AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF
Exhibit 10.4
AMENDED
AND RESTATED
OF
CHARTER
COMMUNICATIONS HOLDING COMPANY, LLC
(a Delaware Limited Liability
Company)
This
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (as amended from time
to time, this “Agreement”) is entered into as of
November 30, 2009 among Charter Communications, Inc., a Delaware corporation
(“CCI”), Charter
Investment, Inc, a Delaware corporation (“CII”), and Charter
Communications Holding Company, LLC, a Delaware limited liability company (the
“Company”).
WITNESSETH:
WHEREAS,
a Certificate of Formation (as amended from time to time, the “Certificate”) of the Company
was filed in the office of the Secretary of State of the State of Delaware on
May 25, 1999. The Company was formed and has heretofore been operated
pursuant to the Limited Liability Company Agreement, entered into and made
effective as of May 25, 1999 by CII, as amended and restated numerous times,
most recently by that certain Amended and Restated Limited Liability Company
Agreement, dated as of January 1, 2001, among CII, Vulcan Cable III Inc., CCI
and certain other investors (the “Existing LLC
Agreement”).
WHEREAS,
on March 27, 2009, CCI, CII and certain direct and indirect subsidiaries of CCI,
including the Company (collectively, the “Debtors”), filed petitions for
relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the
United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy
Court”).
WHEREAS,
the Debtors filed a joint plan of reorganization (the “Joint Plan”) which, pursuant
to the Bankruptcy Code, was confirmed by an order, entered November 17, 2009
(the “Confirmation
Order”), of the Bankruptcy Court.
WHEREAS,
pursuant to the Joint Plan, among other things, and on the effective date
thereof (the “Effective
Date”) (i) all of CII’s existing membership interests in the Company are
being cancelled, other than a 1% interest to be retained by CII (the “Retained Interest”), (ii) CCI
will hold all of the membership interests in the Company other than the Retained
Interest, (iii) the parties are confirming CCI as manager of the Company, and
(iv) CCI, CII and Xxxx X. Xxxxx (“Xx. Xxxxx”) are entering into
an agreement (the “New Exchange
Agreement”), pursuant to which,
among
other things, CII and Xx. Xxxxx shall have the right, exercisable at their
election at any time and from time to time, to exchange, directly or indirectly,
all or any portion of the Retained Interest for common stock of CCI in
accordance with the New Exchange Agreement.
WHEREAS,
the Confirmation Order provides, among other things, for the amendment and
restatement of the Existing LLC Agreement on the terms set forth herein, and the
parties desire to amend and restate the Existing LLC Agreement on such
terms.
NOW,
THEREFORE, in consideration of the terms and provisions set forth herein, the
benefits to be gained by the performance thereof and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree to amend and restate the Existing LLC Agreement as
follows:
SECTION
1. General.
(a) Formation. Effective as of
the date and time of filing of the Certificate in the office of the Secretary of
State of the State of Delaware, the Company was formed as a limited liability
company under the Delaware Limited Liability Company Act, 6 Del. C. § 18-101,
et. seq., as amended from
time to time (the “Act”). Except as expressly
provided herein, the rights and obligations of the Members (as defined in
Section 1(h)) in connection with the regulation and management of the Company
shall be governed by the Act.
(b) Name. The name of the Company
shall be “Charter Communications Holding Company, LLC.” The business of the
Company shall be conducted under such name or any other name or names that the
Manager (as defined in Section 4(a)(i) hereof) shall determine from time to
time.
(c) Registered Agent. The address
of the registered office of the Company in the State of Delaware shall be c/o
Corporation Service Company, 0000 Xxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx,
Xxxxxxxx 00000. The name and address of the registered agent for service of
process on the Company in the State of Delaware shall be Corporation Service
Company, 0000 Xxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000. The
registered office or registered agent of the Company may be changed from time to
time by the Manager.
(d) Principal Office. The
principal place of business of the Company shall be at 00000 Xxxxxxxxxxx Xxxxx,
Xx. Xxxxx, XX 00000. At any time, the Manager may change the location of the
Company’s principal place of business.
(e) Term. The term of the Company
commenced on the date of the filing of the Certificate
of Formation in the office of the Secretary of State of the State of Delaware,
and the
Company
will have perpetual existence until dissolved and its affairs wound up in
accordance with the provisions of this Agreement.
(f) (Intentionally
Omitted).
(g) Qualification; Registration.
The Manager shall cause the Company to be qualified, formed or registered
under assumed or fictitious name statutes or similar laws in any jurisdiction in
which the Company transacts business and in which such qualification, formation
or registration is required or desirable. The Manager, as an authorized person
within the meaning of the Act, shall execute, deliver and file any certificates
(and any amendments and/or restatements thereof) necessary for the Company to
qualify to do business in a jurisdiction in which the Company may wish to
conduct business.
(h) Voting. Each member of the
Company (if there is only one member of the Company, the “Member”; or if there are more than
one, the “Members”) shall have one vote (a
“Vote”) as to any matter under
the Act or this Agreement that requires the vote, approval or consent of the
Members for each one percentage point of Percentage Interest (as defined in
Section 7) held by such Member (totaling 100 Votes for all Members) (any
fraction of such a percentage point shall be entitled to an equivalent fraction
of a Vote). Any vote, approval or consent as to any matter under the Act or this
Agreement by a Member may be evidenced by such Member’s execution of any
document or agreement (including this Agreement or an amendment hereto) which
would otherwise require as a precondition to its effectiveness such vote,
approval or consent of the Members.
SECTION
2. Purposes. The Company was
formed for the object and purpose of, and the nature of the business to be
conducted by the Company is, engaging in any lawful act or activity for which
limited liability companies may be formed under the Act.
SECTION
3. Powers. The Company shall
have all powers necessary, appropriate or incidental to the accomplishment of
its purposes and all other powers conferred upon a limited liability company
pursuant to the Act.
SECTION
4. Management.
(a) Management by
Manager.
i) The
Members hereby confirm CCI, or its successor-in-interest that acquires directly
or indirectly substantially all of the assets or business of CCI, as the
Company’s manager (the “Manager”). CCI shall be the Manager
until a simple majority of the Votes elects otherwise or until its earlier
resignation. No other person may be elected as Manager without the approval of
a simple
majority of the Votes (for purposes of this Agreement, to the extent the context
requires, the term “person” refers to both individuals and
entities). Except as otherwise required by applicable law and as
provided below with respect to the Board (if applicable) and except for such
matters which require the approval of the Members under this Agreement or
applicable law, 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. The Manager is a
“manager” of the Company within the meaning of the Act. Any person appointed as
Manager shall accept its appointment by execution of a consent to this
Agreement.
ii) The
Manager shall be authorized to elect, remove or replace directors and officers
of the Company, who 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 the resolution or resolutions pursuant to which such
directors or officers were elected.
iii) Except as
otherwise required by this Agreement or 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 without the consent of any Member or
other person.
iv) No annual
or regular meetings of the Manager or the Members are required. The Manager and
Members may, by written consent, take any action which it or they are otherwise
required or permitted to take at a meeting.
v) The
Manager’s duty of care in the discharge of its duties to the Company and the
Members is limited to discharging its duties in good faith, with the care a
director of a Delaware corporation would exercise under similar circumstances,
in the manner it reasonably believes to be in the best interests of the Company
and its Members.
vi) Except as
required by the Act, no Manager shall be liable for the debts, liabilities
and obligations of the Company, including without limitation any debts,
liabilities and obligations under a judgment, decree or order of a court, solely
by reason of being a manager of the Company.
