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Exhibit 2.9
PURCHASE AND CONTRIBUTION AGREEMENT
DATED AS OF MAY 26, 1999
BY AND AMONG
CHARTER COMMUNICATIONS, INC.,
FALCON COMMUNICATIONS, L.P.,
FALCON HOLDING GROUP, L.P.,
TCI FALCON HOLDINGS, LLC,
FALCON CABLE TRUST,
FALCON HOLDING GROUP, INC.,
AND
DHN INC.
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PURCHASE AND CONTRIBUTION AGREEMENT
DATED AS OF MAY 26, 1999
TABLE OF CONTENTS
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SECTION 1 CERTAIN DEFINITIONS.............................................................................1
1.1 Terms Defined in this Section..........................................................1
"Adjustment Escrow Agent"..............................................................1
"Adjustment Escrow Agreement"..........................................................1
"Adjustment Time"......................................................................2
"Affiliate"............................................................................2
"Assets"...............................................................................2
"Basic Subscriber".....................................................................2
"Bulk Subscriber"......................................................................2
"Cable Act"............................................................................2
"Charter Holdings".....................................................................2
"Charter LLC"..........................................................................2
"Charter LLC Operating Agreement"......................................................2
"Charter's Disclosure Schedules".......................................................3
"Closing"..............................................................................3
"Closing Date".........................................................................3
"Code".................................................................................3
"Commercial Bulk Subscriber"...........................................................3
"Compensation Arrangement".............................................................3
"Consents".............................................................................3
"Contracts"............................................................................3
"Copyright Act"........................................................................3
"Credit Agreement".....................................................................3
"Debt Documents".......................................................................4
"Employee Plan"........................................................................4
"Encumbrances".........................................................................4
"Enforceability Exceptions"............................................................4
"Enstar Credit Agreement"..............................................................4
"Enstar Debt Documents"................................................................4
"Environmental Claim"..................................................................4
"Environmental Law"....................................................................4
"Equity Interests".....................................................................5
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"Equivalent Subscribers"...............................................................5
"ERISA"................................................................................5
"ERISA Affiliate"......................................................................5
"Exchange Act".........................................................................5
"Exchange Agreement"...................................................................5
"Falcon Companies".....................................................................5
"Falcon's Disclosure Schedules"........................................................6
"FCC"..................................................................................6
"FCC Licenses".........................................................................6
"FCC Regulations"......................................................................6
"FFI"..................................................................................6
"Franchise"............................................................................6
"Franchise Area".......................................................................6
"Franchising Authorities"..............................................................6
"GAAP".................................................................................6
"Governmental Authority"...............................................................6
"Hazardous Substance"..................................................................6
"Headquarters Employees"...............................................................6
"HSR Act"..............................................................................7
"Indebtedness".........................................................................7
"Indenture"............................................................................7
"Intangibles"..........................................................................7
"Knowledge"............................................................................7
"Legal Restrictions"...................................................................7
"Legal Requirements"...................................................................7
"Licenses".............................................................................8
"Loss".................................................................................8
"Material Adverse Effect"..............................................................8
"Material Contract"....................................................................8
"Material FCC Consent".................................................................8
"MONY Agreement".......................................................................8
"MONY Notes"...........................................................................8
"Xxxxxxxxx Agreement"..................................................................8
"Organizational Documents".............................................................8
"Permitted Encumbrances"...............................................................9
"Person"...............................................................................9
"Pre-Closing Tax Period"...............................................................9
"Put Agreement"........................................................................9
"Rate Regulatory Matter"...............................................................9
"Real Property".......................................................................10
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"Registration Rights Agreement".......................................................10
"Released Parties"....................................................................10
"Residential Bulk Subscriber".........................................................10
"SEC".................................................................................10
"Securities Act"......................................................................10
"Senior Debentures"...................................................................10
"Senior Debentures Amount"............................................................10
