Special Profit Allocations is no
greater than the total amount of the net tax loss allocated to the Class A
Common Members in respect of the aggregate Net Profits, Net Losses, and items of
Depreciation allocated to the Class A Common Members pursuant to Sections
6.1.1(b), 6.2.1(b), and 6.3.7(a)(y), respectively (collectively, the "Special
Loss Allocations").
6.4.2 In the event of the dissolution of the Company or the
occurrence of any other event with respect to which the distribution rights of
the Class A Common Members or the Class B Common Members are determined in whole
or in part by reference to their Capital Account balances, the Special Loss
Allocations (to the extent that they have not previously been offset with
Special Profit Allocations or special allocations of other items pursuant to
this Section 6.4) shall be offset either with current Special Profit Allocations
or, to the extent that such current Special Profit Allocations are insufficient,
with special allocations between the Class A Common Members and the Class B
Common Members, to the extent possible, of other items of Company income, gain,
loss, or deduction. Capital Account adjustments shall be made to reflect such
allocations before any distributions in connection with such events are made.
The Manager shall make such offsetting special allocations of other items in
whatever manner it determines appropriate so that, after such offsetting
allocations are made: (i) the Capital Account balances of the Class A Common
Members and the Class B Common Members are, to the extent possible, equal to the
Capital Account balances such Members would have had if the Special Loss
Allocations, the Special Profit Allocations, Sections 6.1.3(c) and 6.3.7(c)(z),
and the exclusion of the Class B Common Members from Sections 6.1.1(a),
6.1.3(a), 6.2.1(a), 6.3.7(a)(x), and 6.3.7(c)(x) had not been part of this
Agreement; and (ii) to the maximum extent consistent with attaining the Capital
Account balances described in the preceding clause (i), the total amount of the
net taxable income allocated to the Class A Common Members in respect of the
aggregate Special Profit Allocations and special allocations of other items
pursuant to this Section 6.4 is no greater than the total amount of the net tax
loss allocated to the Class A Common Members in respect of the aggregate Special
Loss Allocations.
6.4.3 In the event that Class A Common Units are transferred,
directly or indirectly, to PublicCo as part of a Non-Recognition Transaction, if
(i) the Special Loss Allocations have not been fully offset with prior or
current Special Profit Allocations or special allocations of other items
pursuant to this Section 6.4 and (ii) CII or Vulcan Cable so elects with respect
to its Class A Common Units transferred as part of such Non-Recognition
Transaction, then the Special Loss Allocations with respect to such Class A
Common Units (to the extent that they have not been so offset) shall be offset
with special allocations between the Class A Common Members and the Class B
Common Members, to the extent possible, of other items of Company income, gain,
loss, or deduction. The Manager shall make such offsetting special allocations
of other items in whatever manner it determines appropriate so that, after such
offsetting allocations are made: (i) the Capital Account balances of the Class A
Common Members with respect to the Class A Common Units transferred as part of
such Non-Recognition Transaction are, to the extent possible, equal to the
Capital Account balances such Members would have had with respect to such Class
A Common Units if the Special Loss Allocations, the Special Profit Allocations,
Sections 6.1.3(c) and 6.3.7(c)(z), and the exclusion of the Class B Common
Members from Sections 6.1.1(a), 6.1.3(a), 6.2.1(a), 6.3.7(a)(x), and 6.3.7(c)(x)
had not been part of this
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Agreement; and (ii) to the maximum extent consistent with attaining the Capital
Account balances described in the preceding clause (i), the total amount of the
net taxable income allocated to the Class A Common Members with respect to such
Class A Common Units in respect of the aggregate Special Profit Allocations and
special allocations of items pursuant to this Section 6.4 is no greater than the
total amount of the net tax loss allocated to the Class A Common Members with
respect to such Class A Common Units in respect of the aggregate Special Loss
Allocations.
6.4.4 For purposes of this Section 6.4, net taxable income
allocated in respect of a Special Profit Allocation or a special allocation of
another item pursuant to Section 6.4.2 or 6.4.3 refers to the net taxable income
that is allocated in respect thereof for the same Allocation Period for which
such Special Profit Allocation or other special allocation is made.
6.4.5 If any special allocations of other items are made pursuant
to Section 6.4.2 or 6.4.3, the Manager shall thereafter make appropriate
adjustments in the determination of the Special Allocation Amount and any
subsequent Special Profit Allocations so as to reflect that such special
allocations of other items have had the effect of offsetting certain Special
Loss Allocations.
6.4.6 If any Class A Common Units are redeemed by the Company or
any additional Class A Common Units are issued, the Manager shall thereafter
make appropriate adjustments in the determination of the Special Allocation
Amount, any subsequent Special Profit Allocations, and any special allocations
of other items pursuant to Section 6.4.2 or 6.4.3 so that (i) the Special
Allocation Amount excludes any amount with respect to redeemed Units, and (ii)
the proportion in which the Special Profit Allocations are allocated among the
Class A Common Members takes into account that, as a result of the issuance of
additional Class A Common Units, the Percentage Interest of the Member to which
such Units were issued may need to be reduced for purposes of determining such
Member's proper share of the Special Profit Allocations.
6.5 Curative Allocations.
6.5.1 The allocations set forth in Sections 6.2.3, 6.3.1, 6.3.2,
6.3.3, 6.3.4, 6.3.5, and 6.3.6 (collectively, the "Regulatory Allocations") are
intended to comply with certain requirements of the Regulations. The allocations
set forth in Section 6.3.7 are intended to effectuate certain agreements of the
Members (such allocations other than the allocations set forth in Sections
6.3.7(a)(y) and 6.3.7(c)(y) are collectively referred to for purposes of this
Section 6.5.1 as the "Depreciation Allocations"). It is the intent of the
Members that, to the extent possible, the Regulatory Allocations and the
Depreciation Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Company income, gain,
loss, or deduction to the extent provided by this Section 6.5.1. Therefore,
subject to Section 6.5.2 but notwithstanding any other provision of this Article
VI (other than the Regulatory Allocations), the Manager shall make such
offsetting special allocations of Company income, gain, loss, or deduction in
whatever manner it determines appropriate so that, after such offsetting
allocations are made, a Member's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had (the
"Target Capital Account") if the
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Regulatory Allocations and the Depreciation Allocations were not part of this
Agreement and all Company items were allocated pursuant to Sections 6.1, 6.2.1,
6.2.2, 6.3.7(a)(y), 6.3.7(c)(y), 6.3.8, and 6.4. In exercising its discretion
under this Section 6.5.1, the Manager shall take into account any future
Regulatory Allocations under Sections 6.3.1 and 6.3.2 that, although not yet
made, are likely to offset other Regulatory Allocations previously made under
Sections 6.3.4 and 6.3.5.
6.5.2 The Manager shall implement the offsetting special
allocations in Section 6.5.1 in such a manner that:
(a) For any Allocation Period covered by Section 6.3.7(e),
no special allocations shall be made under Section 6.5.1 to either the Class A
Common Members or the Class C Common Members to offset the allocations made as a
result of the operation of Section 6.3.7(e), except in the event of the
dissolution of the Company or the occurrence of any other event with respect to
which the distribution rights of the Class A Common Members or the Class C
Common Members are determined in whole or in part by reference to their Capital
Account balances, in which case the special allocations to be made to the Class
A Common Members, the Class C Common Members, or both, to offset the allocations
arising as a result of the operation of Section 6.3.7(e) and the corresponding
Capital Account adjustments shall be made before any distributions in connection
with such events are made.
(b) For any Allocation Period covered by Section 6.3.7(f),
the special allocations to be made under Section 6.5.1 to the Class A Common
Members, the Class C Common Members, or both, to offset the allocations arising
as a result of the operation of Section 6.3.7(f) shall be limited in amount and
made in a manner such that the amount of the taxable income allocated to any
Class C Common Member shall be no less than, and the amount of the tax loss
allocated to any Class C Common Member shall be no greater than, that Member's
Tentative Taxable Income or Tentative Tax Loss, respectively, for such
Allocation Period; provided, however, that in the event of the dissolution of
the Company or the occurrence of any other event with respect to which the
distribution rights of the Class A Common Members or the Class C Common Members
are determined in whole or in part by reference to their Capital Account
balances, the foregoing limitations shall apply only to the extent consistent
with attaining the Target Capital Accounts and such Capital Account adjustments
shall be made before any distributions in connection with such events are made.
(c) In the case of the offsetting special allocations to be
made to the Class A Common Members, the Class C Common Members, or both, arising
as a result of the operation of Section 6.3.7(e), (i) the total amount of the
increase in the taxable income allocated to the Class A Common Members as a
result of such offsetting special allocations shall be no greater than the
excess, if any, of the Allocated Tax Deductions over the Baseline Tax
Deductions, and (ii) the total amount of the decrease in the taxable income
allocated to the Class A Common Members as a result of such offsetting special
allocations shall be no less than the excess, if any, of the Baseline Tax
Deductions over the Allocated Tax Deductions; provided, however, that in the
event of the dissolution of the Company or the occurrence of any other event
with respect to which the distribution rights of the Class A Common Members or
the Class C Common Members are determined in whole or in part by reference to
their Capital Account balances, the foregoing limitations shall apply only to
the
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extent consistent with attaining the Target Capital Accounts and such Capital
Account adjustments shall be made before any distributions in connection with
such events are made. For purposes of this Section 6.5.2(c), the "Allocated Tax
Deductions" shall mean the total amount of the tax deductions allocated to the
Class A Common Members in respect of the items of Depreciation allocated to the
Class A Common Members pursuant to Section 6.3.7(g) for the Allocation Periods
ending prior to the Class C Common Change Date, and the "Baseline Tax
Deductions" shall mean the total amount of the tax deductions that would have
been allocated to the Class A Common Members if items of Depreciation allocated
under Section 6.3.7 had been allocated to the Class A Common Members in
accordance with their Percentage Interests for the Allocation Periods ending
prior to the Class C Common Change Date.
(d) For purposes of Sections 6.5.2(b) and 6.5.2(c), an
increase or decrease in taxable income or tax loss allocated in respect of an
offsetting special allocation refers to the increase or decrease in taxable
income or tax loss that is allocated in respect thereof for the same Allocation
Period for which such offsetting special allocation is made.
6.6 Other Allocation Rules.
6.6.1 Allocation of Items Included in Net Profits and Net Losses.
Whenever a proportionate part of the Net Profits or Net Losses is allocated to a
Member, every item of income, gain, loss, or deduction entering into the
computation of such Net Profits or Net Losses shall be credited or charged, as
the case may be, to such Member in the same proportion.
6.6.2 Allocations in Respect of a Transferred Membership Interest.
If any Membership Interest is transferred, or is increased or decreased by
reason of the admission of a new Member or otherwise, during any Allocation
Period of the Company, (i) such transfer of or increase or decrease in
Membership Interest shall be deemed to have occurred as of the end of the day on
which such transfer or increase or decrease occurs, and (ii) each item of
income, gain, loss, deduction, or credit of the Company for such Allocation
Period shall be allocated among the Members, as determined by the Manager in
accordance with any method permitted by Code Section 706(d) and the Regulations
promulgated thereunder in order to take into account the Members' varying
interests in the Company during such Allocation Period.