(b) Consent
Required.
i) The
affirmative vote, approval, consent or ratification of the Manager shall be
required to:
(1) alter the
primary purposes of the Company as set forth in Section 2;
(2) issue
membership interests in the Company to any Person and admit such Person as a
member;
(3) do any
act in contravention of this Agreement or any resolution of the members, or
cause the Company to engage in any business not authorized by the Certificate or
the terms of this Agreement or that which would make it impossible to carry on
the usual course of business of the Company;
(4) enter
into or amend any agreement which provides for the management of the business or
affairs of the Company by a person other than the Manager;
(5) change or
reorganize the Company into any other legal form;
(6) amend
this Agreement;
(7) approve a
merger or consolidation with another person;
(8) sell all
or substantially all of the assets of the Company;
(9) change
the status of the Company from one in which management is vested in the Manager
to one in which management is vested in the members or in any other manager,
other than as may be delegated to the Board and the officers
hereunder;
(10) possess
any Company property or assign the rights of the Company in specific Company
property for other than a Company purpose;
(11) operate
the Company in such a manner that the Company becomes an “investment company”
for purposes of the Investment Company Act of 1940;
(12) except as
otherwise provided or contemplated herein, enter into any agreement to acquire
property or services from any person who is a director or officer of the
Company;
(13) settle
any litigation or arbitration with any third party, any Member, or any affiliate
of any Member, except for any litigation or arbitration brought or defended in
the ordinary course of business where the present value of the total settlement
amount or damages will not exceed Fifty Million Dollars
($50,000,000);
(14) subject
to the additional restrictions set forth in Section 4(b)(ii)(6) and Section 13,
materially change any of the tax reporting positions or elections of the
Company;
(15) make or
commit to any expenditures which, individually or in the aggregate, exceed or
are reasonably expected to exceed the Company’s total budget (as approved by the
Manager) by the greater of 5% of such budget or Five Million Dollars
($5,000,000); or
(16) make or
incur any secured or unsecured indebtedness which, individually or in the
aggregate, exceeds Fifty Million Dollars ($50,000,000), provided that this
restriction shall not apply to (i) any refinancing of or amendment to existing
indebtedness which does not increase total borrowing, (ii) any indebtedness to
(or guarantee of indebtedness of) any company controlled by or under common
control with the Company (“Intercompany
Indebtedness”), (iii) the pledge of any
assets to support any otherwise permissible indebtedness of the Company or any
Intercompany Indebtedness or (iv) indebtedness necessary to finance a
transaction or purchase approved by the Manager.
ii) In
addition to the foregoing, at any time prior to January 1, 2010, one hundred
percent (100%) of the Votes shall be required to:
(1) issue
limited liability company interests in the Company to any person or enter into
any agreement, understanding or arrangement to do so;
(2) change or
reorganize the Company into any other legal form;
(3) approve a
merger or consolidation of the Company with another person or enter into any
agreement, understanding or arrangement to do so;
(4) sell all
or substantially all of the assets of the Company and its subsidiaries, taken as
a whole or enter into any agreement, understanding or arrangement to do
so;
(5) voluntarily
dissolve the Company;
(6) amend
Exhibit C
hereto, change the classification of the Company to other than a partnership or
an entity disregarded from its owner for federal, state and local tax purposes,
or materially change any of the tax reporting positions or elections of the
Company; or
(7) engage in
any other transaction reasonably expected to result in income or gain being
allocated to CII for United States federal income tax purposes that is outside
the ordinary course of business with respect to the operation of the Company and
its direct and
indirect
subsidiaries or enter into any agreement, understanding or arrangement to do any
of the foregoing.
iii) Each of
the events described in the foregoing clauses (1) through (7) of Section
4(b)(ii) are referred to herein as a “Gain Recognition
Event.” From and after January 1, 2010, for so long as CII or
another Xxxxx Entity is a Member, if the Manager determines in good faith that a
Gain Recognition Event is reasonably likely to occur, the Manager shall provide
prompt written notice to CII of the nature and terms of such Gain Recognition
Event and the anticipated timing thereof.
(c) Board
of Directors; Meetings.
i) Board of Directors. Notwithstanding Section
4(a), the Manager may delegate its powers 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. Except for the rights and duties that are assigned to
officers of the Company, the rights and duties of the directors may not be
assigned or delegated to any person. The number of directors shall be
determined by the Manager and may be changed form 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. At the date
hereof, there are no directors of the Company.
ii) 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.
iii) Special Meetings. Special
meetings of the Board may be called by the President or any director on
twenty-four (24) hours’ notice to each director; special meetings shall be
called by the President or Secretary in like manner and on like notice on the
written request of Members holding a simple majority of the Votes. Notice of a
special meeting may be given by facsimile. Attendance in person of a director at
a meeting shall constitute a waiver of notice of that meeting, except when the
director objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not duly called or convened.
iv) Telephonic Meetings.
Directors may participate in any regular or special meeting 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 4(d)(iv) will constitute
presence in person at such meeting.
v) 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, the Certificate 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.
vi) Action Without Meeting.
Unless otherwise restricted by the Certificate or this Agreement, any
action required or permitted to be taken at any meeting of the Board may be
taken without a meeting if all directors consent thereto in writing and such
written consent is filed with the minutes of proceedings of the
Board.
vii) Actions of Manager
Controls. No action, authorization or approval of the Board
shall be required, necessary or advisable for the taking of any action by the
Company that has been approved by the Manager. In the event that any
action of the Manager conflicts with any action of the Board or any other person
or entity, the action of the Manager shall control.
SECTION
5. Officers.
(a) Officers. The Company shall
have such officers as may be necessary or desirable for the business of the
Company. The officers may include a Chairman of the Board, a President, a
Treasurer and a Secretary, and such other additional officers, including one or
more Vice Presidents, Assistant Secretaries and Assistant Treasurers as the
Manager, the Board, the Chairman of the Board, or the President may from time to
time elect. Any two or more offices may be held by the same
individual. At the date hereof, the officers of the Company are set
forth on Exhibit
A hereto.
(b) Election and Term. The
President, Treasurer and Secretary shall, and the Chairman of the Board may, be
appointed by and shall hold office at the pleasure of the Manager or the Board.
The Manager, the Board, or the President may each appoint such other officers
and agents as such person shall deem desirable, who shall hold office at the
pleasure of the Manager, the Board, or the President, and who shall have such
authority and shall perform such duties as from time to time shall, subject to
the provisions of Section 5(d) hereof, be prescribed by the Manager, the Board,
or the President.
(c) Removal. Any officer may be
removed by the action of the Manager or the action of at least a majority of the
directors then in office, with or without cause, for any reason or for no
reason. Any officer other than the Chairman of the Board, the President, the
Treasurer or the Secretary may also be removed by the Chairman of the Board or
the President, with or without cause, for any reason or for no
reason.
(d) Duties
and Authority of Officers.
i) President. The President
shall be the chief executive officer and (if no other person has been appointed
as such) the chief operating officer of the Company; shall (unless the Chairman
of the Board elects otherwise) preside at all meetings of the Members and Board;
shall have general supervision and active management of the business and
finances of the Company; and shall see that all orders and resolutions of the
Board or the Manager are carried into effect; subject, however, to the right of
the directors to delegate any specific powers to any other officer or officers.
In the absence of direction by the Manager, Board, or the Chairman of the Board
to the contrary, the President shall have the power to vote all securities held
by the Company and to issue proxies therefor. In the absence or disability of
the President, the Chairman of the Board (if any) or, if there is no Chairman of
the Board, the most senior available officer appointed by the Manager or the
Board shall perform the duties and exercise the powers of the President with the
same force and effect as if performed by the President, and shall be subject to
all restrictions imposed upon him.
ii) Vice President. Each Vice
President, if any, shall perform such duties as shall be assigned to such person
and shall exercise such powers as may be granted to such person by the Manager,
the Board or by the President of the Company. In the absence of direction by the
Manager, the Board or the President to the contrary, any Vice President shall
have the power to vote all securities held by the Company and to issue proxies
therefor.
iii) Secretary. The Secretary
shall give, or cause to be given, a notice as required of all meetings of the
Members and of the Board. The Secretary shall keep or cause to be kept, at the
principal executive office of the Company or such other place as the Board may
direct, a book of minutes of all meetings and actions of directors and Members.