"Senior Debt".........................................................................10
"Senior Debt Amount"..................................................................10
"Senior Discount Debentures"..........................................................10
"Senior Discount Debentures Accreted Value"...........................................10
"Subscriber"..........................................................................11
"Subsidiary"..........................................................................11
"Systems".............................................................................11
"Tangible Personal Property"..........................................................11
"Tax".................................................................................11
"Tax Return"..........................................................................11
"TCI Systems".........................................................................11
"Transaction Documents"...............................................................11
"Transferable Franchise Area".........................................................12
"Upset Date"..........................................................................12
1.2 Terms Defined Elsewhere in this Agreement.............................................12
1.3 Rules of Construction.................................................................14
SECTION 2 SALE AND PURCHASE OF PURCHASED INTERESTS; CONTRIBUTION OF CONTRIBUTED INTEREST; ASSUMPTION OF
LIABILITIES; CONSIDERATION.....................................................................14
2.1 Agreement to Sell and Buy Purchased Interests and to Contribute
Contributed Interest..................................................................14
2.2 Assumption of Obligations; Effect on Partnership Agreement of
Falcon................................................................................16
2.3 Consideration for Purchased Interests and Contributed Interest........................17
2.4 Adjustments...........................................................................17
2.5 Payments at Closing...................................................................20
2.6 Post-Closing Payment of Aggregate Consideration Adjustments..........................21
SECTION 3: REPRESENTATIONS AND WARRANTIES OF FALCON.......................................................23
3.1 Organization and Authority. ..........................................................23
3.2 Authorization and Binding Obligation..................................................23
3.3 Organization and Ownership of Falcon Companies.......................................24
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3.4 Absence of Conflicting Agreements; Consents...........................................24
3.5 Financial Statements..................................................................25
3.6 Absence of Undisclosed Liabilities....................................................25
3.7 Absence of Certain Changes............................................................26
3.8 Franchises, Licenses, Material Contracts..............................................26
3.9 Title to and Condition of Real Property and Tangible Personal
Property..............................................................................27
3.10 Intangibles...........................................................................28
3.11 Information Regarding the Systems.....................................................28
3.12 Taxes.................................................................................29
3.13 Employee Plans........................................................................31
3.14 Environmental Laws....................................................................33
3.15 Claims and Litigation.................................................................33
3.16 Compliance With Laws..................................................................33
3.17 Transactions with Affiliates..........................................................34
3.18 Certain Fees..........................................................................34
3.19 Inventory.............................................................................34
3.20 Overbuilds; Competition...............................................................34
3.21 Disconnections........................................................................35
3.22 Year 2000.............................................................................35
3.23 Budgets...............................................................................35
3.24 SEC Reports...........................................................................35
3.25 Foreign Corrupt Practices Act.........................................................35
3.26 Cure..................................................................................35
SECTION 4: REPRESENTATIONS AND WARRANTIES OF SELLERS......................................................36
4.1 Organization..........................................................................36
4.2 Authorization and Binding Obligation..................................................36
4.3 Absence of Conflicting Agreements; Consents...........................................36
4.4 Title to Purchased Interests..........................................................37
4.5 Claims and Litigation.................................................................37
4.6 Certain Fees..........................................................................37
4.7 Investment Purpose; Investment Company................................................37
4.8 Cure..................................................................................38
SECTION 5: REPRESENTATIONS AND WARRANTIES OF BUYER........................................................38
5.1 Organization..........................................................................38
5.2 Authorization and Binding Obligation..................................................38
5.3 Absence of Conflicting Agreements; Consents...........................................39
5.4 Claims and Litigation.................................................................39
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5.5 Investment Purpose; Investment Company................................................39
5.6 Ownership of Buyer and its Subsidiaries...............................................40
5.7 Certain Fees..........................................................................40
5.8 Availability of Funds.................................................................40
5.9 Financial Statements..................................................................40
5.10 Private Offering Memorandum and S-4...................................................41
5.11 Cure..................................................................................41
SECTION 6: SPECIAL COVENANTS AND AGREEMENTS...............................................................41
6.1 Operation of Business Prior to Closing................................................41
6.2 Confidentiality; Press Release........................................................44
6.3 Cooperation; Commercially Reasonable Efforts..........................................45
6.4 Consents and Notices..................................................................45
6.5 HSR Act Filing........................................................................48
6.6 No Inconsistent Actions; Charter LLC..................................................48
6.7 Falcon Company and Enstar Debt Obligations...........................................49