6.7 Tax Allocations.
6.7.1 Code Section 704(c). The allocations specified in this
Agreement shall govern the allocation of items to the Members for Code Section
704(b) book purposes, and the allocation of items to the Members for tax
purposes shall be in accordance with such book allocations, except that solely
for tax purposes and notwithstanding any other provision of this Article VI:
(a) In accordance with Code Section 704(c) and the
Regulations thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall be allocated among the
Members (including Members who succeed to the Membership Interest of any other
Members or former members of the
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Company) so as to take account of any variation between the Basis of such
property to the Company and its initial Gross Asset Value.
(b) In the event the Gross Asset Value of any Company asset
is adjusted pursuant to Subsection 2 of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the Basis of such asset and
its Gross Asset Value in the same manner as under Code Section 704(c) and the
Regulations thereunder.
(c) The allocations described in (a) and (b) above shall be
made in accordance with Regulations Section 1.704-3 using the Traditional
Method.
6.7.2 Tax Credits. Tax credits, if any, shall be allocated among
the Members in proportion to their Percentage Interests.
6.7.3 Excess Nonrecourse Liabilities. Solely for purposes of
determining a Member's share of the "excess nonrecourse liabilities" of the
Company within the meaning of Regulations Section 1.752-3(a)(3), the Members'
interests in Company profits are in proportion to their Percentage Interests.
6.8 Obligations of Members to Report Consistently. The Members are aware of
the income tax consequences of the allocations specifically set forth in this
Article VI and hereby agree to be bound by such allocations in reporting their
shares of Company income and loss for income tax purposes.
6.9 Distributions by the Company to Members. Prior to the occurrence of any
event specified in Section 9.1, and subject to availability of funds, applicable
law, and any limitations contained elsewhere in this Agreement, Net Cash From
Operations and Net Cash From Sales or Refinancings may be distributed at such
times and in such amounts as may be approved by the Manager, to Common Members
in proportion to their respective Percentage Interests.
6.10 Advances or Drawings. Distributions of money and property shall be
treated as advances or drawings of money or property against a Member's
distributive share of income and as current distributions made on the last day
of the Company's taxable year with respect to such Member.
6.11 Distributees; Liability for Distributions. All distributions made
pursuant to Section 6.9 shall be made only to the Persons who, according to the
books and records of the Company, hold the Membership Interests in respect of
which such distributions are made on the actual date of distribution. Neither
the Company nor any Member, Manager, or officer shall incur any liability for
making distributions in accordance with Section 6.9.
6.12 Form of Distributions. A Member, regardless of the nature of the
Member's Capital Contributions, has no right to demand and receive any
distribution from the Company in any form other than money. No Member may be
compelled to accept from the Company a distribution of any asset in kind in lieu
of a proportionate distribution of money being made to other Members.
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6.13 Return of Distributions. Except for distributions made in
violation of the Act or this Agreement, or as otherwise required by law, no
Member shall be obligated to return any distribution to the Company or pay the
amount of any distribution for the account of the Company or to any creditor of
the Company. Notwithstanding any provision of this Agreement to the contrary, a
Member who receives a distribution from the Company shall have no liability to
return any portion of such distribution after the expiration of three (3) years
from the date of the distribution pursuant to Section 18-607(c) of the Act.
6.14 Limitation on Distributions. Notwithstanding any provision to the
contrary in this Agreement, the Company shall not make a distribution to any
Member on account of such Member's interest in the Company if such distribution
would (i) violate Section 18-607 of the Act or other applicable law or (ii)
breach, or with the passage of time or the giving of notice result in a breach
of, any contractual covenants of the Company or its Subsidiaries (provided that
the Company shall negotiate such covenants in good faith to permit distributions
under Section 6.9.1).
6.15 Withholding. Any tax required to be withheld with respect to any
Member under Section 1446 or other provisions of the Code, or under the law of
any state or other jurisdiction, shall be treated for all purposes of this
Agreement (i) as a distribution of cash to be charged against current or future
distributions to which such Member would otherwise have been entitled, or (ii)
if determined by the Manager in writing, as a demand loan to such Member bearing
interest at a rate per annum equal to the rate of interest then announced by The
Bank of New York as its prime commercial lending rate plus two hundred (200)
basis points.
ARTICLE VII
TRANSFER OF INTERESTS
7.1 Transfer of Interests In General.
7.1.1 Conditions to Transfer. No Member shall be entitled to
Transfer all or any part of such Member's Membership Interest unless all of the
following conditions have been met: (a) the Company shall have received a
written notice of the proposed Transfer, setting forth the circumstances and
details thereof; (b) except for Transfers specifically authorized by Section
7.2.3, the Company shall (at its option) have received a written opinion from
counsel reasonably satisfactory to the Company, which in the case of a permitted
Transfer contemplated by Section 7.2 shall be the Company's counsel, in form and
substance reasonably satisfactory to the Company, specifying the nature and
circumstances of the proposed Transfer and any related transactions of which the
proposed Transfer is a part, and based on such facts stating that the proposed
Transfer and any related transactions will not be in violation of any of the
registration provisions of the Securities Act, or any applicable state
securities laws; (c) the Company shall have received from the transferee a
written consent to be bound by all of the terms and conditions of this Agreement
and, if such Transfer is to PublicCo and the Transferring Member receives common
stock of PublicCo in the exchange, a written consent from such Member not to
Transfer the common stock of PublicCo for one-hundred eighty (180) days after
the Class B Common Measuring Date; (d) the Transfer will not result in the loss
of any license or regulatory approval or exemption
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that has been obtained by the Company and is materially useful in the conduct of
its business as then being conducted or proposed to be conducted; (e) the
Transfer will not result in a material and adverse limitation or restriction on
the operations of the Company taken as a whole; (f) the Company is reimbursed
upon request for its reasonable out-of-pocket expenses, except in the case of a
permitted Transfer contemplated by Section 7.2, in connection with the Transfer;
(g) if the Transfer to the proposed transferee is not otherwise specifically
authorized by Section 7.2, the Transfer has been approved by the Manager, which
consent may be given or withheld, conditioned or delayed as the Manager may
determine in its sole discretion; (h) if the proposed transferee is not a Member
or the Transfer to the proposed transferee is not otherwise specifically
authorized by Section 7.2, the Transfer receives the Approval of the Members;
(i) the Transfer will not cause the Company to be treated as a "publicly traded
partnership" within the meaning of section 7704 of the Code, and (j) the
Transfer will not cause the Company to be treated as an "investment company"
within the meaning of section 3 of the Investment Company Act of 1940, as
amended.
7.1.2 Pledges. Notwithstanding anything to the contrary in
Section 7.1, a Member may pledge, grant a security interest in or otherwise
encumber all or a portion of its Membership Interest, without compliance with
Sections 7.1.1(g) and (h) but subject to the other provisions of Section 7.1, if
prior thereto, the pledgee or secured party delivers to the Company a written
agreement acknowledging receipt of a copy of this Agreement and unconditionally
agreeing that any foreclosure of the pledge or security interest shall be
treated as a Transfer of such Membership Interest to which all provisions of
this Article VII apply.
7.1.3 Invalid Transfers. To the fullest extent permitted by law,
Transfers in violation of this Section 7.1 or in violation of any other
provision of this Article VII or this Agreement shall be null and void ab initio
and of no effect whatsoever.
7.2 Permitted Transfers. Subject to the provisions of Section 7.1
(except with respect to the Transfers described in Sections 7.2.4 and 7.2.5),
the Units may be Transferred under the following circumstances:
7.2.1 Class A Common Units. Class A Common Units may be
Transferred to any Person, including without limitation, PublicCo or any
Affiliate of CII or Vulcan Cable.
7.2.2 Class B Common Units. Class B Common Units may be
Transferred to any Affiliate of PublicCo, CII, or Vulcan Cable.
7.2.3 Class C Common Units. Class C Common Units may be
Transferred to the Bresnan Permitted Transferees, and Class C Common Units with
respect to which any option pursuant to the Bresnan Put Agreement has been
exercised and Paul G. Allen or the Company has breached its purchase obligations
under such put agreements may be Transferred to any transferee; provided,
however, that (i) each such transferee must agree to be bound by the terms of
this Agreement and other applicable equity documents (including the Bresnan
Exchange Agreement), (ii) each such transferee must represent that it is an
accredited investor and give such other investment representations and other
undertakings as
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are customarily given by Persons acquiring securities in a private placement,
and (iii) the Transfer to such transferee must be effected pursuant to an
exemption from registration under applicable securities laws.
7.2.4 Class A Preferred Units. Class A Preferred Units may be
Transferred to any Person to which a Class A Preferred Member is permitted to
assign its rights under the Rifkin Put Agreement in accordance with Section 10.9
thereof; provided, however, that (i) each such transferee agrees to be bound by
the terms of the Agreement, (ii) each such transferee (x) represents that it is
an accredited investor and gives such other investment representations and other
undertakings as are customarily given by Persons acquiring securities in a
private placement or (y) provides the Company with a written opinion of counsel
reasonably satisfactory to the Company that such Transfer would not result in a
violation of the registration requirements of the Securities Act, and (iii) any
such Transfer will not result in violation of the registration requirements of
the Securities Act.
7.2.5 Transfer to Paul G. Allen, the Company, and Certain Other
Transferees. Notwithstanding anything to the contrary in this Agreement, all
Units shall be freely transferable without restriction to Paul G. Allen (or his
Affiliates), the Company, or any other Person to which Units may be put pursuant
to the Rifkin Put Agreement, or the Bresnan Put Agreement.
7.2.6 Transfers to PublicCo. Notwithstanding anything to the
contrary in this Agreement, certain Persons may Transfer their Units to PublicCo
in exchange for the Class A Common Stock or Class B Common Stock of PublicCo,
pursuant to the terms of the Bresnan Exchange Agreement, the CII Exchange
Agreement, and certain employee option/compensatory plans and agreements of the
Company.
7.2.7 Admission of a Transferee as a Member. Each transferee
(other than the Company) of a Transfer of a Membership Interest permitted by
Section 7.2 shall be admitted to the Company as a Member of the Company upon
completion of the Transfer in accordance with the conditions set forth in
Sections 7.1 and 7.2.
7.3 Effective Date of Permitted Transfers. Any permitted Transfer of
all or any portion of a Membership Interest shall be effective no earlier than
the date following the date upon which the requirements of this Agreement have
been met. Any Transfer, issuance, or redemption of all or any portion of a
Membership Interest on any date shall be deemed to have occurred as of the end
of such date.
7.4 Effect of Permitted Transfers. After the effective date of any
Transfer of any part of a Membership Interest in accordance with this Agreement,
the Membership Interest so Transferred shall continue to be subject to the
terms, provisions, and conditions of this Agreement and any further Transfers
shall be required to comply with all of the terms, provisions, and conditions of
this Agreement. Any transferee of all or any portion of a Membership Interest
shall take subject to the restrictions on Transfer imposed by this Agreement.
Notwithstanding anything to the contrary in this Section 7.4, any part of a
Membership Interest Transferred to the Company shall be deemed cancelled.
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7.5 Substitution of Members. Except as provided in Section 7.2, a
transferee of a Membership Interest shall not have the right to become a
substitute Member until each of the following is true: (i) the requirements of
Section 7.1.1 are satisfied; (ii) such Person executes an instrument
satisfactory to the Members approving the transfer and to the Manager accepting
and adopting the terms, provisions, and conditions of this Agreement, including
without limitation Section 10.15 herein, with respect to the acquired Membership
Interest; and (iii) such Person pays any reasonable out-of-pocket expenses of
the Company in connection with such Person's admission as a new Member. The
admission of a substitute Member shall not result in the release of the Member
who assigned the Membership Interest from any liability that such Member may
have to the Company.