The minutes shall show the time and place of each meeting, whether regular or
special (and, if special, how authorized and the notice given), the names of
those present at Board meetings, the number of Votes present or represented at
Members’ meetings, and the proceedings thereof. The Secretary shall perform such
other duties as may be prescribed from time to time by the Manager or the Board
and may be assisted in his or her duties by any Assistant Secretary who shall
have the same powers of the Secretary in absence of the Secretary.
iv) Treasurer. The Treasurer
shall have custody of the Company funds and securities and shall keep or cause
to be kept full and accurate accounts of receipts and disbursements in books of
the Company to be maintained for such purpose; shall deposit all moneys and
other valuable effects of the Company in the name and to the credit of the
Company in
depositories
designated by the Manager or the Board; and shall disburse the funds of the
Company as may be ordered by the Manager or the Board.
v) Chairman of the Board. The
Chairman of the Board, if any, shall perform such duties as shall be assigned,
and shall exercise such powers as may be granted to him or her by the Manager or
the Board.
vi) Authority of Officers. The
officers, to the extent of their powers set forth in this Agreement or otherwise
vested in them by action of the Manager or the Board not inconsistent with this
Agreement, are agents of the Company for the purpose of the Company’s business
and the actions of the officers taken in accordance with such powers shall bind
the Company.
SECTION
6. Members.
(a) Members. The Members of the
Company shall be set forth on Exhibit B hereto as
amended from time to time. At the date hereof, CCI and CII are the only Members.
Neither CCI nor CII are required to make any capital contribution to the
Company; however, CCI may make capital contributions to the Company at any time
in its sole discretion (for which its capital account balance shall be
appropriately increased). Each Member shall have a capital account in the
Company, the balance of which, at the date hereof, is reflected on Exhibit B hereto,
which capital account balance shall be adjusted from time to time in accordance
with the provisions set forth on Exhibit C hereto. The
provisions of this Agreement, including this Section 6, are intended to benefit
the Members and, to the fullest extent permitted by law, shall not be construed
as conferring any benefit upon any creditor of the Company. Notwithstanding
anything to the contrary in this Agreement, neither CCI nor CII shall have any
duty or obligation to any creditor of the Company to make any contribution to
the Company.
(b) Admission of Members. Other
persons may be admitted as Members from time to time pursuant to the provisions
of this Agreement, including Section 4(b). In such event, this Agreement may be
amended as appropriate in accordance with the provisions of Section 15(b) to
establish the rights and responsibilities of the Members and to govern their
relationships.
(c) Limited Liability. Except as
required by the Act, no Member shall be liable for the debts, liabilities and
obligations of the Company, including without limitation any debts, liabilities
and obligations of the Company under a judgment, decree or order of a court,
solely by reason of being a member of the Company.
(d) Competing Activities.
Notwithstanding any duty otherwise existing at law or in equity, (i)
neither a Member nor a Manager of the Company, or any of their respective
affiliates, partners, members, shareholders, directors, managers, officers or
employees, shall be expressly or impliedly restricted or prohibited solely by
virtue of this Agreement or the relationships created
hereby
from engaging in other activities or business ventures of any kind or character
whatsoever and (ii) except as otherwise agreed in writing or by written Company
policy, each Member and Manager of the Company, and their respective affiliates,
partners, members, shareholders, directors, managers, officers and employees,
shall have the right to conduct, or to possess a direct or indirect ownership
interest in, activities and business ventures of every type and description,
including activities and business ventures in direct competition with the
Company.
(e) Bankruptcy. Notwithstanding
any other provision of this Agreement, the bankruptcy (as defined in the Act) of
a Member shall not cause the Member to cease to be a member of the Company and,
upon the occurrence of such an event, the Company shall continue without
dissolution.
SECTION
7. Units; Percentage Interests.
The Company has only one class of units (“Units”) representing
membership interests in the Company, which entitle the Members to certain rights
as set forth in this Agreement. The number of Units held by each
Member, at the date hereof, is set forth on Exhibit B
hereto. For purposes of this Agreement, “Percentage Interest” shall mean (a) with
respect to CII (or its permitted transferees), a fraction expressed as a
percentage (x) the numerator of which is the number of Available Exchange Shares
(as defined in the New Exchange Agreement) from time to time, and (y) the
denominator of which is the sum of (I) 111,990,247, plus (II) the number of
Available Exchange Shares from time to time, plus (III) the number of additional
shares of CCI common stock (if any) issued after the Effective Date (other than
in connection with exercise of the Exchange Option under the New Exchange
Agreement) so long as all of the proceeds (if any) of such issuance (net of
underwriting discounts and commissions) are contributed to the Company or any of
the Company’s wholly owned direct or indirect subsidiaries, and (b) with respect
to CCI, one-hundred percent (100%) minus the percentage calculated pursuant to
clause (a) of this definition.
SECTION
8. Distributions. The Company
may from time to time distribute to the Members such amounts in cash and other
assets as shall be determined by the Members acting by simple majority of the
Votes. Each such distribution (including liquidating distributions)
shall be divided among the Members in accordance with their respective
Percentage Interests. 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 the Company’s profits reflected in such Member’s
positive capital account balance, a Member shall have no recourse against the
Company or any other Member. Notwithstanding any provision to the contrary
contained in this Agreement, the Company shall not be required to make a
distribution to the Members on account of their interest in the Company if such
distribution would violate the Act or any other applicable law.
SECTION
9. Allocations. The profits and
losses of the Company shall be allocated to the Members in accordance with the
provisions set forth on Exhibit C
hereto.
SECTION
10. Dissolution;
Winding Up.
(a) Dissolution. The Company
shall be dissolved upon (i) the adoption of a plan of dissolution by the Members
acting by unanimity of the Votes and the approval of the Manager or (ii) the
occurrence of any other event required to cause the dissolution of the Company
under the Act.
(b) Effective Date of Dissolution.
Any dissolution of the Company shall be effective as of the date on which
the event occurs giving rise to such dissolution, but the Company shall not
terminate unless and until all its affairs have been wound up and its assets
distributed in accordance with the provisions of the Act and the Certificate is
cancelled.
(c) Winding Up. Upon dissolution
of the Company, the Company shall continue solely for the purposes of winding up
its business and affairs as soon as reasonably practicable. Promptly after the
dissolution of the Company, the Manager shall immediately commence to wind up
the affairs of the Company in accordance with the provisions of this Agreement
and the Act. In winding up the business and affairs of the Company, the Manager
may, to the fullest extent permitted by law, take any and all actions that it
determines in its sole discretion to be in the best interests of the Members,
including, but not limited to, any actions relating to (i) causing written
notice by registered or certified mail of the Company’s intention to dissolve to
be mailed to each known creditor of and claimant against the Company, (ii) the
payment, settlement or compromise of existing claims against the Company, (iii)
the making of reasonable provisions for payment of contingent claims against the
Company and (iv) the sale or disposition of the properties and assets of the
Company. It is expressly understood and agreed that a reasonable time
shall be allowed for the orderly liquidation of the assets of the Company and
the satisfaction of claims against the Company so as to enable the Manager to
minimize the losses that may result from a liquidation.