6.8 Retention and Access to the Falcon Companies' Records.................................50
6.9 Employee Matters......................................................................51
6.10 Tax Matters...........................................................................52
6.11 Falcon Name...........................................................................55
6.12 No Recourse; Release of Claims........................................................55
6.13 Exculpation and Indemnification.......................................................56
6.14 Rate Regulatory Matters...............................................................56
6.15 Disclosure Schedules..................................................................57
6.16 Environmental Reports.................................................................57
6.17 Year 2000 Matters.....................................................................57
6.18 TCI Arrangements......................................................................57
6.19 Restructuring.........................................................................57
SECTION 7: CONDITIONS TO OBLIGATIONS......................................................................58
7.1 Conditions to Obligations of the Buyer................................................58
7.2 Conditions to Obligations of Sellers..................................................59
SECTION 8: CLOSING AND CLOSING DELIVERIES.................................................................60
8.1 Closing...............................................................................60
8.2 Deliveries by Sellers.................................................................61
8.3 Deliveries by Buyer...................................................................62
SECTION 9: TERMINATION....................................................................................63
9.1 Agreement between Sellers and Buyer...................................................63
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9.2 Termination by Sellers................................................................63
9.3 Termination by Buyer..................................................................64
9.4 Effect of Termination.................................................................64
9.5 Attorneys' Fees.......................................................................65
SECTION 10: SURVIVAL.......................................................................................66
10.1 Survival..............................................................................66
SECTION 11: MISCELLANEOUS..................................................................................66
11.1 Fees and Expenses.....................................................................66
11.2 Notices...............................................................................66
11.3 Benefit and Binding Effect............................................................68
11.4 Further Assurances....................................................................69
11.5 GOVERNING LAW.........................................................................69
11.6 WAIVER OF JURY TRIAL..................................................................69
11.7 Severability..........................................................................69
11.8 Entire Agreement......................................................................69
11.9 Amendments; Waiver of Compliance; Consents............................................69
11.10 Counterparts..........................................................................70
11.11 Specific Performance..................................................................70
11.12 Tax Consequences......................................................................70
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TABLE OF SCHEDULES
Schedule Description
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Schedule 1.1(a) Falcon Companies
Schedule 1.1(b) Headquarters Employees
Schedule 1.1(c) Buyer Knowledge
Schedule 1.1(d) Falcon Knowledge
Schedule 1.1(e) Material FCC Consent
Schedule 1.1(f) Designated Franchises
Schedule 3.1 Organization and Authority
Schedule 3.3 Organization and Ownership of the Falcon Companies
Schedule 3.4 Absence of Conflicting Agreements; Consents
Schedule 3.6 Absence of Undisclosed Liabilities
Schedule 3.7 Absence of Certain Changes
Schedule 3.8 Franchises, Licenses, Material Contracts
Schedule 3.9 Title to and Condition of Real Property and Tangible
Personal Property
Schedule 3.10 Intangibles
Schedule 3.11 Information Regarding the Systems
Schedule 3.12 Taxes
Schedule 3.13 Employee Plans
Schedule 3.14 Environmental Laws
Schedule 3.15 Claims and Litigation
Schedule 3.16 Compliance with Laws
Schedule 3.17 Transactions with Affiliates
Schedule 3.20 Overbuilds; Competition
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Schedule Description
-------- -----------
Schedule 3.21 Disconnections
Schedule 3.23 Budgets
Schedule 4.3 Absence of Conflicting Agreements; Consents
Schedule 4.4 Title to Purchased Interests and Contributed Interest
Schedule 4.5 Claims and Litigation
Schedule 4.6 Certain Fees
Schedule 5.4 Claims and Litigation
Schedule 5.6 Charter Ownership Chart
Schedule 5.9 Charter Financial Statements
Schedule 6.1 Operation of Business Prior to Closing
Schedule 6.18 TCI Arrangements
The preceding schedules have been omitted from this exhibit. The Company agrees
to provide copies of such schedules to the Commission upon request.
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TABLE OF EXHIBITS
Exhibit Description
------- -----------
Exhibit A Adjustment Escrow Agreement
Exhibit B Put Agreement
Exhibit C Registration Rights Agreement
Exhibit D Terms of Charter LLC Operating Agreement
Exhibit E Terms of Exchange Agreement
Exhibit F Form of Allocation Notice
Exhibit G Form of Opinions of Counsel to Falcon and Sellers
Exhibit H Form of Seller Release
Exhibit I Form of Opinion of Counsel to Buyer
The preceding exhibits A, F, G, H and I have been omitted from this exhibit.
The Company agrees to provide copies of such exhibits to the Commission upon
request.
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PURCHASE AND CONTRIBUTION AGREEMENT
This PURCHASE AND CONTRIBUTION AGREEMENT (this "Agreement") is dated as
of May 26, 1999, by and among Charter Communications, Inc., a Delaware
corporation ("Buyer"), Falcon Communications, L.P., a California limited
partnership ("Falcon"), Falcon Holding Group, L.P., a Delaware limited
partnership ("FHGLP"), TCI Falcon Holdings, LLC, a Delaware limited liability
company ("TCI"), Falcon Cable Trust, a California trust ("FC Trust"), Falcon
Holding Group, Inc., a California corporation ("FHGI"), and DHN Inc., a
California corporation ("DHN") (FHGLP, TCI, FC Trust, FHGI and DHN sometimes
referred to herein as "Sellers").
R E C I T A L S:
A. FHGLP and TCI hold all of the outstanding partnership interests in
Falcon. FC Trust and FHGI hold partnership interests in certain other Falcon
Companies. FHGLP holds certain equity interests in Enstar Communications
Corporation ("Enstar") and Enstar Finance Company, LLC ("Enstar Finance"). DHN
holds certain equity interests in Adlink Cable Advertising LLC ("Adlink").
B. Buyer desires to acquire from FHGLP and TCI all of the partnership
interests in Falcon, the specified partnership interests in certain Falcon
Companies held by FC Trust and FHGI, the specified interests in Enstar and
Enstar Finance held by FHGLP, and the specified interests in Adlink held by DHN.