ARTICLE VIII
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
8.1 Books and Records. The Manager shall cause the books and records of
the Company to be kept, and the financial position and the results of its
operations to be recorded, in accordance with generally accepted accounting
principles; provided, however, that the Manager may, to the extent appropriate
under applicable tax and accounting principles, maintain separate and
corresponding records for book and tax purposes. The books and records of the
Company shall reflect all the Company transactions and shall be appropriate and
adequate for the Company's business.
8.2 Delivery to Members and Inspection.
8.2.1 Upon the request of any Member, the Manager shall make
reasonably available to the requesting Member the Company's books and records;
provided, however, that the Manager shall have the right to keep confidential
from the Members, for such period of time as the Manager deems reasonable, any
information which the Manager reasonably believes to be in the nature of trade
secrets or other information the disclosure of which the Manager in good faith
believes is not in the best interest of the Company or could damage the Company
or its business or which the Company is required by law or by agreement with a
third party to keep confidential.
8.2.2 Any request, inspection, or copying of information by a
Member under this Section 8.2 may be made by that Person or that Person's agent
or attorney.
8.3 Financial Statements.
8.3.1 General. The Manager shall provide any Member with such
periodic operating and financial reports of the Company as such Member may from
time to time reasonably request.
8.3.2 Annual Report. The Manager shall cause annual audited
financial statements to be sent to each Member holding more than one Unit not
later than 90 days after the close of the calendar year, but in the case of a
Member holding more than one-tenth (1/10) of one percent (1%) of outstanding
Common Units, in no event later than when PublicCo receives such statements. The
report shall contain a balance sheet as of the end of the calendar year and an
income statement and statement of cash flow for the calendar year.
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Such financial statements shall be prepared in accordance with generally
accepted accounting principles consistently applied and be accompanied by the
report thereon of the independent accountants engaged by the Company.
8.4 Tax Returns. The Manager shall cause to be prepared at least
annually information necessary for the preparation of the Members' federal and
state income tax and information returns. The Manager shall send or cause to be
sent to each Member, or as soon as practicable following the end of each
Allocation Period, but in no event later than July 15, (i) such information as
is necessary to complete such Member's federal and state income tax or
information returns, and (ii) a schedule setting forth each Member's Capital
Account balance as of the end of the most recent Allocation Period; provided,
however, that the Manager shall send or cause to be sent to each Member such
information and schedule for the Allocation Period ended December 31, 2000, as
soon as practicable following December 31, 2000, but in no event later than
August 15, 2001. The Manager shall cause the income tax and information returns
for the Company to be timely filed with the appropriate authorities. If a Member
requests, the Company shall provide such Member with copies of the Company's
federal, state, and local income tax or information returns for that year,
tax-related schedules, work papers, appraisals, and other documents as
reasonably required by such Member in preparing its tax returns.
8.5 Other Filings. The Manager also shall cause to be prepared and
timely filed, with appropriate federal and state regulatory and administrative
bodies, amendments to, or restatements of, the Certificate and all reports
required to be filed by the Company with those entities under the Act or other
then current applicable laws, rules, and regulations.
8.6 Bank Accounts. The Manager shall maintain the funds of the Company
in one or more separate bank accounts in the name of the Company, and shall not
permit the funds of the Company to be commingled in any fashion with the funds
of any other Person.
8.7 Accounting Decisions and Reliance on Others. All decisions as to
accounting matters, except as otherwise specifically set forth herein, shall be
made by the Manager or the Board. The Manager or the Board may rely upon the
advice of the Company's accountants as to whether such decisions are in
accordance with accounting methods followed for federal income tax purposes or
financial accounting purposes (as applicable).
8.8 Tax Matters.
8.8.1 Taxation as Partnership. The Company shall be treated as a
partnership for tax purposes. The Company shall avail itself of any election or
procedure under the Code or the Regulations and under state and local tax law,
including any "check-the-box" election, for purposes of having an entity
classified as a partnership for tax purposes, and the Members shall cooperate
with the Company in connection therewith and hereby authorize the Manager,
directors, and officers to take whatever actions and execute whatever documents
are necessary or appropriate to effectuate the foregoing.
8.8.2 Elections; Tax Matters Partner. Subject to the provisions
of this Agreement, the Manager shall from time to time cause the Company to make
such tax elections as it deems to be necessary or appropriate. The Members
hereby designate CII as
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the "tax matters partner" (within the meaning of Code Section 6231(a)(7)) to
represent the Company in connection with all examinations of the Company's
affairs by tax authorities, including without limitation resulting judicial and
administrative proceedings, and shall expend Company funds for professional
services and costs associated therewith.
8.8.3 Section 754 Election. At the request of a transferee of or
other successor to any Units that takes a federal income tax basis in such Units
greater than the proportionate share of the Basis of the Company's property with
respect to such Units, the Manager shall cause the Company to make an election
under Section 754 of the Code, unless the Manager determines that such an
election should not be made because any Member who holds a number of Units (or
other equity interests) at least as great as the number (or value) being
transferred has a built-in federal income tax loss with respect to such Units
(or other equity interests) held objects to such an election. If the Company
elects, pursuant to Section 754 of the Code and any like provision of applicable
state law, to adjust the Basis of the Company's property or, if any other
information is necessary to implement this Section 8.8.3, then each Member shall
provide the Company with all information necessary to give effect to such
elections and to implement such provisions.
ARTICLE IX
DISSOLUTION AND WINDING UP
9.1 Dissolution. The Company shall be dissolved, its assets shall be
disposed of, and its affairs shall be wound up on the first to occur of the
following:
(a) The entry of a decree of judicial dissolution
pursuant to Section 18-802 of the Act;
(b) The Approval of the Members; provided, however, that
prior to the beginning of the Put Period (as defined in the Bresnan Put
Agreement), the Company will not be dissolved or liquidated without the consent
of all Bresnan Holders, which consent shall not be unreasonably withheld; or
(c) The last remaining Member's ceasing to be a Member
of the Company unless the Company is continued without dissolution in accordance
with the Act.
9.2 Winding Up. Upon the occurrence of any event specified in Section
9.1, the Company shall continue solely for the purpose of winding up its affairs
in an orderly manner, liquidating its assets, and satisfying the claims of its
creditors. The Manager shall be responsible for overseeing the winding up and
liquidation of the Company, shall take full account of the assets and
liabilities of the Company, shall either cause its assets to be sold to any
Person or distributed to a Member, and if sold, as promptly as is consistent
with obtaining the fair market value thereof, shall cause the proceeds
therefrom, to the extent sufficient therefor, to be applied and distributed as
provided in Section 9.5 herein. All actions and decisions required to be taken
or made by such Person(s) under this Agreement shall be taken or made only with
the consent of all such Person(s).
9.3 Distributions in Kind. Any non-cash asset distributed to one or
more Members shall first be valued at its fair market value to determine the
gain or loss that would have
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been included in the amounts allocated pursuant to Article VI if such asset were
sold for such value. Such gain or loss shall then be allocated pursuant to
Article VI, and the Members' Capital Accounts shall be adjusted to reflect such
allocations. The amount distributed and charged to the Capital Account of each
Member receiving an interest in such distributed asset shall be the fair market
value of such interest (net of any liability secured by such asset that such
Member assumes or takes subject to). Notwithstanding anything to the contrary in
this Section 9.3, the Company shall not make distributions of non-cash assets to
any Member who objects.
9.4 Determination of Fair Market Value. For purposes of Section 9.2 and
9.3, the fair market value of each asset of the Company shall be determined in
good faith by the Manager, or if the Common Members holding more than one
percent (1%) of all outstanding Common Units request, by an independent,
third-party appraiser experienced in the valuation of the type of assets at
issue, selected in good faith by the Manager and the Common Members requesting
such appraisal. The Company shall bear the costs of the appraisal.
9.5 Order of Distributions Upon Liquidation. After satisfying (whether
by payment or reasonable provision for payment) the debts and liabilities of the
Company to the extent required by law, including without limitation debts and
liabilities to Members who are creditors of the Company to the extent permitted
by law, the remaining assets shall be distributed to the Members in the
following order:
9.5.1 First, to the Class A Preferred Members as of the date of
distribution, pro rata to such Members in accordance with the respective sums of
(i) their Class A Preferred Contributed Amounts in respect of the Class A
Preferred Units then held by them, and (ii) the Class A Preferred Return Amounts
with respect to such Units, until each such Member shall have received an amount
equal to such sum with respect to such Member as of the date of distribution;
provided, however, that no distribution shall be made pursuant to this Section
9.5.1 that creates or increases a Capital Account deficit for any Member which
exceeds such Member's obligation deemed and actual to restore such deficit,
determined as follows: Distributions shall first be determined tentatively
pursuant to this Section 9.5.1 without regard to the Members' Capital Accounts,
and then the allocation provisions of Article VI shall be applied tentatively as
if such tentative distributions had been made. If any Member shall thereby have
a deficit Capital Account which exceeds such Member's obligation (deemed or
actual) to restore such deficit, the actual distribution to such Member pursuant
to this Section 9.5.1 shall be equal to the tentative distribution to such
Member less the amount of the excess to such Member; and
9.5.2 Second, to the Common Members in accordance with their
positive Capital Account balances, after taking into account income and loss
allocations for the Company's taxable year during which liquidation occurs.
Such liquidating distributions shall be made by the end of the
Company's taxable year in which the Company is liquidated, or, if later, within
ninety (90) days after the date of such liquidation.
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9.6 Limitations on Payments Made in Dissolution. Each Member shall be
entitled to look solely to the assets of the Company for the return of such
Member's positive Capital Account balance. Notwithstanding that the assets of
the Company remaining after payment of or due provision for all debts,
liabilities, and obligations of the Company may be insufficient to return the
Capital Contributions or share of Net Profits reflected in such Member's
positive Capital Account balance, a Member shall have no recourse against the
Company or any other Member.
9.7 Certificate of Cancellation. Upon completion of the winding up of
the affairs of the Company, the Manager, as an authorized person, shall cause to
be filed in the office of the Delaware Secretary of State, an appropriate
certificate of cancellation.
9.8 Termination. The Company shall terminate when all of the assets of
the Company have been distributed in the manner provided for in this Article IX,
and the certificate of cancellation is filed in accordance with Section 9.7.
9.9 No Action for Dissolution. Except as expressly permitted in this
Agreement and to the fullest extent permitted by law, a Member shall not take
any voluntary action that directly causes a dissolution of the Company.
9.10 Bankruptcy or Incapacity of a Member. The bankruptcy (as defined
in the Act) of a Member or the incapacity of a Member who is an individual shall
not cause the Member to cease to be a Member of the Company, and upon such an
event, the Company shall continue without dissolution.
ARTICLE X
MISCELLANEOUS
10.1 Complete Agreement. This Agreement (including any schedules or
exhibits hereto), any documents referred to herein or therein (the "TRANSACTION
DOCUMENTS"), and the Certificate contain the entire understanding of the parties
with respect to the subject matter hereof. There are no restrictions,
agreements, promises, representations, warranties, covenants or undertakings
with respect to the subject matter hereof other than those expressly set forth
or referred to herein or in the Transaction Documents. Except for the
Transaction Documents, this Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter.
10.2 Binding Effect. Subject to the provisions of this Agreement
relating to transferability, this Agreement shall be binding upon and inure to
the benefit of the Members, and their respective heirs, representatives,
successors and permitted assigns.