SECTION
11. Transfer. At any such time as
the Company has more than one Member, no Member shall transfer, directly or
indirectly, whether by sale, assignment, gift, pledge, hypothecation, mortgage,
exchange or otherwise (each, a “Transfer”), all or any part of
his, her or its limited liability company interest in the Company to any other
person without the prior written consent of each of the other Members; provided, however, that this
Section 11 shall not restrict the ability of (x) any Member to Transfer (at any
time) all or a portion of its limited liability company interest in the Company
to another Member or (y) CCI to Transfer (at any time) all or a portion of its
limited liability company interest in the Company to any other person or
entity. For the avoidance of doubt, nothing herein shall prohibit,
restrict or limit in any way the rights of Xx. Xxxxx and CII to engage in the
transactions set forth in the New Exchange Agreement. Upon the
Transfer of a Member’s limited liability company interest, the Manager shall
provide notice of such Transfer to each of the other Members and shall amend
Exhibit B
hereto to reflect the Transfer. Notwithstanding the foregoing, (x) CII shall be
permitted to Transfer (at any time) its membership interest in the Company (or
any portion thereof) to another Xxxxx Entity (as defined below), including in
connection with a liquidation of CII, and (y) the holders of capital stock of
CII shall be permitted to Transfer (at any time) shares of such capital stock
(or any portion thereof) to an Xxxxx Entity or, so long as CII’s membership
interest in the Company is Transferred to one or more Xxxxx Entities prior to or
concurrently with the Transfer of such capital stock, to any other person or
entity. For purposes hereof, “Xxxxx Entity” means from time
to time any of (1) Xx.
Xxxxx,
(2) any entity controlled by Xx. Xxxxx, (3) any trust in which Xx. Xxxxx is the
grantor, (4) the estate, spouse, immediate family members and heirs of Xx.
Xxxxx, and (5) any trust created as a result of the death of Xx.
Xxxxx. “Controlled” shall mean the
direct or indirect ownership of at least 50 % of the voting power and economic
interest of an entity.
SECTION
12. Admission of Additional Members.
The admission of additional or substitute Members to the Company shall be
accomplished by the approval required under Section 4(b) and the amendment of
this Agreement, including Exhibit B hereto, in
accordance with the provisions of Section 15(b), pursuant to which amendment
each additional or substitute Member shall agree to become bound by this
Agreement.
SECTION
13. Tax Status. It is
intended that the Company shall be treated as a partnership for federal, state
and local income tax purposes. Notwithstanding anything to the
contrary in this Agreement, the Manager shall not take any action that would
result in the Company being treated as other than a partnership or an entity
disregarded from its owner for federal, state and local income tax purposes (or
refrain from taking any action, where omission would have such result) without
prior consent from all the Members. All provisions of this Agreement
are to be construed so as to preserve such tax status. Additional
provisions with respect to tax matters are set forth on Exhibit C
hereto. The Members acknowledge and agree that transactions
consummated pursuant to the Joint Plan did not result in a termination of the
Company pursuant to Section 708 of the Code.
SECTION
14. Exculpation
and Indemnification.
(a) Exculpation. Neither the
Members, the Manager, the directors (if any) of the Company, the officers of the
Company, their respective affiliates, nor any person who at any time shall
serve, or shall have served, as a director, officer, employee or other agent of
any such Members, Manager, directors, officers, or affiliates (a “Specified Agent”) shall be liable, in
damages or otherwise, to the Company or to any Member or any other Person for,
and neither the Company nor any Member shall take any action against such
Members, Manager, directors, officers, affiliates or Specified Agent, in respect
of any Loss (as defined below) which arises out of any acts or omissions
performed or omitted by such person pursuant to the authority granted by this
Agreement, or otherwise performed on behalf of the Company, or otherwise arising
out of or relating to the business and affairs of the Company, unless it is
determined by a court of competent jurisdiction that such Member, Manager,
director, officer, affiliate, or Specified Agent did not act in good faith, in
the best interests of the Company and within the scope of authority conferred on
such person by this Agreement or approved by the Manager, to the extent
applicable. For purposes hereof, “Loss” means any costs or
expenses (including reasonable attorneys’ fees and expenses), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any actual or threatened claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative.
(b) No Recourse. Each Member
shall look solely to the assets of the Company for return of such Member’s
investment, and if the property of the Company remaining after the discharge of
the debts and liabilities of the Company is insufficient to return such
investment, each Member shall have no recourse against the Company, the other
Members or their affiliates, except as expressly provided herein; provided, however, that the
foregoing shall not relieve any Member or the Manager of any fiduciary duty or
implied covenant of good faith and fair dealing to the Members that it may have
hereunder or under applicable law.
(c) Indemnification. In any
threatened, pending or completed claim, action, suit or proceeding to which a
Member, a Manager, a director of the Company, any officer of the Company, their
respective affiliates, or any Specified Agent was or is a party or is threatened
to be made a party by reason of the fact that such person is or was engaged in
activities on behalf of the Company or otherwise relating to the business and
affairs of the Company, including without limitation any action or proceeding
brought under the Securities Act of 1933, as amended, against a Member, a
Manager, a director of the Company, any officer of the Company, their respective
affiliates, or any Specified Agent relating to the Company, the Company shall to
the fullest extent permitted by law indemnify and hold harmless the Members,
Manager, directors of the Company, officers of the Company, their respective
affiliates, and any such Specified Agents against losses, damages, expenses
(including attorneys’ fees), judgments and amounts paid in settlement
actually and reasonably incurred by or in connection with such claim, action,
suit or proceeding; provided,
however, that none of the Members, Managers, directors of the Company,
officers of the Company, their respective affiliates or any Specified Agent
shall be indemnified for actions constituting bad faith, willful misconduct, or
fraud. Any act or omission by any such Member, Manager, director, officer, or
any such affiliate or Specified Agent, if done in reliance upon the opinion of
independent legal counsel or public accountants selected with reasonable care by
such Member, Manager, director, officer, or any such affiliate or Specified
Agent, as applicable, shall not constitute bad faith, willful misconduct, or
fraud on the part of such Member, Manager, director, officer, or any such
affiliate or Specified Agent.
(d) Expenses. To the extent
permitted by applicable law, expenses (including reasonable legal fees) incurred
by a Member, a Manager, a director of the Company, any officer of the Company,
their respective affiliates, or any Specified Agent in such Person’s capacity as
such in defending any claim, action, suit, or proceeding shall, from time to
time, be advanced by the Company prior to the final disposition of such claim,
action, suit, or proceeding upon receipt by the Company of an undertaking by or
on behalf of the Member, Manager, director, officer, affiliate, or Specified
Agent to repay such amount if it shall be determined that such Person is not
entitled to be indemnified as authorized in Section 14(c).
(e) No Presumption. The
termination of any claim, action, suit or proceeding by judgment, order or
settlement shall not, of itself, create a presumption that any act or failure to
act by a Member, a Manager, a director of the Company, any officer of the
Company, their respective affiliates or any Specified Agent constituted bad
faith, willful misconduct or fraud under this Agreement.
(f) Limitation on Indemnification.
Any such indemnification under this Section 14 shall be recoverable only
out of the assets of the Company and not from the Members.
(g) Reliance on the Agreement. To
the extent that, at law or in equity, a Member, Manager, director of the
Company, officer of the Company or any Specified Agent has duties (including
fiduciary duties) and liabilities relating thereto to the Company or to any
Member or other person bound by this Agreement, such Member, Manager, director,
officer or any Specified Agent acting under this Agreement shall not be liable
to the Company or to any Member or other person bound by this Agreement for its
good faith reliance on the provisions of this Agreement. The provisions of this
Agreement, to the extent that they restrict the duties and liabilities of a
Member, Manager, director of the Company, officer of the Company or any
Specified Agent otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of such Member,
Manager, director or officer or any Specified Agent.