C. The parties hereto desire to set forth the terms in accordance with
which Buyer shall acquire the above-described interests from the Sellers for the
consideration and on the terms and conditions set forth in this Agreement.
A G R E E M E N T S:
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, the parties to this Agreement, intending
to be bound legally, agree as follows:
SECTION 1 CERTAIN DEFINITIONS.
1.1 Terms Defined in this Section. The following terms, as used in this
Agreement, have the meanings set forth in this Section:
"Adjustment Escrow Agent" means the Escrow Agent to be named in the
Adjustment Escrow Agreement.
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"Adjustment Escrow Agreement" means the Adjustment Escrow Agreement
that may, subject to the terms of this Agreement, be executed and delivered by
Buyer, FHGLP and the Adjustment Escrow Agent, substantially in the form of
Exhibit A hereto.
"Adjustment Time" means 11:59 p.m., California time, on the Closing
Date.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with the specified Person.
"Assets" means all of the tangible and intangible assets that are
owned, leased or held by the Falcon Companies and that are used or held for use
in connection with the conduct of the business or operations of the Systems, and
less any such Assets that are sold, transferred or otherwise conveyed by the
Falcon Companies to third Persons prior to the Closing in accordance with the
provisions of this Agreement, provided that with respect to any assets that are
leased by the Falcon Companies or otherwise not owned by the Falcon Companies,
"Assets" includes only the interest, title and rights in such assets held by the
Falcon Companies.
"Basic Subscriber" means, with respect to any System, any Subscriber to
a System at the regular basic monthly subscription rate (including discounted
rates offered in the ordinary course of business consistent with past practice)
for at least broadcast basic cable service (either alone or in combination with
any other service) for such System, who has rendered payment for at least one
month's service and who does not have more than Five Dollars ($5.00) (excluding
late charges and fees and amounts subject to a bona fide dispute) that is more
than two months past due from the last day of the period to which any
outstanding xxxx relates.
"Bulk Subscriber" means, with respect to any System, any Subscriber,
other than a Basic Subscriber, to at least broadcast basic cable service (either
alone or in combination with any other service) for such System which is billed
to such Subscriber on a bulk basis to bulk commercial accounts, such as hotels,
motels and hospitals and bulk residential accounts, such as condominiums,
trailer parks, apartment houses and similar multiple dwelling units or other
commercial accounts and who has rendered payment for at least one month's
service at such customer's regular basic monthly subscription rate for such
service and who does not have more than Five Dollars ($5.00) (excluding late
charges and fees and amounts subject to a bona fide dispute) that is more than
two months past due from the last day of the period to which any outstanding
xxxx relates.
"Cable Act" means Title VI of the Communications Act of 1934, as
amended, 47 U.S.C. Section 521 et seq., all other provisions of the Cable
Communications Policy Act of 1984, the Cable Television Consumer Protection and
Competition Act of 1992, and the provisions of the Telecommunications Act of
1996 amending Title VI of the Communications Act of 1934, in each case as
amended and in effect from time to time.
"Charter Holdings" means Charter Communications Holdings, LLC.
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"Charter LLC" means a limited liability company to be formed pursuant
to the Charter LLC Operating Agreement as contemplated by Section 6.6.
"Charter LLC Operating Agreement" means the operating agreement of
Charter LLC containing the provisions set forth in Exhibit D hereto and such
other provisions as contemplated in Section 6.6, which agreement shall be
executed and delivered on the Closing Date.
"Charter's Disclosure Schedules" means the Disclosure Schedules
referred to in Section 5 of this Agreement and attached to this Agreement.
"Closing" means the purchase and sale of the Purchased Interests
pursuant to this Agreement.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, as amended and in effect from time
to time.
"Commercial Bulk Subscriber" means a Bulk Subscriber that is a
commercial or business bulk account, such as a hotel, motel or hospital, as
reflected in the records of the Falcon Companies.
"Compensation Arrangement" means any plan or compensation arrangement
other than an Employee Plan, whether written or unwritten, which provides to
employees, former employees, officers, directors and shareholders of any Falcon
Company or any ERISA Affiliate any compensation or other benefits, whether
deferred or not, in excess of base salary or wages, including, but not limited
to, any bonus or incentive plan, stock rights plan, deferred compensation
arrangement, life insurance, stock purchase plan, severance pay plan and any
other employee fringe benefit plan.
"Consents" means the consents, permits, approvals and authorizations of
Governmental Authorities and other Persons necessary to transfer the Purchased
Interests to Buyer and to consummate the other transactions contemplated by this
Agreement.
"Contracts" means all leases, easements, rights-of-way, rights of
entry, programming agreements, pole attachment and conduit agreements, customer
agreements and other agreements (other than Franchises), written or oral
(including any amendments and other modifications thereto), to which any Falcon
Company is a party or which are binding upon any Falcon Company.