10.3 Parties in Interest. Except as expressly provided in the Act,
nothing in this Agreement shall confer any rights or remedies under or by reason
of this Agreement on any Persons other than the Members and their respective
heirs, representatives, successors and permitted assigns nor shall anything in
this Agreement relieve or discharge the obligation or liability of any third
person to any party to this Agreement, nor shall any provision give any third
person any right of subrogation or action over or against any party to this
Agreement.
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<PAGE> 57
10.4 Pronouns; Statutory References; Agreement References. All pronouns
and all variations thereof shall be deemed to refer to the masculine, feminine,
or neuter, singular or plural, as the context in which they are used may
require. Any reference to the Code, the Regulations, the Act, or other statutes
or laws shall include all amendments, modifications, or replacements of the
specific sections and provisions concerned. Any reference to any agreement
defined in Article I of this Agreement shall include all amendments,
modifications, or replacements of the specific sections and provisions
concerned.
10.5 Headings. All headings herein are inserted only for convenience
and ease of reference and shall not be considered in the construction or
interpretation of any provision of this Agreement.
10.6 References to this Agreement. Numbered or lettered articles,
sections, and subsections herein contained refer to articles, sections, and
subsections of this Agreement unless otherwise expressly stated.
10.7 Governing Law. This Agreement shall be enforced, governed by, and
construed in accordance with the laws of the State of Delaware, regardless of
the choice or conflict of laws provisions of Delaware or any other jurisdiction.
10.8 Severability. If any provision of this Agreement or the
application of such provision to any Person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision to
Persons or circumstances other than those to which it is held invalid shall not
be affected thereby.
10.9 Additional Documents and Acts. Each Member agrees to execute and
deliver, from time to time, such additional documents and instruments and to
perform such additional acts as may be necessary or appropriate to effectuate,
carry out, and perform all of the terms, provisions, and conditions of this
Agreement and the transactions contemplated hereby.
10.10 Notices. Any notice to be given or to be served upon the Company
or any party hereto in connection with this Agreement shall be in writing (which
may include facsimile) and shall be deemed to have been given and received when
delivered to the address specified by the party to receive the notice. The
respective address of each Member shall be as set forth on Schedule A attached
hereto. Any party may, at any time by giving five (5) days' prior written notice
to the other parties, designate any other address in substitution of the
foregoing address to which such notice shall be given.
10.11 Amendments. Any amendment to this Agreement shall be adopted and
be effective as an amendment hereto only upon the Approval of the Members;
provided, however, (i) that this Agreement may not be amended in a manner that
is adverse to the Class C Common Members, without the consent of Class C Common
Members owning a majority of the Class C Common Units adversely affected, (ii)
that this Agreement may not be amended in a manner that is adverse to the Class
A Common Members, without the approval of the Class A Common Members owning a
majority of the Class A Common Units adversely affected, and (iii) that this
Agreement may not be amended (a) in a manner that is adverse to the Class A
Preferred Members with respect to their redemption and
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<PAGE> 58
preferred return rights under Section 3.5.2 or 3.5.3, transfer rights under
Section 7.2.5, or liquidation rights under Section 9.5.1 or (b) in a manner that
adversely alters any other expressly articulated rights of the Class A Preferred
Members hereunder and that treats the Class A Preferred Members in a
discriminatory manner vis-a-vis the Common Members, without the consent of Class
A Preferred Members owning a majority of the Class A Preferred Units. Without
limiting the generality of the foregoing, no consent of the Members, other than
the Approval of the Members, shall be required to amend this Agreement (x) to
issue additional Units or any other securities of the Company pursuant to the
terms of this Agreement, (y) to admit additional Members in connection with any
issuance of Units to such Persons pursuant to the terms of this Agreement, or
(z) to subdivide or combine any outstanding Units pursuant to Section 3.6.1 of
this Agreement. Each Member hereby irrevocably constitutes and appoints the
Manager as its true and lawful attorney-in-fact, in its name, place, and stead,
to make, execute, acknowledge, and file any duly adopted amendment to or
restatement of this Agreement (solely to the extent that such Member's consent
is not required under this Agreement). It is expressly intended by each Member
that the power of attorney granted by the preceding sentence is coupled with an
interest, shall be irrevocable, and shall survive and not be affected by the
subsequent disability or incapacity of such Member (or if such Member is a
corporation, partnership, trust, association, limited liability company or other
legal entity, by the dissolution or termination thereof).
10.12 No Interest in Company Property; Waiver of Action for Partition.
No Member has any interest in specific property of the Company or any
Subsidiary. Without limiting the foregoing, each Member irrevocably waives
during the duration of the Company any right that such Member may have to
maintain any action for partition with respect to the property of the Company.
10.13 Multiple Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
10.14 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any Person may be
lawfully entitled.
10.15 Investment Representation. Each Member hereby represents to, and
agrees with, the other Members and the Company that such Member is acquiring the
Membership Interest for investment purposes for such Member's own account only
and not with a view to or for sale in connection with any distribution of all or
any part of the Membership Interest. No other Person will have any direct or
indirect beneficial interest in or right to the Membership Interest.
10.16 Spousal Consent. Each Member who is a married individual shall,
upon becoming a Member or, if later, upon becoming married, cause his spouse to
execute a spousal consent in the form attached hereto as Schedule 10.16 and
shall furnish such consent to the Company.
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<PAGE> 59
IN WITNESS WHEREOF, the parties have executed this Agreement, effective
as of the date first written above.
Charter Communications, Inc.
By: /s/ Marcy Lifton
-----------------
Name: Marcy Lifton
Title: Vice President
Class A Preferred Members
Class A Common Members
By: Charter Communications, Inc., as an
attorney-in-fact pursuant to Section 10.11 of
the Existing LLC Agreement
By: /s/ Marcy Lifton
-----------------
Name: Marcy Lifton
Title: Vice President
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<PAGE> 60
BCI (USA), LLC
By: Bresnan Communications, Inc., its
managing member
By: /s/ William J. Bresnan
-----------------------
Name: William J. Bresnan
Title: Chief Executive Officer
/s/ William J. Bresnan
----------------------
William J. Bresnan, individually
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<PAGE> 61
Blackstone BC Capital Partners, Inc.
By: Blackstone Management Associates III
L.L.C., its general partner
By: /s/ Mark T. Gallogly
---------------------
Name: Mark T. Gallogly
Title: Member
Blackstone BC Offshore Capital Partners, L.P.
By: Blackstone Management Associates III
L.L.C., its general partner
By: /s/ Mark T. Gallogly
---------------------
Name: Mark T. Gallogly
Title: Member
Blackstone Family Media Partnership III L.P.
By: Blackstone Management Associates III
L.L.C., its general partner
By: /s/ Mark T. Gallogly
---------------------
Name: Mark T. Gallogly
Title: Member
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<PAGE> 62
Accepting its appointment as the Manager of the Company under and to the extent
provided in Section 5.1.1 of this Agreement:
Charter Investment, Inc.
By: /s/ Marcy Lifton
-----------------
Name: Marcy Lifton
Title: Vice President
Charter Communications, Inc.
By: /s/ Marcy Lifton
-----------------
Name: Marcy Lifton
Title: Vice President
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<PAGE> 63
SCHEDULE A
MEMBERS; ADDRESS; NUMBER OF UNITS (AS OF THE END OF THE EFFECTIVE DATE)
<TABLE>
<CAPTION>
CLASS A
CLASS A CLASS B CLASS C CLASS A PREFERRED
MEMBER/ADDRESS COMMON COMMON COMMON PREFERRED CONTRIBUTED
AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charter Investment, Inc. 217,585,246
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131
Attn: Jerald L. Kent
Vulcan Cable III Inc. 106,715,233
110 110th Avenue, N.E., Suite 550
Bellevue, WA 98004
Attn: William D. Savoy
Charter Communications, Inc. 222,089,746
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131
Attn: Jerald L. Kent
BCI (USA), LLC 4,980,411
c/o Bresnan Communications, Inc.
709 Westchester Avenue
White Plains, New York 10604
Attn: Jeffrey S. DeMond and
Robert V. Bresnan, Esq.
William J. Bresnan 240,654
c/o Bresnan Communications, Inc.
709 Westchester Avenue
White Plains, New York 10604
Attn: Jeffrey S. DeMond and
Robert V. Bresnan, Esq
Blackstone BC Capital Partners L.P 8,092,934
c/o The Blackstone Group
345 Park Avenue
New York, New York 10154
Attn: Simon Lonergan
</TABLE>
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<PAGE> 64
<TABLE>
<CAPTION>
CLASS A
CLASS A CLASS B CLASS C CLASS A PREFERRED
MEMBER/ADDRESS COMMON COMMON COMMON PREFERRED CONTRIBUTED
AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Blackstone BC Offshore Capital Partners L.P. 907,500
c/o The Blackstone Group
345 Park Avenue
New York, New York 10154
Attn: Simon Lonergan
Blackstone Family Media Partnership III L.P. 574,496
c/o The Blackstone Group
345 Park Avenue
New York, New York 10154
Attn: Simon Lonergan
Morris Children's Trust 325,412 $325,412
c/o Charles R. Morris III
4875 South El Camino Drive
Englewood, CO 80111
CRM II Limited Partnership, LLLP 1,127,321 $1,127,321
c/o Charles R. Morris III
4875 South El Camino Drive
Englewood, CO 80111
Charles R. Morris, III 1,553,469 $1,553,469
4875 South El Camino Drive
Englewood, CO 80111
</TABLE>
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<PAGE> 65
SCHEDULE 10.16
The undersigned is the spouse of _____________ and acknowledges that
____ [he/she] has read the Amended and Restated Limited Liability Company
Agreement ("AGREEMENT") of Charter Communications Holding Company, LLC, a
Delaware limited liability company (the "Company"), dated as of ________, 1999,
as amended or supplemented from time to time, and understands its provisions.
The undersigned is aware that, by the provisions of the Agreement, ____ [he/she]
and _____ [his/her] spouse have agreed to sell or transfer all ____ [his/her]
Membership Interest in the Company, including any community property interest or
quasi-community property interest, in accordance with the terms and provisions
of the Agreement. The undersigned hereby expressly approves of and agrees to be
bound by the provisions of the Agreement in its entirety, including, but not
limited to, those provisions relating to the sales and transfers of Membership
Interests and the restriction thereon. If the undersigned predeceases ____
[his/her] spouse when ____ [his/her] spouse owns any Membership Interest in the
Company, ____ [he/she] hereby agrees not to devise or bequeath whatever
community property interest or quasi-community property interest ____ [he/she]
may have in the Company in contravention of the Agreement.
Date:
------------------------------
Signature:
-------------------------
Name:
------------------------------
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<PAGE> 1
EXHIBIT 10.40
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "AGREEMENT") is made and entered into as
of February 14, 2000 by and between Charter Communications, Inc., a Delaware
corporation (the "COMPANY"), and the holders listed on the signature pages
hereto (each, a "HOLDER").
PRELIMINARY STATEMENT
A. The Company is the manager of, and owns Common Units of, Charter
Communications Holding Company, LLC, a Delaware limited liability company
("CHARTER LLC").
B. Charter LLC and the Holders are parties to a Purchase and
Contribution Agreement, dated as of June 29, 1999 (as amended, the "PURCHASE
AGREEMENT").