SECTION
15. Miscellaneous.
(a) Certificate of Limited Liability
Company Interest. A Member’s limited liability company interest may be
evidenced by a certificate of limited liability company interest executed by the
Manager or an officer in such form as the Manager may approve; provided that
such certificate of limited liability company interest shall not bear a legend
that causes such limited liability company interest to constitute a security
under Article 8 (including Section 8-103) of the Uniform Commercial Code as
enacted and in effect in the State of Delaware, or the corresponding statute of
any other applicable jurisdiction.
(b) Amendment. The terms and
provisions set forth in this Agreement may be amended by simple majority of the
Votes unless such an amendment would disproportionately affect a Member (each
such Member, a “Disproportionately Affected
Member”) in which case the terms and provisions set forth in this
Agreement may be amended only by a written instrument executed by each such
Disproportionately Affected Member. Notwithstanding the foregoing,
one hundred percent (100%) of the Votes shall be required to amend Section
4(b)(ii), Section 4(b)(iii), Section 6, Section 7, Section 8, Section 9, Section
11, Section 13, Section 14 and this Section 15(b) of this Agreement and Exhibit C to this
Agreement. Compliance with any term or provision set forth herein may
be waived only by a written instrument executed by each Member. No
failure or delay on the part of any Member in exercising any right, power or
privilege granted hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege granted hereunder.
(c) Binding Effect. This
Agreement shall be binding upon and inure to the benefit of the Members and
their respective successors and assigns.
(d) Governing Law. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Delaware, without regard to any conflicts of law principles that would require
the application of the laws of any other jurisdiction.
(e) Severability. In the event
that any provision contained in this Agreement shall be held to be invalid,
illegal or unenforceable for any reason, the invalidity, illegality or
unenforceability thereof shall not affect any other provision
hereof.
(f) Multiple Counterparts. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
(g) Entire Agreement. This
Agreement (together with the New Exchange Agreement, the Joint Plan and all
related documents, instruments and agreements contemplated by the Joint Plan)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes and replaces any prior or contemporaneous
understandings.
(h) Relationship between the Agreement
and the Act. Regardless of whether any provision of this Agreement
specifically refers to particular Default Rules (as defined below), (i) if any
provision of this Agreement conflicts with a Default Rule, the provision of this
Agreement controls and the Default Rule is modified or negated accordingly, and
(ii) if it is necessary to construe a Default Rule as modified or negated in
order to effectuate any provision of this Agreement, the Default Rule is
modified or negated accordingly. For purposes of this Section 15(h), “Default Rule” shall mean a rule stated
in the Act which applies except to the extent it may be negated or modified
through the provisions of a limited liability company’s Limited Liability
Company Agreement.
(i) Inspection. 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. Any such request, inspection, or copying of information
by a Member may be made by that Person or that Person’s agent or
attorney.
(j) Financial
Statements. The Manager shall cause annual audited financial
statements to be sent to each Member not later than 90 days after the close of
the calendar year, but in no event later than when CCI 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. 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. Notwithstanding the
foregoing, the audited financial statements of CCI shall satisfy this Section
15(j) to the extent that such financials statements do not reflect the
financials or assets of other material operations. In addition, 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.
(k) Parties in
Interest. Except as expressly provided in the Act and Section
14 of this Agreement, 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.
(l) Notices. Any
notice to be given to 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 of the receiving party as
specified on the signature pages hereof. 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.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on
the date first above written.
CHARTER
COMMUNICATIONS, INC., a Delaware corporation, as Member and Manager
By: __________________________
Name:
Title:
Address
for notices:
__________________________
__________________________
__________________________
CHARTER
INVESTMENT, INC., a Delaware corporation
By: __________________________
Name: Xxxxxxx
X. XxXxxxx
Title: Vice
President
Address
for notices:
c/o
Vulcan Inc.
000 Xxxxx
Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxxxx 00000
Attention: General
Counsel
Facsimile: (000)
000-0000
CHARTER
COMMUNICATIONS HOLDING COMPANY LLC, a Delaware limited liability
company
By: __________________________
Name:
Title:
Address
for notices:
__________________________
__________________________
__________________________
[Signature
Page to Amended and Restated Limited Liability Company Agreement of
Charter
Communications Holding Company, LLC]
EXHIBIT
A
Officers
|
Xxxx
Xxxx
|
President
and Chief Executive Officer
|
|
Xxxxxxx
X. Xxxxxx
|
Executive
Vice President and Chief Operating Officer
|
|
Xxxxxx
X. Xxxxxxx
|
Executive
Vice President and Chief Financial Officer
|
|
Xxxxxxx
X. Xxxxx
|
Executive
Vice President and General Counsel
|
|
Xxxxx
X. Xxxxxx
|
Executive
Vice President and Chief Administrative Officer
|
|
Xxxxxx
Xxxxx
|
Executive
Vice President and Chief Technology Officer
|
|
Xxx
X. Xxxxxxx
|
Executive
Vice President and Chief Marketing Officer
|
|
Xxxxxx
X. Xxxxxxx
Xxxxxx
X. Xxxxxxx
|
President,
East Operations
President,
West Operations
|
|
Xxxx
X. Xxxxxx
|
Senior
Vice President - Corporate Development
|
|
Xxxxxx
X. Xxxxxxxxxx
|
Senior
Vice President - Customer Operations
|
|
Xxx
X. Xxxxxxx
|
Senior
Vice President - Information Technology
|
|
Xxxxx
X. Xxxxxx
|
Vice
President, Controller and Chief Accounting Officer
|
|
Xxxxxx
X. Xxxxxx
|
Vice
President - Finance and Corporate Treasurer
|
|
Xxxxxxx
X. Xxxxxxxx
|
Vice
President, Associate General Counsel and Corporate
Secretary
|
|
Xxxx
X. Xxxxxxxx
|
Assistant
Secretary
|
EXHIBIT
B
|
Member
|
Capital Account
|
Units
|
||
|
Charter
Communications, Inc.
|
$[•]
|
99
|
||
|
Charter
Investment, Inc.
|
$[•]
|
1
|
EXHIBIT
C
TAX
AND ACCOUNTING MATTERS
SECTION
1. Capital
Accounts.
(a) Maintenance of Capital Accounts;
Determination of Profits and Losses; General Rules. A separate “Book
Capital Account” (as defined in Section 1(b) of this Exhibit C) shall be
maintained for each Member in accordance with the provisions of this Section
1. Similarly, the “Profits” or “Losses” (as defined in Section 2(a)
of this Exhibit
C) shall be determined by the Company.