"Copyright Act" means the Copyright Act of 1976, as amended and in
effect from time to time.
"Credit Agreement" means the Credit Agreement dated as of June 30,
1998, as amended, among certain of the Falcon Companies named therein and the
Lenders (as defined therein), including NationsBank, N.A., as Syndication Agent,
Bank of America, N.T. & S.A., as Agent, The
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Chase Manhattan Bank, as Co-Syndication Agent, BankBoston, N.A., as
Documentation Agent and Toronto Dominion (Texas) Inc., as Administrative Agent,
as the same may be amended and in effect from time to time.
"Debt Documents" means the Indenture and the Credit Agreement and the
MONY Agreement and all documents or instruments delivered in connection
therewith or pursuant thereto, including any placement agreement or registration
rights agreement executed and delivered in connection with the issuance of the
securities subject to the Indenture.
"Employee Plan" means any pension, retirement, profit-sharing, deferred
compensation, vacation, severance, bonus, incentive, medical, vision, dental,
disability, life insurance or any other employee benefit plan as defined in
Section 3(3) of ERISA to which any Falcon Company or any ERISA Affiliate of any
Falcon Company contributes or is required to contribute or which any Falcon
Company or any such ERISA Affiliate sponsors or maintains.
"Encumbrances" means any pledge, claim, mortgage, lien, charge,
encumbrance, attachment, exception to or defect in title or other ownership
interest or security interest of any kind or nature whatsoever.
"Enforceability Exceptions" means the exceptions or limitations to the
enforceability of contracts under bankruptcy, insolvency, or similar laws
affecting creditors' rights generally or by judicial discretion in the
enforcement of equitable remedies and by public policies generally.
"Enstar Credit Agreement" means the Credit Agreement dated as of
September 30, 1997 among Enstar Finance, Banque Paribas, as Administrative
Agent, Bank of America National Trust and Savings Association, as Documentation
Agent, and the other financial institutions party thereto, as the same may be
amended and in effect from time to time.
"Enstar Debt Documents" means the Enstar Credit Agreement and all
documents or instruments delivered in connection therewith or pursuant thereto.
"Environmental Claim" means any written claim, complaint, action, suit,
proceeding, investigation or notice, including without limitation any proceeding
before any federal, state or local administrative body by any Person, agent or
agency of a federal, state or local government alleging potential liability
arising out of, based on or resulting from (A) the release or disposal into, or
the presence in the environment, including, without limitation, the indoor
environment, soil, subsurface, surface or groundwater, of any pollutant,
contaminant, waste, toxic substance, hazardous substance, petroleum or petroleum
derivative at any location, whether or not owned by the Falcon Companies, or (B)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
"Environmental Law" means any and all federal, state or local laws,
statues, rules, regulations, ordinances, orders, decrees or other binding
obligations (A) related to releases or
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threatened releases of any Hazardous Substance to soil, surface water,
groundwater, air or any other environmental media; (B) governing the use,
treatment, storage, disposal, transport, or handling of Hazardous Substance; or
(C) related to the protection of the environment and human health. Such
Environmental Laws shall include, but are not limited to, RCRA, CERCLA, EPCRA,
the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Toxic
Substances Control Act, the Endangered Species Act, and any other federal, state
or local laws, statutes, ordinances, rules, orders, permit conditions, licenses
or any terms or provisions thereof related to clauses (A), (B), or (C) above.
"Equity Interests" means any and all shares, interests, or other
equivalent interests (however designated) in the equity of any Person, including
capital stock, partnership interests and membership interests, and including any
rights, options or warrants with respect thereto.
"Equivalent Subscribers" means, with respect to any System, as of any
date of determination, the sum of: (A) the number of Basic Subscribers served by
such System as of such date; (B) the number of Basic Subscribers represented by
the Commercial Bulk Subscribers served by such System as of such date, which
number of Commercial Bulk Subscribers shall be calculated by dividing (1) the
monthly xxxxxxxx attributable to such System's Commercial Bulk Subscribers for
full basic cable service provided by such System for the calendar month
immediately preceding the date on which such calculation is made, by (2) the
full, non-discounted monthly rate charged by such System for full basic cable
service (excluding pass-through charges for sales taxes, line-itemized franchise
fees, fees charged by the FCC and other similar line-itemized charges); and (C)
the number of Basic Subscribers represented by the Residential Bulk Subscribers
served by such System as of such date, which number of Residential Bulk
Subscribers shall be calculated by determining the number of individual dwelling
units in such Residential Bulk Subscriber (e.g., for an apartment building, the
number of individual apartments in such building) as of such date. For purposes
of the foregoing, monthly xxxxxxxx shall exclude xxxxxxxx for a la carte or
optional service tiers and for premium services, pass-through charges for sales
taxes, line-itemized franchise fees, fees charged by the FCC and other similar
line-itemized charges, and nonrecurring charges or credits which include those
relating to installation, connection, relocation and disconnection fees and
miscellaneous rental charges for equipment such as remote control devices and
converters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder, as amended and in effect from
time to time.