C. As of the date hereof, in connection with the closing of the
transactions pursuant to the Purchase Agreement, Charter LLC is issuing Class C
Common Units of Charter LLC ("CLASS C COMMON UNITS") to BCI (USA), LLC and
William J. Bresnan (collectively, the "BRESNAN HOLDERS") and Blackstone BC
Capital Partners L.P., a Delaware limited partnership, Blackstone BC Offshore
Capital Partners L.P., a Cayman Islands exempted limited partnership and
Blackstone Family Media Partnership III L.P., a Delaware limited partnership
(collectively, the "BLACKSTONE HOLDERS"). The Bresnan Holders and the Blackstone
Holders desire to have the right to exchange such Class C Common Units for
shares of the Company's common stock.
D. As of the date hereof, in connection with the closing of the
transactions pursuant to the Purchase Agreement, CC VIII, LLC, a Delaware
limited liability company ("CC VIII") is issuing Class A Preferred Units of CC
VIII ("CLASS A CC VIII UNITS") to TCID of Michigan, Inc., a Nevada corporation,
and TCI Bresnan LLC, a Delaware limited liability company (collectively, the
"TCI HOLDERS"). The TCI Holders desire to have the right to exchange such Class
A CC VIII Units for shares of the Company's common stock.
E. This Agreement is the Exchange Agreement described in Section
5.16(a) of the Purchase Agreement and supersedes Exhibit F to the Purchase
Agreement.
NOW, THEREFORE, in consideration of the respective covenants and
agreements of the parties and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged by each party), the
parties hereby agree as follows:
<PAGE> 2
Section 1 Definitions.
1.1. Terms Defined in this Section. For purposes of this Agreement,
the following terms shall have the following meanings:
"AVERAGE TRADING PRICE" means, with respect to any publicly traded
securities, as of any Closing Date, the average for the twenty full Trading Days
preceding such date of:
(i) the last reported sale price, regular way, as reported on the
principal national securities exchange registered under Section 7 of the
Exchange Act (or any successor provision of law) on which such securities are
listed or admitted for trading, or
(ii) if such securities are not listed or admitted for trading on
any national securities exchange, the last reported sale price, regular way, as
reported on the Nasdaq National Market (or any successor system) or, if such
securities are not listed on the Nasdaq National Market, the average of the
highest bid and lowest asked prices on each such Trading Day as reported on the
Nasdaq Stock Market, or
(iii) if such securities are not listed or admitted for trading on
any national securities exchange, the Nasdaq National Market or the Nasdaq Stock
Market, the average of the highest bid and lowest asked prices on each such
Trading Day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization.
For purposes of determining the "Average Trading Price" of any
securities,
(iv) the applicable sale price or bid and asked prices of such
securities on any day prior to any "ex-dividend" date or any similar date
occurring prior to such Closing Date for any dividend or distribution (other
than a dividend or distribution contemplated by clause (B) of paragraph (ii)
below) paid or to be paid with respect to such securities shall be reduced by
the fair value of the per share amount of such dividend or distribution, and
(v) the applicable sale price or bid and asked prices of such
securities on any day prior to (A) the effective date of any subdivision (by
stock split or otherwise) or combination (by reverse stock split or otherwise)
of such securities occurring prior to such Closing Date or (B) any "ex-dividend"
date or any similar date occurring prior to such Closing Date for any dividend
or distribution with respect to such securities to be made in such securities or
securities that are convertible, exchangeable, or exercisable for such
securities shall be appropriately adjusted, as determined in good faith by the
Board of Directors of the Company, to reflect such subdivision, combination,
dividend or distribution.
"BACK-TO-BACK OBLIGATION" means any liability or obligation of
Charter LLC to the Company, the terms of which are substantially equivalent to a
liability or
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<PAGE> 3
obligation of the Company to any third party, as contemplated by Clause (b)
of Article Third of the Certificate of Incorporation.
"BUSINESS DAY" means any day other than a Saturday, Sunday, or other
day on which commercial banking institutions in New York, New York are required
or authorized by law to remain closed.
"CERTIFICATE OF INCORPORATION" means the Restated Certificate of
Incorporation of the Company as in effect on November 12, 1999.
"CLASS A STOCK" means the Class A Stock of the Company as set forth in
the Certificate of Incorporation.
"CLASS B STOCK" means the Class B common stock of the Company as set
forth in the Certificate of Incorporation.
"CLOSING" means the consummation of any exchange of all or a portion
of the Exchangeable Units for shares of Publicly Traded Stock in accordance with
this Agreement.
"CLOSING DATE" means, with respect to any Closing, the day on which
such Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON UNITS" means any Unit denominated "Common", including without
limitation Class A Common Units, Class B Common Units, Class C Common Units, and
any Units denominated "Common" that may be issued by Charter LLC, as set forth
in the LLC Agreement, and any other securities into which such Common Units may
thereafter be changed, converted, or exchanged (other than pursuant to an
exercise of the Exchange Option or a similar option).
"COMPANY'S SEC REPORTS" means all forms, reports, and similar
documents filed by the Company with the SEC.
"CONVERTIBLE SECURITIES" means (subject to Section 2.3(b)(7)) options,
warrants, and other similar instruments issued by the Company that are
exercisable or convertible for shares of common stock of the Company.
"EXCHANGEABLE UNITS" means (i) any Class C Common Units acquired by
the Bresnan Holders or the Blackstone Holders under the Purchase Agreement; (ii)
any Class A CC VIII Units acquired by the TCI Holders under the Purchase
Agreement; (iii) any Class C Common Units acquired by the TCI Holders upon the
exchange of Class A CC VIII Units for such Class C Common Units; (iv) any
securities of the Company distributed on, with respect to, or in exchange for
the Class C Common Units referred to in clauses (i) or (iii) as a unit dividend,
unit split or reclassification, and any other securities into which such
Exchangeable Units may thereafter be changed, converted or exchanged (other than
pursuant to an exercise of the Exchange Option or a similar option); and (v) any
securities of CC VIII distributed on, with respect to, or in exchange
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for the Class A CC VIII Units referred to in clause (ii) as a unit dividend,
unit split or reclassification, and any other securities into which such
Exchangeable Units may thereafter be changed, converted or exchanged (other than
pursuant to an exercise of the Exchange Option or a similar option).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, or any
successor federal statute, and the rules and regulations of the SEC promulgated
thereunder, in each case as amended from time to time.
"EXCHANGE OPTION" means the right and option of any Holder to exchange
such Holder's Exchangeable Units for Publicly Traded Stock pursuant to Section
2.1.
"EXCHANGING HOLDER" means any Holder exercising its Exchange Option
with respect to its Exchangeable Units.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States of America, applied in a manner consistent
with that used in the preparation of the financial statements included in the
Company's SEC Reports.
"GOVERNMENTAL AUTHORITY" means any federal, state, or local
governmental authority, including any court or administrative or regulatory
agency.
"HOLDER GROUP" the Blackstone Holders, the TCI Holders or the Bresnan
Holders, as the case may be.
"INVESTMENT BANKER'S OPINION" means the opinion of an investment
banking or valuation firm of nationally recognized standing that is not
affiliated with the Company.
"LLC ACT" means the Delaware Limited Liability Company Act, 6 Del. C.
Section 18-101 et seq., as the same may be amended from time to time.
"LLC AGREEMENT" means that certain Amended and Restated Limited
Liability Agreement for Charter LLC, dated the same date as this Agreement, as
amended from time to time (provided that any amendment that results in the
deletion or renumbering of any section specifically referenced herein shall
result in an automatic modification to this Agreement to delete or renumber such
section reference, as appropriate).
"MEMBER" means each Person who is listed on Schedule A to the LLC
Agreement as a Member, and any additional or substitute Member admitted to
Charter LLC in accordance with the terms of the LLC Agreement.
"MEMBERSHIP INTEREST" means a Member's entire limited liability
company interest in Charter LLC including the Member's right to share in income,
gains, losses, deductions, credits, or similar items of, and to receive
distributions from, Charter LLC pursuant to the LLC Agreement and the LLC Act.
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"MIRROR SECURITY" means any equity security issued by Charter LLC and
held by the Company, the terms of which are substantially equivalent to a
security of the Company issued to any third party, as contemplated by Clause (b)
of Article Third of the Certificate of Incorporation.
"PERSON" means any individual, corporation, partnership, limited
partnership, limited liability partnership, limited liability company, trust,
association, organization, or other entity.
"PREFERRED UNITS" mean any Units denominated "Preferred" including the
Class A Preferred Units, as set forth in the LLC Agreement.
"PUBLICLY TRADED STOCK" means (i) the Class A Stock of the Company, if
it is nationally traded or (ii) any other series of common stock of the Company
that is publicly traded on the Closing Date except that, if more than one class
or series of shares of common stock of the Company is publicly traded on the
Closing Date, "Publicly Traded Stock" means:
(x) if more than one class or series of shares of common stock of
the Company is publicly traded on the Closing Date but only one class or series
of shares of common stock of the Company is nationally traded on the Closing
Date, then "Publicly Traded Stock" means shares of that class or series of
common stock of the Company that is nationally traded on the Closing Date; and
(y) if more than one class or series of shares of common stock of
the Company is nationally traded on the Closing Date, then "Publicly Traded
Stock" means shares of that class or series of common stock of the Company that
the holders of Class A Stock of the Company as of the closing of the Purchase
Agreement (the "CURRENT STOCKHOLDERS") hold together with all such rights and
preferences as the Current Stockholders are entitled to receive; provided that
if the Current Stockholders are entitled to elect whether they shall retain the
Class A Stock or exchange such stock for one or more different classes or series
of shares of common stock of the Company that are nationally traded, the Holders
shall elect at such time as the Current Stockholders are required to elect on
comparable terms and conditions, which classes or series of Company stock the
Holders will be entitled to receive in the event such Holder exercises its
Exchange Option. In the event the Current Stockholders are entitled to make such
an election as described in the preceding sentence, the Company shall provide
the Holders with the same notice and information as required to be provided to
the Current Stockholders in connection with the election and the Holders shall
be required to provide written notice to the Company of such election within the
same time period as required of the Current Stockholders. In the event any
Holder fails to make a required election in the applicable time period, such
Holder shall irrevocably be deemed to have elected to receive the security which
the holders of a majority of the shares of Class A Stock to receive in such an
election.
For purposes of this definition of "Publicly Traded Stock", a class or
series of common stock is "nationally traded" if it is (A) registered under
Section 12 of the Exchange Act (or any successor provision of law), and (B)
listed for trading on any
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national securities exchange registered under Section 7 of the Exchange Act (or
any successor provision of law) or on the Nasdaq National Market (or any
successor system).
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreements entered into by the Company and the Holders as of the date hereof.
"SEC" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act or the Exchange Act.
"SEC REPORTS" means any form, report or similar document filed by the
Company with the SEC.
"SECURITIES ACT" means the Securities Act of 1933, or any successor
federal statute, and the rules and regulations of the SEC promulgated
thereunder, in each case as amended from time to time.
"TRADING DAY" means, with respect to any security, a day on which the
principal national securities exchange on which such security is listed or
admitted to trading, or the Nasdaq National Market or the Nasdaq Stock Market,
as applicable, if such security is not listed or admitted to trading on any
national securities exchange, is open for the transaction of business (unless
such trading shall have been suspended for the entire day) or, if such security
is not listed or admitted to trading on any national securities exchange, the
Nasdaq National Market or the Nasdaq Stock Market, any Business Day.
"UNITS" means units of Membership Interest issued by Charter LLC to
its Members which entitle the Members to the rights set forth in the LLC
Agreement.