(b) Book Capital
Accounts. A capital account (the “Book Capital Account”) for
each Member shall be maintained at all times during the term of the Company in
accordance with this Section 1(b) and the capital accounting rules set forth in
Section 1.704-1(b)(2)(iv) of the Income Tax Regulations, as the same may be
amended from time to time (“Income Tax
Regulations”). The Company shall make all adjustments required
by Section 1.704-1(b)(2)(iv), including, without limitation, the adjustments
contained in Section 1.704-1(b)(2)(iv)(g) of the Income Tax
Regulations (relating to Section 704(c) property). In the event that
at any time during the term of the Company beginning on the day immediately
following the Effective Date it shall be determined that the Book Capital
Accounts shall not have been maintained as required by this Section 1(b), then
said accounts shall be retroactively adjusted so that the same shall conform to
this Section 1(b).
i) Initial Book Capital
Accounts. The “Initial Book Capital Account”
of a Member, as of the date of this Agreement, shall be equal to the amount set
forth on Exhibit
B of the Agreement.
ii) Determination of Book
Items. Consistent with the provisions of Section
1.704-1(b)(2)(iv)(g)(3) of the Income
Tax Regulations: (1) “Book
Depreciation” (which means the depreciation, depletion or amortization
deduction or allowance that shall be allowable to the Company with respect to an
item of property of the Company, determined in the manner hereinafter set forth)
for each item of property of the Company shall be the amount that bears the same
relationship to the “Gross
Asset Value” of such item of property of the Company as the “Tax Depreciation” (which means
the depreciation, depletion, amortization deduction or allowance as determined
for federal income tax purposes) with respect to such item of property of the
Company for such year bears to the “adjusted basis” (within the meaning of
Section 1011(a) of the Internal Revenue Code of 1986, as amended (the “Code”)) of such item of
property of the Company; and (2) “Book Gain or Loss” shall be
the gain or loss recognized by the Company from the sale, other disposition or
revaluation (as provided in the definition of “Gross Asset Value” below) of
property of the Company (such gain or loss determined by reference to the Gross
Asset Value, and not the adjusted tax basis, of such property to the
Company). If an item of property of
the
Company shall have an “adjusted basis” (as defined in the preceding sentence)
equal to zero, Book Depreciation shall be determined under a reasonable method,
which method shall be selected by the Manager; provided that with respect to any
item of property with an adjusted basis of zero as of the Effective Date, Book
Depreciation shall be determined consistent with past
practice.
iii) Book Adjustments on
Distributions. With respect to all distributions of property
to the Members, such distribution shall comply with the provisions contained in
Section 1.704-1(b)(2)(iv)(e) of the Income Tax Regulations (relating to
adjustments to Member’s Book Capital Accounts in connection with such
distributions) and all allocations and adjustments made in connection therewith
shall be in accordance with Section 2 of this Exhibit
C.
iv) Section 704(b)
Compliance. The foregoing provisions and the other provisions
of this Agreement relating to the maintenance of Book Capital Accounts are
intended to comply with Section 704(b) of the Code and with the Income Tax
Regulations promulgated thereunder (and shall be interpreted and applied in a
manner consistent with such Income Tax Regulations). In the event the
Manager shall determine that it is prudent to modify the manner in which the
Book Capital Accounts, or any debits or credits thereto, are computed in order
to comply with Section 704(b) of the Code and with Income Tax Regulations
promulgated thereunder, then the Manager may make such modification, provided that any change in
the manner of maintaining Book Capital Accounts shall not materially alter the
economic arrangement between the Members.
|
SECTION
2.
|
Allocation of Income, Losses
and Deductions for Book and Tax
Purposes.
|
(a) Profits and
Losses. The “Profits” or “Losses” of the Company (which
means the Company’s taxable income or loss, respectively, as calculated in
accordance with Section 703(a) of the Code (with, however, (1) all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code being included in such taxable income or loss, (2)
any income and gain that is exempt from federal income tax, and all expenditures
made by the Company described in Section 705(a)(2)(B) of the Code (or treated as
expenditures so described pursuant to Section 1.704-1(b)(2)(iv)(i) of the Income
Tax Regulations) being included in such Profits or Losses, (3) Book Depreciation
(and not Tax Depreciation) including without limitation all items of Member
Nonrecourse Deductions (as defined in Section 2(c) of this Exhibit C)) being
included in calculating such Profits or Losses, and (4) Book Gain or Loss (and
not Tax Gain or Loss (as defined in Section 2(b)(i) of this Exhibit C)) being
included in calculating such Profits or Losses), but excluding in such
calculation the amounts allocated under Sections 2(b) and (d) of this Exhibit C) for each
fiscal year of the Company, shall be determined and allocated to each of the
Members in the following order and priority:
i) Profit and
Loss. Except as otherwise provided in this Agreement, Profit
(and items thereof) and Loss (and items thereof) shall be allocated among the
Member’s Book Capital Accounts such that the Book Capital Accounts of the
Members (after the Book Capital
Accounts
have been adjusted to reflect all prior capital contributions and distributions
for the relevant fiscal year and increased by each Member’s share of Company
Minimum Gain and Member Nonrecourse Debt Minimum Gain) are as nearly as possible
equal (proportionately) to the amounts that would be distributed to the Members
if (1) all of the assets of the Company were sold to a third party for cash in
an amount equal to their Gross Asset Value (except assets actually sold during
the fiscal year shall be treated as sold for the consideration received
therefore), (2) the Company satisfied all of its liabilities in accordance with
their terms (limited with respect to each nonrecourse liability to the Gross
Asset Value of the assets securing such liability), and (3) all of the Company
assets were distributed in liquidation of the Company in accordance with Section 8 of this
Agreement. The Manager may, in its discretion, make such other
assumptions as it deems necessary or appropriate in order to effectuate the
intended economic arrangement of the Members. Notwithstanding
anything else in this Agreement or this Exhibit C to the
contrary, the provisions of the Existing LLC Agreement, taking into account each
Member’s Percentage Interest (as defined in the Existing LLC Agreement)
immediately before the transactions contemplated by the Joint Plan, shall govern
with respect to allocations of income, gain, loss, credit and deduction for the
period up to and including the Effective Date, including any items of income,
gain, loss, credit and deduction arising on the Effective Date and/or arising as
a result of the transactions effective as of the Effective Date, as contemplated
by the Joint Plan.
The
assets of the Company shall be revalued as of the Effective Date in accordance
with Section 1.704-1(b)(2)(iv)(f) of the Income Tax Regulations. For
purposes of this Section 2, “Gross Asset Value” shall mean,
with respect to any asset, the gross fair market value of such asset as of the
Effective Date, except as follows:
(1) the
initial Gross Asset Value of any asset contributed by a Member to the Company
after the Effective Date shall be the gross fair market value of such asset at
the time of such contribution as determined in good faith by the Manager and the
initial Gross Asset Value of any other asset acquired by the Company after the
Effective Date shall be equal to its cost, within the meaning of Section 1012 of
the Code;
(2) the Gross
Asset Values of all Company assets may, in the discretion of the Manager, be
adjusted to equal their respective gross fair market values, as reasonably
determined by the Manager, as of the following times: (i) 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; (ii) the
distribution by the Company to a Member of more than a de minimis amount of
Company property as consideration for an interest in the Company; (iii) the
liquidation of the Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of
the Income Tax Regulations or as otherwise provided in the Income Tax
Regulations; and (iv) at any other time the Manager reasonably deems
appropriate;
(3) the Gross
Asset Value of any Company asset distributed to any Member shall be the gross
fair market value of such asset on the date of distribution (taking Section
7701(g) of the Code into account), as reasonably determined by the
Manager;
(4) the Gross
Asset Values of Company assets shall be increased (or decreased) to reflect any
adjustments to the adjusted 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 Book Capital Accounts pursuant to Section
1.704-1(b)(2)(iv)(m) of the Income Tax Regulations and this Exhibit C; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this clause
(4) to the extent the Manager reasonably determines that an adjustment pursuant
to clause (2) above is necessary or appropriate in connection with a transaction
that would otherwise result in an adjustment pursuant to this clause (4);
and
(5) if the
Gross Asset Value of an asset has been determined or adjusted pursuant to clause
(1), (2) or (4) above, such Gross Asset Value shall thereafter be adjusted by
the Book Depreciation taken into account with respect to such asset for purposes
of computing Profits and Losses.