"ERISA Affiliate" means a trade or business affiliated within the
meaning of Sections 414(b), (c) or (m) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder, as in effect
from time to time.
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"Exchange Agreement" means the Exchange Agreement by and among the
parties named therein, containing the provisions set forth in Exhibit E hereto
and such other provisions as contemplated in Section 6.6, which agreement shall
be executed and delivered on the Closing Date.
"Falcon Companies" means, collectively, the companies listed on
Schedule 1.1(a) hereto, each of which may be referred to herein individually as
a "Falcon Company," and specifically excludes Enstar and Enstar Finance and the
other Enstar partnerships listed on Schedule 4.4, Adlink, and all other
Investment Persons.
"Falcon's Disclosure Schedules" means the Disclosure Schedules referred
to in Sections 3, 4 and 6.1 of this Agreement and attached to this Agreement.
"FCC" means the Federal Communications Commission, or any successor
agency thereof.
"FCC Licenses" means any domestic satellite, business radio or other
Licenses issued by the FCC with respect to the Systems.
"FCC Regulations" means the rules, regulations and published policies
and decisions of the FCC promulgated by the FCC with respect to the Cable Act,
as in effect from time to time.
"FFI" means Falcon First, Inc.
"Franchise" means any cable television franchise and related
agreements, ordinances, permits, instruments or other authorizations issued or
granted to a Falcon Company by any Franchising Authority, including all
amendments thereto and renewals or modifications thereof, authorizing the
construction or operation of a cable television system.
"Franchise Area" means any geographic area in which a Falcon Company is
authorized to provide cable television service pursuant to a Franchise
(including any area pursuant to which a Falcon Company is operating under an
expired Franchise) or otherwise provides cable television service for which area
a Franchise is being negotiated or is not required pursuant to applicable Legal
Requirements.
"Franchising Authorities" means all Governmental Authorities that have
issued or granted any Franchises relating to the operation of a System.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Governmental Authority" means any federal, state, or local
governmental authority or instrumentality, including any court, tribunal or
administrative or regulatory agency, department, bureau, commission or board.
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"Hazardous Substance" means any substance, hazardous material, or other
substance or compound regulated under Environmental Laws, including, without
limitation, petroleum or any refined product or fraction or derivative thereof.
"Headquarters Employees" means the employees of the Falcon Companies
set forth in Schedule 1.1(b), less any such employees who are no longer employed
by the Falcon Companies at the Closing (other than as a result of the
transactions contemplated by this Agreement), plus any employees hired in the
ordinary course of business to replace any such Headquarters Employees.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, and the regulations promulgated by the Federal Trade Commission with
respect thereto, as amended and in effect from time to time.
"Indebtedness" of any Person means, without duplication, (A) all
indebtedness for borrowed money; (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables and accrued liabilities entered into in the ordinary course of business
on ordinary terms); (C) all non-contingent reimbursement or payment obligations
with respect to surety instruments; (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses;
(E) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property); (F) all capitalized lease obligations;
(G) all net obligations with respect to swap or interest rate hedge Contracts;
(H) all indebtedness referred to in clauses (A) through (G) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any lien upon or in property (including accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness; and (I) all
guaranty obligations in respect of indebtedness or obligations of others of the
kinds referred to in clauses (A) through (G) above; provided, however, that
"Indebtedness" shall not include any obligations such as letters of credit,
surety bonds or performance bonds or similar obligations entered into in the
ordinary course of business.
"Indenture" means the Indenture dated as of April 3, 1998 among FHGLP
(and assumed by Falcon) and Falcon Funding Corporation and United States Trust
Company of New York, as Trustee, as the same may be amended and in effect from
time to time.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, patents, permits, proprietary information, technical
information and data, machinery and equipment warranties, and other similar
intangible property rights and interests (which shall in no event include
Franchises, Licenses or Contracts) issued to or owned by any of the Falcon
Companies.
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"Knowledge" means the actual knowledge of the persons listed in
Schedule 1.1(c) with respect to Buyer and the actual knowledge of the persons
listed in Schedule 1.1(d) with respect to Falcon.
"Legal Restrictions" means restrictions on transfer arising under the
securities laws, the Cable Act, FCC Regulations, the Franchises and the
Licenses.
"Legal Requirements" means applicable common law and any applicable
statute, permit, ordinance, code or other law, rule, regulation, order,
technical or other standard, requirement or procedure enacted, adopted,
promulgated or applied by any Governmental Authority (including the FCC),
including any applicable order, decree or judgment which may have been handed
down, adopted or imposed by any Governmental Authority, all as in effect from
time to time.