1.2. Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have the meanings set forth in the sections
indicated:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Agreement Preliminary Statement
Allen Put Agreement Section 3
Blackstone Holders Preliminary Statement
Bresnan Holders Preliminary Statement
CC VIII Preliminary Statement
Charter LLC Preliminary Statement
Class A CC VIII Units Preliminary Statement
Class C Common Units Preliminary Statement
Company Introductory Paragraph
Current Stockholders Definition of Publicly Traded Stock
Exchange Value Section 2.3(a)
Holder Preliminary Statement
One-for-One Conditions Section 2.2(a)
TCI Holders Preliminary Statement
</TABLE>
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<PAGE> 7
1.3. Terms Generally. The definitions in this Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context requires, any pronoun includes the corresponding masculine, feminine,
and neuter forms. The words "include," "includes," and "including" are not
limiting. Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.
Section 2 Exchange.
2.1. Right to Exchange.
(a) Subject to the terms and conditions of this Agreement, the
Company hereby grants to each Holder the right and option, exercisable from time
to time, on one or more occasions, to exchange all or any portion of its
Exchangeable Units for shares of Publicly Traded Stock; provided, however, if
the One-for-One Conditions (as defined in Section 2.2) are not satisfied as of
the Closing Date for a proposed exchange, the Holder shall not be able to
exercise its Exchange Option in connection with such exchange unless the Holder
is delivering a written notice of exercise with respect to all remaining
Exchangeable Units held by such Holder or unless the aggregate market value of
the Exchangeable Units proposed to be exchanged by such Holder exceeds
$10,000,000.
(b) Any Holder shall exercise its Exchange Option by delivering
written notice of exercise to the Company, specifying the portion of such
Holder's Exchangeable Units to be exchanged.
(c) Subject to Section 2.6, upon its receipt of notice pursuant
to Section 2.1(b), the Company shall be obligated to acquire the Exchangeable
Units specified in such notice and deliver to the Exchanging Holder the number
of shares of Publicly Traded Stock required to be delivered under Section 2.2 or
Section 2.3, and the Exchanging Holder shall be obligated to assign and transfer
to the Company such Exchangeable Units on the terms and conditions specified in
this Agreement.
(d) Notwithstanding anything to the contrary herein, each
Holder's right to exchange its Exchangeable Units pursuant to this Agreement and
the Company's obligation to effectuate such exchange shall be conditioned on the
Company's becoming reasonably satisfied that the issuance of Publicly Traded
Stock to the Holder in such exchange complies with applicable securities laws.
If in connection with a proposed exchange, the Company is not reasonably
satisfied that the issuance of such Publicly Traded Stock to the Holder complies
with applicable securities laws, such proposed exercise of the Exchange Option,
upon written notice by the Company to the Holder, shall be deemed to have never
been effected.
(e) Notwithstanding anything to the contrary herein, in the event
that a Holder's exchange of its Exchangeable Units pursuant to this Agreement
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would result in a violation of the ownership restrictions of the Communications
Act of 1934, as amended, and the Ownership Rules (as defined in the LLC
Agreement), the violation shall be remedied, as determined in the Company's sole
discretion, by (i) the Holder selling a sufficient number of shares of Publicly
Traded Stock to cure the violation; (ii) the Company taking such actions with
respect to its business or operations as are necessary to cure the violation,
provided that in no event shall the Company be obligated to take such actions;
or (iii) if proposed by a Holder, such Holder taking actions with respect to its
business or operations as are necessary to cure the violation; provided, however
that the Company shall not unreasonably withhold its consent to any remedy
proposed by a Holder that will adequately and promptly address the violation and
would not require the Company or any of its subsidiaries to divest any of its
properties or assets or to cease any of its business activities or to forego any
opportunity to acquire or expand any properties, assets or business activities
or otherwise adversely affect the Company's or Charter LLC's business,
operations or financial condition in any way or result in any significant
financial expense or tax disadvantage to the Company or Charter LLC. In the
event that the FCC lowers the permissible attribution percentages under its
Ownership Rules (as defined in the LLC Agreement), if requested by the Holder,
the Company will reasonably cooperate in good faith to assist the Holder in
taking appropriate and timely action to seek to insulate the Holder's interest
in the Company to the extent required (including, subject to the qualification
set forth below, issuing preferred non-voting stock on substantially the same
terms as the Publicly Traded Stock to the Holder in exchange for its Publicly
Traded Stock or permitting the Holder to form a special purpose corporation), or
the Holder, at its option, may take any other actions with respect to its
business necessary to comply with the new rules; provided that in no event shall
the Company or any of its subsidiaries be required to divest any of its
properties or assets or to cease any of its business activities or to forego any
opportunity to acquire or expand any properties, assets or business activities
or take any any action that would otherwise adversely affect the Company's or
Charter LLC's business, operations or financial condition in any way or result
in any significant financial expense or tax disadvantage to the Company or
Charter LLC in order to achieve such insulation; provided that if such
insulation is not achieved, the Holder shall divest the number of shares of
Publicly Traded Stock as is necessary to remedy the applicable FCC rule or
regulation at issue.
2.2. Exchange Ratio. The Exchanging Holder shall receive one share of
Publicly Traded Stock for each Exchangeable Unit being exchanged pursuant to
Section 2.1(a); provided, however, that if at the Closing Date, the One-for-One
Conditions (as defined below) are not satisfied, the number of shares of
Publicly Traded Stock that the Exchanging Holder will receive in exchange for
each Exchangeable Unit shall be determined pursuant to Section 2.3. On any date,
the "One-for-One Conditions" shall be deemed satisfied, if, on such date:
(a) Clause (b) of Article Third and Clauses (a)(ii) and (b)(iii)
of Article Fourth of the Company's Certificate of Incorporation have not been
amended so as to substantively modify the provisions thereof, and the Company is
in compliance in all material respects with those provisions;
(b) Sections 3.5.4 (to the extent the Section is applicable
because the Company is required to request Charter LLC to redeem its Units under
the
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<PAGE> 9
Company's Certificate of Incorporation), 3.6.1, 3.6.4(b), 3.6.4(c) and 5.1.7 of
the LLC Agreement have not then been amended so as to substantively modify the
provisions thereof, and Charter LLC is in compliance in all material respects
with those provisions; and
(c) with respect to the Class A Preferred CC VIII Units, in
addition to the requirements set forth in (a) and (b) above, Section 3.6.3 of
the limited liability company agreement of CC VIII has not then been amended so
as to substantively modify the provisions thereof, and CC VIII is in compliance
in all material respects with those provisions.
2.3. Exchange Ratio if the One-For-One Conditions are not Satisfied;
Effective Number of Exchangeable Units.
(a) If the One-For-One Conditions are not satisfied as of the
Closing Date, the number of shares of Publicly Traded Stock to be issued in
exchange for any Exchangeable Units pursuant to this Agreement shall be that
number of shares with an aggregate Exchange Value as of the Closing Date equal
to the fair market value of such Exchangeable Units as of the Closing Date,
determined in accordance with Section 2.3(b). The "EXCHANGE VALUE" of each share
of Publicly Traded Stock issued at any Closing pursuant to this Agreement shall
be the Average Trading Price of such Publicly Traded Stock.
(b) The fair market value of any Exchangeable Unit shall be the
fair market value of all Common Units held by the Company as of the Closing Date
divided by the total number of Common Units held by the Company. For purposes of
this Section 2.3(b):
(1) Subject to adjustment as provided below in this Section
2.3(b) the fair market value of all of the Common Units held by the Company as
of the Closing Date shall be deemed to equal the aggregate value of all
outstanding shares of Publicly Traded Stock, with each such share being valued
at the Average Trading Price of a share of Publicly Traded Stock as of the
Closing Date.
(2) If on the Closing Date there are outstanding any
Convertible Securities (other than a Convertible Security for which the Company
holds a Mirror Security) for which the exercise price per share of Publicly
Traded Stock is less than the Average Trading Price of a share of Publicly
Traded Stock as of such Closing Date, then the fair market value of the
Company's Common Units as of the Closing Date shall be increased by the amount
by which the aggregate exercise price of all such Convertible Securities is less
than the aggregate value of all shares of Publicly Traded Stock issuable upon
the exercise or conversion thereof, with each such issuable share being valued
at the Average Trading Price of a share of Publicly Traded Stock as of the
Closing Date.
(3) If on the Closing Date the Company has any indebtedness,
liabilities, or obligations that would be required by GAAP to be reflected on an
unconsolidated balance sheet of the Company as of the Closing Date (other than
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deferred taxes, obligations for which there exists a Back-to-Back Obligation or
liabilities or obligations for which the Company is entitled to reimbursement
from Charter LLC), the fair market value of the Company's Common Units as of the
Closing Date shall be increased by the amount of such liability or obligation as
of the Closing Date, determined in accordance with GAAP.
(4) If on the Closing Date the Company has outstanding any
publicly traded equity securities (other than Publicly Traded Stock, Convertible
Securities required to be taken into account under Section 2.3(b)(2) and
publicly traded equity securities for which the Company holds a Mirror
Security), the fair market value of the Company's Common Units as of the Closing
Date shall be increased by the aggregate value of all such outstanding
securities as of the Closing Date, with such securities being valued at the
Average Trading Price of such securities as of the Closing Date.
(5) If on the Closing Date the Company has outstanding any
equity securities (such as the Class B Stock) (other than Publicly Traded Stock,
other publicly traded equity securities, Convertible Securities required to be
taken into account under Section 2.3(b)(2) and equity securities for which the
Company holds a Mirror Security), the fair market value of the Company's Common
Units as of the Closing Date shall be increased, without duplication, by the
aggregate market value of all such outstanding securities as of the Closing
Date. For purposes of this Section 2.3(b)(5):
(A) to the extent practicable, the market value of such
securities shall be the amount that would be distributed with respect to such
securities (or, if greater, any securities of the Company for which such
securities may be converted or exchanged) upon the liquidation of the Company if
the amount that would be distributed to the holders of the Publicly Traded Stock
upon such liquidation were equal to the aggregate value of all outstanding
shares of Publicly Traded Stock, with each such share being valued at the
Average Trading Price of a share of Publicly Traded Stock as of the Closing Date
(for example, a share of any class of common stock of the Company (such as the
Class B Stock) that has the same rights to liquidating distributions as a share
of Publicly Traded Stock shall be deemed to have a market value equal to the
Average Trading Price of a share of such Publicly Traded Stock, and a share of
non-convertible, non-participating preferred stock of the Company that is
entitled to a preference over the common stock of the Company upon liquidation
of the Company shall be deemed to have a market value equal to its liquidation
preference);
(B) if the market value of such securities cannot
practicably be determined under Section 2.3(b)(5)(A), the market value of such
securities shall be determined in good faith by the Board of Directors of the
Company; provided, however, that if the aggregate value of all such securities
exceeds $100,000,000, then the Board of Director's determination of the market
value of such securities shall be made in reliance on, and shall be supported
by, an Investment Banker's Opinion obtained by the Company not more than three
months prior to the Closing Date; and
(C) the value of any securities valued pursuant to
Section 2.3(b)(5)(B) shall be determined without regard to any discount or
premium
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<PAGE> 11
for liquidity, control, minority interest, lack of marketability, restrictions
on transfer, or any other market factor.