(b) Tax Allocations.
i) Tax Gain or
Loss. The gain or loss for United States federal income tax
purposes from the sale or other disposition of property of the Company (“Tax Gain or Loss”) for each
fiscal year of the Company shall be calculated and reflected to the Members as
provided in this Section 2(b). Tax Gain or Loss for purposes of this
Section shall be calculated (1) without including any income from interest on
any deferred portion of the sale price and (2) without including in the tax
basis of the property of the Company any remaining special basis adjustment to
property of the Company under Section 732(d) or 743 of the Code except to the
extent that such special basis adjustment is allocated to the common basis of
property of the Company under Section 1.734-2(b)(1) of the Income Tax
Regulations. The Members agree that the tax effects of any special
basis adjustment that is not included in the calculation of tax gain or loss in
accordance with clause (2) of the preceding sentence shall be separately
reflected in calculating the tax gain or loss of the Member to whom such special
basis adjustment relates.
ii) Section 704(c)
Property. In the case of “Section 704(c) Property” (as
hereinafter defined), Tax Gain or Loss (as the case may be) and Tax Depreciation
shall be allocated in accordance with the requirements of Section 704(c) of the
Code and the Income Tax Regulations thereunder and such other provisions of the
Code as govern the treatment of Section 704(c) Property. Such
allocations shall be made in accordance with the “traditional method” as set
forth in Section 1.704-3(b) of the Income Tax Regulations. As used
herein, “Section 704(c)
Property” means (i) each item of property of the Company which is
contributed to the Company (or which was contributed to the Company prior to the
Effective Date) and to which Section 704(c) of the Code or Section
1.704-1(b)(2)(iv)(d) of the Income Tax Regulations applies, and (ii) each item
of property of the Company which, as contemplated by Section 1.704-1(b)(4)(i)
and other analogous provisions of the Income Tax Regulations, is governed by the
principles of Section 704(c) of the Code (or principles analogous to the
principles contained in Section 704(c) of the Code) by virtue of (a) an increase
or decrease in the Book Capital Accounts of the Members to reflect a revaluation
of property of the Company on the Company’s books as provided by Section
1.704-1(b)(2)(iv)(f)
of the Income Tax Regulations (including revaluations occurring prior to the
Effective Date), (b) the fact that it constitutes a receivable, account payable,
or other accrued but unpaid item which, under principles analogous to those
applying to an item of property of the Company having an adjusted tax basis that
differs from its Gross Asset Value, is treated as an item of property described
in Section 1.704-1(b)(2)(iv)(g)(2) of the Income Tax Regulations, or (c) any
other provision of the Code or the Income Tax Regulations (including, without
limitation, Section 1.704-1(b)(4)(i) of the Income Tax Regulations) as the same
may from time to time be construed, to the extent that, and for so long as, such
item of property of the Company continues to be governed by the principles of
Section 704(c) of the Code (or principles analogous to the principles contained
in Section 704(c) of the Code). The allocation of tax items shall
except as provided otherwise in this Exhibit C or the Code
and the Income Tax Regulations follow the allocation of book
items.
(c) Exceptions.
i) Limitations.
(1) General
Limitation. Notwithstanding anything to the contrary contained
in this Section 2 of Exhibit C, no
allocation of Loss shall be made to a Member which would cause such Member (a
“Restricted Member”) to
have a deficit balance (or increase such deficit balance) in its Adjusted Book
Capital Account which exceeds the sum of such Member’s share of Company Minimum
Gain and such Member’s share of Member Nonrecourse Debt Minimum
Gain. If the limitation contained in the preceding sentence would
apply to cause an item of loss or deduction to be unavailable for allocation to
a Restricted Member, then such item of loss or deduction shall be allocated
between or among Members who are not Restricted Members in accordance with
such Members’ Percentage Interests. If all members are
Restricted Members, items of loss or deduction shall be allocated among all
Members in accordance with their Percentage Interests.
(2) Members Nonrecourse
Deductions. Notwithstanding anything to the contrary contained
in this Section 2, any and all items of loss and deduction and any and all
expenditures described in Section 705(a)(2)(B) of the Code (or treated as
expenditures so described pursuant to Section 1.704-1(b)(2)(iv)(i) of the Income
Tax Regulations) that are (in accordance with the principles set forth in
Section 1.704-2(i)(2) of the Income Tax Regulations) attributable to Member
Nonrecourse Debt (collectively, “Member Nonrecourse
Deductions”) shall be allocated to the Member that bears the Economic
Risk of Loss for such Member Nonrecourse Debt. If both Members bear
such Economic Risk of Loss, such Member Nonrecourse Deductions shall be
allocated between or among Members in accordance with the ratios in which they
share such Economic Risk of Loss. If both Members bear such Economic
Risk of Loss for different portions of Member Nonrecourse Debt, each such
portion shall be treated as a separate Member Nonrecourse Debt.
ii) Minimum Gain
Chargebacks.
(1) Company Minimum
Gain. Except to the extent provided in Section 1.704-2(f)(2),
(3), (4) and (5) of the Income Tax Regulations, if there is, for any fiscal year
of the Company, a net decrease in Company Minimum Gain, there shall be allocated
to each Member, before any other allocation pursuant to this Section 2 is made
under Section 704(b) of the Code of the Company items for such fiscal year,
items of income and gain for such year (and, if necessary, for subsequent years)
equal to the Member’s share of the net decrease in Company Minimum
Gain. A Member’s share of the net decrease in Company Minimum Gain is
(i) the amount of such total net decrease multiplied by the Member’s percentage
share of the Company’s minimum gain at the end of the immediately preceding
taxable year, and (ii) in the event that a Member’s share of the net decrease in
Company Minimum Gain results from a revaluation, the increase in such Member’s
Book Capital Account attributable to such revaluation to the extent the
reduction in minimum gain is caused by the revaluation determined in accordance
with Section 1.704-2(g)(1) and (2) of the Income Tax
Regulations. Items of income and gain to be allocated pursuant to the
foregoing provisions of this Section 2(c)(ii)(1) shall consist first of gains
recognized from the disposition of items of property of the Company subject to
one or more Nonrecourse Liabilities of the Company, and then of a pro rata
portion of the other items of Company income and gain for that
year. This Section 2(c)(ii)(1) is intended to comply with the minimum
gain chargeback requirement in the Income Tax Regulations and shall be
interpreted consistently therewith.
(2) Company’s Nonrecourse Debt Minimum
Gain. Except to the extent provided in Section 1.704-2(i)(4)
of the Income Tax Regulations, if there is, for any fiscal year of the Company,
a net decrease in the Member Nonrecourse Debt Minimum Gain, there shall be
allocated to each Member that has a share of the Member Nonrecourse Debt Minimum
Gain at the beginning of such fiscal year before any other allocation pursuant
to this Section 2 (other than an allocation required pursuant to Section
2(c)(ii)(1) of this Exhibit C) is made
under Section 704(b) of the Code for such fiscal year, items of income and gain
for such year (and, if necessary, for subsequent years) equal to such Member’s
share of the net decrease in the Member Nonrecourse Debt Minimum
Gain. The determination of a Member’s share of the net decrease in
the Member Nonrecourse Debt Minimum Gain shall be made in a manner consistent
with the principles contained in Sections 1.704-2(i)(5) and 1.704-2(g)(1) and
(2) of the Income Tax Regulations. The determination of which items
of income and gain to be allocated pursuant to the foregoing provisions of this
Section 2(c)(ii)(2) shall be made in a manner that is consistent with the
principles contained in Sections 1.704-2(f)(6), (i)(4) and (j)(2) of the Income
Tax Regulations. This Section 2(c)(ii)(2) is intended to comply with
the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Income
Tax Regulations and shall be interpreted consistently therewith.
iii) Nonrecourse
Deductions. Nonrecourse Deductions for any fiscal year shall
be specially allocated among the Members in accordance with their Percentage
Interests.