"Licenses" means all domestic satellite, business radio and other FCC
Licenses, and all other licenses, authorizations and permits issued by any
Governmental Authority that are held by a Falcon Company in the business and
operations of the Systems, excluding the Franchises.
"Loss" means any claims, losses, liabilities, damages, penalties, costs
and expenses (excluding any and all consequential, incidental and special
damages).
"Material Adverse Effect" means a material adverse effect on the
business, results of operations, assets, liabilities or financial condition of
the Falcon Companies, taken as a whole or the Systems, taken as a whole, but
without giving effect to any effect resulting from (i) changes in conditions
(including economic conditions, Rate Regulatory Matters and other federal or
state governmental actions, proposed or enacted legislation or proposed or
enacted regulations) that are applicable to the economy or the cable television
industry in general on a national, regional or state basis or (ii) any changes
in competition affecting the business of the Falcon Companies.
"Material Contract" means any Contract that requires payments by a
Falcon Company in the aggregate of more than $150,000 per year, any Contract
containing a noncompete covenant binding on any of the Falcon Companies, any
Contract relating to the business of providing Internet access or telephony
services, any Contract relating to a pending purchase or sale of cable
television systems, and any partnership agreement, limited liability operating
agreement or similar agreement pursuant to which any Falcon Company has made an
investment in an Investment Person, but "Material Contract" specifically
excludes all subscription agreements with customers (including, multiple
dwelling unit agreements and Contracts with Bulk Subscribers), pole attachment
agreements and conduit agreements, and construction contracts.
"Material FCC Consent" means any Consent of the FCC that is necessary
for the transfer of control to Buyer in connection with the consummation of the
transactions contemplated by this Agreement with respect to the Licenses
identified in Schedule 1.1(e).
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"MONY Agreement" means the Note Purchase and Exchange Agreement dated
as of October 21, 1991, among Falcon Telecable, a California Limited
Partnership, XXXX & CO., and J. Romeo & Co., relating to the 11.56% Series A
Subordinated Notes due March 31, 2001 and 11.56% Series B Subordinated Notes due
March 31, 2001, as the same may be amended and in effect from time to time.
"MONY Notes" means the Notes issued pursuant to the MONY Agreement.
"Xxxxxxxxx Agreement" shall mean the agreement relating to the
appointment of Xxxx Xxxxxxxxx as Vice-Chairman of Charter and as a director of
any public entity formed by Charter and related items relating to such
appointment, including office space and staff assistance for Xx. Xxxxxxxxx, that
has been entered into concurrently with the execution of this Agreement.
"Organizational Documents" means, with respect to any Person (other
than an individual), the articles or certificate of incorporation, bylaws,
certificate of limited partnership, partnership agreement, certificate of
formation, limited liability company operating agreement, and all other
organizational documents of such Person.
"Permitted Encumbrances" means each of the following: (A) liens for
current taxes and other governmental charges that are not yet due and payable;
(B) liens for taxes, assessments, governmental charges or levies, or claims the
non-payment of which is being diligently contested in good faith or liens
arising out of judgments or awards against the Falcon Companies with respect to
which at the time there shall be a prosecution for appeal or there shall be a
proceeding to review or the time limit has not yet run for such an appeal or
review with respect to such judgment or award; provided that with respect to the
foregoing liens in this clause (B), adequate reserves shall have been set aside
on the Falcon Companies' books, and no foreclosure, distraint, sale or similar
proceedings shall have been commenced with respect thereto that remain unstayed
for a period of 60 days after their commencement; (C) liens of carriers,
warehousemen, mechanics, laborers, and materialmen and other similar statutory
liens incurred in the ordinary course of business for sums not yet due or being
diligently contested in good faith, and for which adequate reserves have been
set aside on the Falcon Companies' books; (D) liens incurred in the ordinary
course of business in connection with worker's compensation and unemployment
insurance or similar laws; (E) statutory landlords' liens; (F) with respect to
the Real Property, leases, easements, rights to access, rights-of-way, mineral
rights or other similar reservations and restrictions, defects of title, which
are either of record or set forth in Schedule 3.9 or in the deeds or leases to
such Real Property or which, either individually or in the aggregate, do not
materially and adversely affect or interfere with the ownership or use of such
Real Property in the business and operation of the Systems as presently
conducted; (G) Encumbrances arising under or in respect of the Senior Debt and
the Credit Agreement and the Enstar Credit Agreement and the documents and
instruments delivered in connection therewith or pursuant thereto; and (H) any
other claims or encumbrances that are described in Schedule 3.9 and that relate
to liabilities and obligations that are to be discharged in full at the Closing
or that will be removed prior to or at Closing.
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"Person" means an individual, corporation, association, partnership,
joint venture, trust, estate, limited liability company, limited liability
partnership, Governmental Authority, or other entity or organization.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the Closing Date.