(6) If on the Closing Date the Company has any assets (other
than the Company's Common Units, Back-to-Back Obligations, Mirror Securities,
goodwill or deferred tax assets), including cash, cash equivalents, or assets
used in the conduct of any business, then the fair market value of the Company's
Common Units as of the Closing Date shall be reduced by the fair market value of
such assets as determined in good faith by the Board of Directors of the
Company; provided, however, that if the aggregate value of all such assets
(other than cash and cash equivalents) exceeds $100,000,000, then the Board of
Director's determination of the fair market value of such assets shall be made
in reliance on, and shall be supported by, an Investment Banker's Opinion
obtained by the Company not more than three months prior to the Closing Date.
(7) Any exchange rights granted by the Company that entitle
the holder to exchange Common Units or Class A Preferred CC VIII Units for
shares of common stock of the Company pursuant to this Agreement or on valuation
terms substantially similar to those provided in 2.2 and 2.3, shall not be
deemed to be Convertible Securities or other equity securities of the Company
for purposes of Section 2.3(b)(2) or Section 2.3(b)(5).
(8) Without limiting the foregoing, for purposes of Section
2.3, (i) any outstanding securities of the Company with respect to which the
Company holds a Mirror Security shall be deemed to be of equal and offsetting
value to such Mirror Security and (ii) any obligation of the Company with
respect to which there exists a Back-to-Back Obligation or a contractual
reimbursement obligation from Charter LLC or any subsidiary thereof shall be
deemed to be of equal and offsetting value to such Back-to-Back Obligation or
reimbursement obligation.
(c) If the One-for-One Condition described in Section 2.2(c) is
not met, the number of Exchangeable Units that are Class A Preferred CC VIII
Units will be deemed to be such number that would have been issued to the TCI
Holders had such condition been met.
2.4. Time and Place of Closing.
(a) The Closing shall be held at the offices of Irell & Manella
LLP in Los Angeles, California, on the date specified below:
(1) if the Exchanging Holder has requested registration for
sale to the public pursuant to the Registration Rights Agreement of the shares
of Publicly Traded Stock to be received by it at the Closing through the
exercise of its Exchange Option, then, at the Exchanging Holder's election, the
Closing shall take place following the effectiveness of the Company's
registration statement with respect to such shares and immediately prior to the
closing of the Exchanging Holder's sale of such shares in accordance with the
plan of distribution described in the registration statement; and
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(2) in all other cases, the Closing shall take place on the
tenth Business Day after the Exchanging Holder delivers its notice pursuant to
Section 2.1(b), or at such other time and place as the Exchanging Holder and the
Company may agree.
(b) The Exchanging Holder and the Company will cooperate so as
to permit all documents required to be delivered at or in connection with the
Closing to be delivered by mail, delivery service, or courier without requiring
either party or its representatives to be physically present at the Closing.
(c) Notwithstanding Section 2.4(a), if on the date on which the
Closing would otherwise be required to take place pursuant to Section 2.4(a)
there shall be in effect any order of or by any Governmental Authority that
prohibits, enjoins or makes unlawful the Closing, then the Closing shall be
postponed until a date, to be set by the Company on at least five Business Days'
written notice to the Exchanging Holder, as soon as practicable after such order
ceases to be in effect.
2.5. Closing Deliveries.
(a) Company's Deliveries. At the Closing, the Company will
deliver to the Exchanging Holder certificates evidencing the shares of Publicly
Traded Stock to be issued at the Closing.
(b) Exchanging Holder's Deliveries. At the Closing, the
Exchanging Holder will deliver to the Company the following:
(1) Certificate Evidencing Exchangeable Units. (a) If the
Exchangeable Units are then certificated, one or more certificates evidencing
the portion of the Exchanging Holder's Exchangeable Units to be transferred and
assigned at the Closing, and (b) duly executed assignments in form and substance
sufficient to effectuate the transfer of the portion of the Exchanging Holder's
Exchangeable Units to be transferred to the Company.
(2) Title Representations. A certificate to the effect that
the Exchanging Holder owns all Exchangeable Units to be exchanged at the
Closing, both of record and beneficially, free and clear of all liens,
encumbrances or adverse interests of any kind or nature whatsoever (including
any restriction on the right to vote, sell, or otherwise dispose of the
Exchangeable Units), other than those arising under applicable state and federal
securities laws and those arising under the organizational documents of Charter
LLC or the Company, and, upon the transfer of such Exchangeable Units pursuant
to this Agreement, the Company will receive good title to the Exchangeable
Units, free and clear of all liens, encumbrances, and adverse interests other
than those arising under the organizational documents of Charter LLC or the
Company.
(3) Investment Representations. A certificate to the effect
that:
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(A) Except as may be described in any registration statement
filed with the SEC under the Securities Act (including such registration
statement filed pursuant to the Registration Rights Agreement) with respect to
any of the shares of Publicly Traded Stock to be acquired at the Closing, it is
acquiring such shares with the intent of holding such shares for investment for
its own account and without the intent or a view to participating directly or
indirectly in, or for resale in connection with, any distribution of such shares
within the meaning of the Securities Act of any applicable state securities
laws.
(B) It acknowledges and agrees that shares of Publicly
Traded Stock are being issued to it in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act and exemptions
contained in applicable state securities laws, and that they cannot be sold or
transferred except in a transaction that is exempt under the Securities Act and
those state acts or pursuant to an effective registration statement under those
acts or in a transaction that is otherwise in compliance with the Securities Act
and those state acts.
(C) It is an "accredited investor" within the meaning
assigned to such term under Regulation D promulgated pursuant to the Securities
Act (including an indication of the basis for such representation).
2.6. Exchanging Holder's Right to Rescind Exercise of Exchange Option.
(a) Any Exchanging Holder may elect to rescind its exercise of
its Exchange Option, in whole or in part, if:
(1) the Closing is postponed pursuant to Section 2.4(c) for
more than thirty days after the date on which the Closing would otherwise have
been required to take place, or
(2) The Exchanging Holder requested registration pursuant to
the Registration Rights Agreement of the shares of Publicly Traded Stock to be
received by it at the Closing, and the registration statement covering such
shares was withdrawn, such shares were withdrawn from inclusion in such
registration statement or such shares were excluded from such registration
statement in accordance with the terms of the Registration Rights Agreement.
(b) Any Exchanging Holder shall elect to rescind the exercise
of its Exchange Option pursuant to Section 2.6(a) by delivering written notice
of its election to the Company prior to the Closing. In the event of such a
rescission, the Exchangeable Units subject to the rescinded exchange shall be
deemed not to have been exchanged.
(c) An election by any Exchanging Holder to rescind the
exercise of its Exchange Option pursuant to Section 2.6(a), on one or more
occasions, shall not impair the Exchanging Holder's rights under this Agreement
to exercise its Exchange Option on any future occasion.
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Section 3 Exchange at Election of Company. The Company shall have the
right, by notice to any Holder at any time after the expiration of the Put
Period (as defined in the Put Agreement entered into by and between Paul Allen
and the Holders as of the date hereof) (the "ALLEN PUT AGREEMENT") to require
such Holder to exchange its Exchangeable Units as to which such Holder has not
exercised its Put Option under the Allen Put Agreement for Publicly Traded Stock
as provided in this Agreement; provided, however, that the Company will not be
entitled to require any Holder of a Holder Group to exchange their Exchangeable
Units provided in this Section 3 unless (x) such exchange can be accomplished in
a manner that does not cause aggregate adverse tax or economic consequences to
such Holder Group (taking into account any compensation to be provided to such
entities) in excess of One Million Dollars ($1,000,000); (y) the Company
receives the written consent of the applicable Holder Group; or (z) the Company
indemnifies such Holder Group from such adverse tax or economic consequences
specified in clause (x) above in a manner reasonably satisfactory to such Holder
Group.
Section 4 Other Covenants.
4.1. Prior Notice by the Company.
(a) The Company will deliver written notice to the Holders at
least fifteen Business Days prior to:
(1) the fixing of the record date to determine the holders
of shares of common stock of the Company entitled to receive any dividend or
other distribution (other than cash dividends payable out of earnings or earned
surplus and dividends payable solely in shares of common stock) or any right,
including the right to acquire any additional shares of stock of any class;
(2) the fixing of the record date to determine the holders
of shares of common stock of the Company entitled to participate in any capital
reorganization or any reclassification of or change in the outstanding capital
stock of the Company (other than a change resulting solely from a subdivision or
combination of outstanding shares), any consolidation or merger, any sale,
transfer, or disposition of substantially all of the Company's or Charter LLC's
assets as an entirety, or the liquidation, dissolution, or winding up of the
Company;
(3) the consummation of any disposition by the Company of
all or substantially all of its Common Units; or
(4) any "going private" transaction or voluntary delisting
by the Company of its Publicly Traded Stock from the NASDAQ National Market or a
securities exchange on which such Publicly Traded Stock is listed.
(b) Any notice by the Company pursuant to Section 4.1(a) shall
specify the applicable record date and set forth the general nature of the
action to be taken.
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<PAGE> 15
4.2. Investment Banker's Opinions. The Company will promptly notify
each Holder in writing of its decision at any time to retain an investment
banking firm to prepare an Investment Banker's Opinion. Such notice will
identify the assets or securities that are intended to be the subject of such
Investment Banker's Opinion. Within five Business Days after the Company
receives an Investment Banker's Opinion, the Company will deliver to each Holder
a copy of such Investment Banker's Opinion together with any supplementary
material that was prepared or relied upon by the investment banking firm issuing
such Investment Banker's Opinion relating to the subject of such Investment
Banker's Opinion.
4.3. Certain Transactions. The Company will not consolidate with any
Person, merge into any Person, or otherwise sell, convey, transfer, or otherwise
dispose of all or substantially all of its Common Units (in one transaction or a
series of related transactions) to any Person, or liquidate or dissolve unless
the Person that consolidates or merges with the Company or acquires all or
substantially all of the Company's Common Units or, in the case of a triangular
merger or consolidation or other transaction in which a direct or indirect
parent of such consolidating Person has a publicly traded class of equity
securities, such direct or indirect parent, assumes all of the obligations of
the Company under this Agreement.
4.4. Termination. The obligations set forth in Section 4 shall
terminate after all Exchangeable Units held by the Holders have been exchanged
pursuant to this Agreement.
4.5. Reservation of Publicly Traded Stock. The Company shall at all
times reserve and keep available for issuance upon the conversion of
Exchangeable Units pursuant to this Agreement such number of its authorized but
unissued shares of Publicly Traded Stock as will from time to time be sufficient
to permit the exchange of all of the Exchangeable Units which the Holders are
permitted to exchange pursuant to this Agreement.
Section 5 Representations of the Company. The Company represents and
warrants to the Holders as follows:
5.1. Organization, Standing, and Authority. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of Delaware. The Company has all requisite power and authority to execute
and deliver this Agreement and the documents contemplated hereby, and to perform
and comply with all of the terms, covenants, and conditions to be performed and
complied with by the Company hereunder and thereunder. The Company is duly
qualified to transact business in each jurisdiction in which the nature of its
business makes such qualification necessary, except where the failure to be so
qualified would not impair or hinder the ability of the Company to perform its
obligations under this Agreement.
5.2. Authorization and Binding Obligation. The execution, delivery,
and performance of this Agreement by the Company have been duly authorized by
all necessary actions on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes the legal, valid, and
binding obligation of
-15-
<PAGE> 16
the Company, enforceable against it in accordance with its terms except as the
enforceability of this Agreement may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally, and by judicial discretion
in the enforcement of equitable remedies.
5.3. Shares Validly Issued. The shares of Publicly Traded Stock to be
issued under this Agreement, when issued, sold, and delivered in accordance with
the terms of this Agreement, will be duly and validly issued, fully paid, and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under applicable state and federal securities laws.