iv) Certain Defined
Terms. For purposes of this Exhibit C: (i) “Company Minimum Gain” shall
have the same meaning as “partnership minimum gain” as set forth in Section
1.704-2(b)(2) of the Income Tax Regulations and the amount of Company Minimum
Gain, as well as any net increase or decrease in any Company Minimum Gain for
any taxable year shall be determined in accordance with the rules of Section
1.704-2(d) of the Income Tax Regulations
treating
such Company Minimum Gain as partnership minimum gain; (ii) “Member Nonrecourse Debt” shall
have the meaning set forth in Section 1.704-2(b)(4) of the Income Tax
Regulations; (iii) “Member
Nonrecourse Debt Minimum Gain” shall have the same meaning as “partner
nonrecourse debt minimum gain” as set forth in Section 1.704-2(i)(2) of the
Income Tax Regulations; (iv) “Nonrecourse Liability” shall
have the meaning set forth in Section 1.704-2(b)(3) of the Income Tax
Regulations; (v) “Adjusted Book
Capital Account” means the Book Capital Account of a Member reduced by
any adjustments, allocations or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Income Tax Regulations; (vi) “Economic Risk of Loss” shall
have the meaning set forth in Section 1.752-2(b)-(j) of the Income Tax
Regulations; (vii) “Nonrecourse
Deductions” shall have the meaning set forth in Section 1.704-2(b)(1) of
the Income Tax Regulations.
v) Code Section 754 Adjustments.
As of the Effective Date and upon consummation of the Joint Plan, the Company
shall have in place and the Manager shall cause the Company to file an election
under Section 754 of the Code (and applicable provisions of state and local
law). Pursuant to Section 1.704-1(b)(2)(iv)(m) of the Income Tax
Regulation, to the extent an adjustment to the adjusted tax basis of any Member
asset under Sections 734(b) or 743(b) of the Code is required to be taken into
account in determining Book Capital Accounts, the amount of such adjustment to
the Book 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 a
manner consistent with the manner in which their Book Capital Accounts are
required to be adjusted pursuant to Section 1.704-1(b)(2)(iv)(m) of the Income
Tax Regulations.
(d) Tax and Accounting
Matters.
i) Qualified Income
Offset. Notwithstanding anything to the contrary in this Exhibit C, in the
event any Member unexpectedly receives any adjustments, allocations or
distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the
Income Tax Regulations, there shall be specially allocated to such Member such
items of Company income and gain, at such times and in such amounts as will
eliminate as quickly as possible the deficit balance (if any) in its Book
Capital Account (in excess of the sum of such Member’s share of Company Minimum
Gain and such Member’s share of Member Nonrecourse Debt Minimum Gain) created by
such adjustments, allocations or distributions.
ii) Gross Income
Allocation. In the event any Member has a deficit balance (if
any) in its Book Capital Account (in excess of the sum of such Member’s share of
Company Minimum Gain and such Member’s share of Member Nonrecourse Debt Minimum
Gain) at the end of any fiscal year, each such Member shall be specially
allocated items of Company income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this Section
2(d)(ii) shall be made only if and to the extent that such Person would have a
deficit balance (if any) in its Book Capital Account (in excess of the sum of
such Member’s share of Company Minimum Gain and such Member’s share of Member
Nonrecourse Debt Minimum Gain)
after all
other allocations provided for in this Exhibit C have been
made as if Section 2(d)(i) and this Section 2(d)(ii) were not in this Exhibit
C.
(e) Nonrecourse Liabilities for Purposes
of Section 752. As permitted by Section 1.752-3(a)(3) of the
Income Tax Regulations, the Members hereby specify that excess Nonrecourse
Liabilities of the Company shall be allocated first to each Member up to the
amount of built-in gain that is allocable to such Member on Section 704(c)
Property where such Section 704(c) Property is subject to the Nonrecourse
Liability to the extent that such built-in gain exceeds the amount of
liabilities allocated pursuant to Section 1.752-3(a)(2) of the Income Tax
Regulations with respect to such property. To the extent the excess
Nonrecourse Liabilities exceed the amount of such built-in gain, remaining
excess Nonrecourse Liabilities shall then be allocated in accordance with the
Members’ Percentage Interests. The amount of Nonrecourse Liabilities
allocated to any Member shall be adjusted to reflect any transfer of interests,
diminution and/or increase in Percentage Interests or diminution and/or increase
in any built-in gain allocable to any Member pursuant to section 704(c) of the
Code, taking into account an adjustment for any such diminution and/or increase
in Percentage Interests.
SECTION
3. No Deficit Funding
Obligation.
Notwithstanding
anything to the contrary contained in this Exhibit C or in the
Agreement, no Member having a negative balance in its Book Capital Account shall
have any obligation to the Company or to any other Member to restore its Book
Capital Account to zero.
SECTION
4. Order of
Application.
For
purposes of this Exhibit C, the
provisions set forth in the Agreement and this Exhibit C shall be
applied in the order and manner provided in Section 1.704-2 of the Income Tax
Regulations.
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SECTION
5.
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Allocations in Connection with
Transfer of Member
Interests.
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Upon the
effective date of a valid direct or indirect transfer of all or part of an
interest in the Company pursuant to the New Exchange Agreement, CII
and Xx. Xxxxx shall specify a “closing of the books” or “pro rata” method with
respect to the allocation of items of income, deduction, gain, loss
and/or credit of the Company in accordance with Section 706(d) of the Code;
provided, however, that with respect to any transaction pursuant to the Joint
Plan, all cancellation of indebtedness income shall be allocated using a
“closing of the books” method pursuant to the Existing LLC
Agreement.
SECTION
6. Tax Matters
Partner.
(a) Tax Matters
Partner. The Manager shall be the “tax matters partner” of the
Company as such term is defined in Section 6231(a)(7) of Code (“Tax Matters Partner”), and it
shall serve as such at the expense of the Company with all powers granted to a
tax matters partner under the Code. Each Member shall give prompt
notice to each other Member of any and all notices it receives from the Internal
Revenue Service or any relevant state or local taxing authority concerning the
Company, or its federal, state or local income tax return. The Tax
Matters Partner shall at the Company’s expense furnish the Members with status
reports regarding any negotiation between the Internal Revenue Service (or any
relevant state or local taxing authority) and the Company, and each Member, if
it so requests, may participate in such negotiation. The Tax Matters
Partner shall not enter into any settlement with any taxing authority (federal,
state or local), or extend the statute of limitations, on behalf of the Company
or the Members without the approval of the Members.
(b) Books and
Records. The Manager shall maintain books and records of the
Company as may be required in connection with the preparation and filing of the
Company’s required United States federal, state and local income tax returns or
other tax returns or reports of foreign jurisdictions. All such books
and records shall at all times be made available at the principal office of the
Manager and shall be open to the reasonable inspection and examination by the
Members or their duly authorized representatives during normal business hours
upon reasonable advance notice.
(c) Tax Returns. The
Manager shall use commercially reasonable efforts to cause the Company’s
accountants, as soon as practicable after the end of each fiscal year of the
Company but in no event later than July 15, to (i) prepare and submit drafts of
the Company’s federal, state and local tax returns to the Members and (ii)
prepare and deliver to each Member such information as is necessary to complete
such Member’s federal, state and local tax or information
returns. The Manager shall also use commercially reasonable efforts
to cause the Company’s accountants, as soon as practicable after the end of any
short taxable year of a Member with respect to the Company, but in no event
later than 225 days after the end of such short taxable year, to prepare and
submit estimates to such Member of such information as is necessary to permit
such Member to prepare its federal, state and local tax or information
returns. The costs of such preparation and review, and the costs of
any revisions or supplements to such tax returns or information statements
required as a result of such review, shall be a Company expense. The
Manager shall use diligent efforts to have the Company’s accountants prepare and
file final federal, state and local tax returns for the Company no later than
the initial statutory filing date therefore (subject to any extension obtained
from the Internal Revenue Service relating thereto).