Section 6 Miscellaneous.
6.1. Complete Agreement; Modifications. This Agreement constitutes the
parties' entire agreement with respect to the subject matter hereof and
supersedes all other agreements, representations, warranties, statements,
promises and understandings, whether oral or written, with respect to the
subject matter hereof, other than those contained in the Registration Rights
Agreement. This Agreement may not be amended, altered or modified except by a
writing signed by each party hereto.
6.2. Additional Documents. Each party hereto agrees to execute any and
all further documents and writings and to perform such other actions which may
be or become necessary or expedient to effectuate and carry out this Agreement.
6.3. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be sufficiently given if
delivered in person or transmitted by telecopy or similar means or recorded
electronic communication to the relevant party, addressed as follows (or at such
other address as either party shall have designated by notice as herein provided
to the other party):
If to any Holder: At the address specified for
such holder on the
signature pages hereto
and (if different) at the
address specified in the
records of Charter LLC.
If to the Company: Charter Communications, Inc.
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131
Attention: Jerald Kent and Curtis Shaw
Telecopy: (314) 965-8793
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<PAGE> 17
with copies to: Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
Attention: Alvin G. Segel
Telecopy: (310) 203-7199
Any such notice or other communication shall be deemed to have been given and
received on the day on which it is delivered or telecopied (or, if such day is
not a Business Day or if the notice or other communication is not telecopied
during business hours, at the place of receipt, on the next following Business
Day); provided, however, that any such notice or other communication shall be
deemed to have been given and received on the day on which it is sent if
delivery thereof is refused or if delivery thereof in the manner described above
is not possible because of the intended recipient's failure to advise the
sending party of a change in the intended recipient's address or telecopy
number.
6.4. No Third-Party Benefits. None of the provisions of this Agreement
shall be for the benefit of, or enforceable by, any Person that is not a party
to this Agreement other than those contemplated by Section 6.7.
6.5. Waivers Strictly Construed. With regard to any power, remedy or
right provided herein or otherwise available to any party hereunder (a) no
waiver or extension of time shall be effective unless expressly contained in a
writing signed by the waiving party; and (b) no alteration, modification or
impairment shall be implied by reason of any previous waiver, extension of time,
delay, or omission in exercise or other indulgence.
6.6. Severability. The validity, legality, or enforceability of the
remainder of this Agreement shall not be affected even if one or more of the
provisions of this Agreement shall be held to be invalid, illegal, or
unenforceable in any respect.
6.7. Successors and Assigns. Except as provided herein to the
contrary, this Agreement shall be binding upon and shall inure to the benefit of
the parties, their respective successors (including any successor by merger,
consolidation, or otherwise to all or substantially all of a party's business or
assets) and permitted assigns.
6.8. Assignments. Except for assignments to a Holder's Permitted
Transferee(s) (as defined in the Registration Rights Agreement), the rights of
Holder hereunder shall not be transferable to any party without the written
consent of the Company (which may be withheld by the Company in its sole and
absolute discretion).
6.9. Governing Law. This Agreement shall be governed by the laws of
the State of New York, without regard to any choice of law provisions of that
state or the laws of any other jurisdiction.
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<PAGE> 18
6.10. Headings. The Section headings in this Agreement are inserted
only as a matter of convenience and in no way define, limit, extend, or
interpret the scope of this Agreement or of any particular Section.
6.11. Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.12. Costs. All filing fees, transfer taxes, sales taxes, document
stamps, or other similar charges levied by any Governmental Authority in
connection with the exchange of shares of Publicly Traded Stock for Exchangeable
Units pursuant to this Agreement shall be paid by the Holder. Except as
otherwise provided in this Agreement, each party will bear its own costs in
connection with the performance of its obligations under this Agreement.
6.13. Default. In the event of any legal action between the parties
arising out of or in relation to this Agreement, the prevailing party in such
legal action shall be entitled to recover, in addition to any other legal
remedies, all of its costs and expenses, including reasonable attorney's fees,
from the non-prevailing party, regardless of whether such legal action is
prosecuted to completion.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 19
[COMPANY SIGNATURE PAGE TO
EXCHANGE AGREEMENT]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day first heretofore mentioned.
Charter Communications, Inc.
By: /s/ Marcy Lifton
-------------------------------
Name: Marcy Lifton
Title: Vice President
<PAGE> 20
[HOLDER SIGNATURE PAGE TO
EXCHANGE AGREEMENT]
BCI (USA), LLC
By: Bresnan Communications, Inc., its Managing Member
By: /s/ William J. Bresnan
------------------------------------------------
Name: William J. Bresnan
Title: President and Chief Executive Officer
NAME OF HOLDER: BCI (USA), LLC
-------------------------
ADDRESS (including fax):
c/o Bresnan Communications, Inc.
709 Westchester Avenue
White Plains, New York 10604
Attention: Jeffrey S. DeMond and Robert V. Bresnan, Esq.
Telecopier: (914) 993-6601
<PAGE> 21
[HOLDER SIGNATURE PAGE TO
EXCHANGE AGREEMENT]
/s/ William J. Bresnan
- ----------------------------------------
William J. Bresnan, individually
NAME OF HOLDER: WILLIAM J. BRESNAN
----------------------------
ADDRESS (including fax):
c/o Bresnan Communications, Inc.
709 Westchester Avenue
White Plains, New York 10604
Attention: Jeffrey S. DeMond and Robert V. Bresnan, Esq.
Telecopier: (914) 993-6601
<PAGE> 22
[HOLDER SIGNATURE PAGE TO
EXCHANGE AGREEMENT]
TCID OF MICHIGAN, INC.
By: /s/ Carol O'Keeffe
-------------------------------
Name: Carol O'Keeffe
Title: Vice President
NAME OF HOLDER: TCID OF MICHIGAN, INC.
-----------------------------------
ADDRESS (including fax):
c/o AT&T Broadband & Internet Services
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Carol O'Keeffe
Telecopier: (720) 875-5396
<PAGE> 23
[HOLDER SIGNATURE PAGE TO
EXCHANGE AGREEMENT]
TCI BRESNAN LLC
By: /s/ Carol O'Keeffe
------------------------
Name: Carol O'Keeffe
Title: Vice President
NAME OF HOLDER: TCI BRESNAN LLC
--------------------------------
ADDRESS (including fax):
c/o AT&T Broadband & Internet Services
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Carol O'Keeffe
Telecopier: (720) 875-5396
<PAGE> 24
[HOLDER SIGNATURE PAGE TO
EXCHANGE AGREEMENT]
BLACKSTONE BC CAPITAL PARTNERS, L.P.
By: Blackstone Media Management Associates III
L.L.C., its General Partner
By: /s/ Mark T. Gallogly
-----------------------------------
Name: Mark T. Gallogly
Title: Member
NAME OF HOLDER: BLACKSTONE BC CAPITAL PARTNERS, L.P.
---------------------------------------------
ADDRESS (including fax):
c/o The Blackstone Group
345 Park Avenue
New York, New York 10154
Attention: Simon Lonergan
Telecopier: (212) 583-5710
<PAGE> 25
[HOLDER SIGNATURE PAGE TO
EXCHANGE AGREEMENT]
BLACKSTONE FAMILY MEDIA PARTNERSHIP III L.P.
By: Blackstone Media Management Associates
III L.L.C., its General Partner
By: /s/ Mark T. Gallogly
----------------------------------
Name: Mark T. Gallogly
Title: Member
NAME OF HOLDER: BLACKSTONE FAMILY MEDIA PARTNERSHIP III L.P.
------------------------------------------------
ADDRESS (including fax):
c/o The Blackstone Group
345 Park Avenue
New York, New York 10154
Attention: Simon Lonergan
Telecopier: (212) 583-5710
<PAGE> 26
[HOLDER SIGNATURE PAGE TO
EXCHANGE AGREEMENT]
BLACKSTONE BC OFFSHORE CAPITAL PARTNERS L.P.
By: Blackstone Media Management Associates III L.L.C.,
its Investment General Partner
By: /s/ Mark T. Gallogly
--------------------------
Name: Mark T. Gallogly
Title: Member
NAME OF HOLDER: BLACKSTONE BC OFFSHORE CAPITAL PARTNERS L.P.
--------------------------------------------
ADDRESS (including fax):
c/o The Blackstone Group
345 Park Avenue
New York, New York 10154
Attention: Simon Lonergan
Telecopier: (212) 583-5710
<PAGE> 1
EXHIBIT 99.1
[CHARTER COMMUNICATIONS(c)A WIRED WORLD COMPANY LOGO]
FOR IMMEDIATE RELEASE
CHARTER COMMUNICATIONS COMPLETES ACQUISITION
OF BRESNAN COMMUNICATIONS PROPERTIES
Twelve Acquisitions Announced in 1999 Completed, Charter To Continue Growth in
2000
ST. LOUIS, MO, FEBRUARY 14, 2000 - Charter Communications, Inc. (Nasdaq:CHTR)
announced today that it has completed the previously announced $3.1 billion
acquisition of Bresnan Communications Company Limited Partnership. The
acquisition will add approximately 690,000 cable customers to Charter,
solidifying its position as the fourth-largest cable operator in the United
States serving 6.2 million customers. The Bresnan acquisition formed a super
cluster in Wisconsin, Michigan and Minnesota serving approximately 1.3 million
customers. With the completion of the Bresnan acquisition, Charter will have
concluded the last of the twelve acquisitions announced in 1999.
Jerald L. Kent, Charter's President and CEO, said, "We have completed 12
acquisitions in the past year without sacrificing our operational strength. The
Bresnan systems bring not only good markets and excellent facilities, but a
quality management team that will enhance this very important cluster and allow
us to maintain our high operating standards. We are adding an experienced
management team that has recently upgraded the broadband systems and are
currently delivering the next generation of services -- digital video and
Internet services -- to customers. That gives us the ability to hit the ground
running and continue to deploy new services at an accelerated pace."
-more-
<PAGE> 2
Charter add one-
Kent added, "My hat is off to Bill Bresnan, one of the truly great cable
entrepreneurs who made the industry what it is today. He is a man whose word is
golden. I appreciate the grace with which he turned over the keys, and I look
forward to his continued involvement as a shareholder of Charter."
Charter Communications, a Wired World(TM) company, is among the country's
leading broadband communications companies. Charter serves approximately 6.2
million customers. Charter offers an array of services including cable
television under the Charter brand; high-speed Internet access via Charter
Pipeline(TM); advanced digital video programming services under the Charter
Digital Cable(TM) brand and Charter Paging(TM). The Chairman of Charter
Communications is Paul G. Allen. Jerald L. Kent is the company's President &
CEO. Charter is traded on the NASDAQ National Market under the ticker symbol
"CHTR." More information about Charter can be accessed on the Internet at
www.chartercom.com.
"Safe Harbor" Statements under the Private Securities Litigation Reform
Act of 1995: Statements in this press release regarding Charter
Communications' business which are not historical facts are
"forward-looking statements" that involve risks and uncertainties. For
a discussion of such risks and uncertainties, which could cause actual
results to differ from those contained in the forward-looking
statements, see "Risk Factors" in the Company's Prospectus
INVESTOR CONTACT: MEDIA ONLY CONTACT:
Ralph Kelly Andy Morgan
Senior Vice President & Corporate Communications
Treasurer Charter Communications
Charter Communications (314) 543-2217
(314) 543-2388
###