"Put Agreement" means the Put Agreement by and among the parties named
therein, substantially in the form of Exhibit B hereto, which agreement shall be
executed and delivered on the Closing Date.
"Rate Regulatory Matter" means, with respect to any cable television
system, any matter or any effect on such system or the business or operations
thereof, arising out of or related to the Cable Act, any FCC Regulations
heretofore adopted thereunder, or any other present or future Legal Requirement
dealing with, limiting or affecting the rates which can be charged by cable
television systems to their customers (whether for programming, equipment,
installation, service or otherwise).
"Real Property" means all of the fee and leasehold estates that are
owned or held by any of the Falcon Companies and used or held for use in the
business or operations of the Systems, and, to the extent of the interest,
title, and rights of the Falcon Companies in the following: buildings and other
improvements thereon, easements, licenses, rights to access, rights-of-way, and
other real property interests that are owned or held by any of the Falcon
Companies and used or held for use in the business or operations of the Systems,
plus in each case such additions thereto and less such deletions therefrom
arising between the date hereof and the Closing Date in accordance with this
Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
by and among the parties named therein, substantially in the form of Exhibit C
hereto, which agreement shall be executed and delivered at the time contemplated
in such agreement.
"Released Parties" means, collectively, Sellers and their Affiliates
and their respective officers, directors, shareholders, members, partners,
employees and agents.
"Residential Bulk Subscriber" means a Bulk Subscriber that is a
residential bulk account, such as an apartment, condominium or trailer park, as
reflected in the records of the Falcon Companies.
"SEC" means the U.S. Securities and Exchange Commission or any
successor agency thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder, as in effect from time
to time.
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"Senior Debentures" means the Series A and Series B 8.375% Senior
Debentures due 2010 issued by FHGLP (and assumed by Falcon) and Falcon Funding
Corporation.
"Senior Debentures Amount" means the aggregate principal amount, plus
accrued and unpaid interest, outstanding in respect of the Senior Debentures as
of the Closing Date.
"Senior Debt" means the outstanding indebtedness of the Falcon
Companies under the Credit Agreement.
"Senior Debt Amount" means the aggregate principal amount, plus accrued
and unpaid interest, outstanding in respect of the Senior Debt pursuant to the
Credit Agreement as of the Closing Date.
"Senior Discount Debentures" means the Series A and Series B 9.285%
Senior Discount Debentures due 2010 issued by FHGLP (and assumed by Falcon) and
Falcon Funding Corporation.
"Senior Discount Debentures Accreted Value" means the Accreted Value
(as defined in the Indenture) of the Senior Discount Debentures as of the
Closing Date.
"Subscriber" means any Person to whom any Falcon Company provides cable
television programming or other service through the Systems into a single
household, a multiple dwelling unit, a hotel or motel unit, a commercial
business or any other real property improvement.
"Subsidiary" means, with respect to any Person, any other Person of
which the outstanding voting Equity Interests sufficient to elect at least a
majority of its board of directors or other governing body (or, if there are no
such voting interests, of which 50% or more of the Equity Interests) are owned
(beneficially or otherwise) directly or indirectly by such first Person or any
Subsidiary thereof.
"Systems" means the cable television systems owned and operated by any
Falcon Company or any combination of any of them, each of which may be referred
to herein individually as a "System," but excluding the cable television systems
owned, operated or managed, directly or indirectly, by Enstar and the other
Investment Persons.
"Tangible Personal Property" means all of the equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant,
converters, spare parts, and other tangible personal property which are owned or
leased by any of the Falcon Companies and used or held for use in the conduct of
the business or operations of the Systems, plus such additions thereto and less
such deletions therefrom arising between the date hereof and the Closing Date in
accordance with this Agreement.
"Tax" means any and all taxes, fees, levies, duties, tariffs, imposts
and other charges of any kind imposed by any government or taxing authority,
including: federal, state, local, or foreign gross income, gross receipts, net
income, ad valorem, value added, possessory interest, alternative or add-
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on minimum, windfall profits, severance, property, production, sales, use,
license, excise, franchise, capital, stamp, occupation, premium, environmental,
transfer, payroll, employment, withholding, or other taxes, charges, fees,
liens, customs, duties, licenses or other governmental assessments, together
with any interest, additions, or penalties with respect thereto and any interest
in respect of such additions or penalties, but excluding Franchise fees, FCC
payments and fees, and copyright payments and fees.
"Tax Return" means any tax return, declaration of estimated tax, tax
report or other tax statement, or any other similar filing, including any
schedule or attachment thereto, and including any amendment thereof, required to
be submitted to any Governmental Authority with respect to any Tax.
"TCI Systems" means the Systems contributed to the Falcon Companies by
TCI pursuant to the Contribution and Purchase Agreement referred to in the
Amended and Restated Agreement of Limited Partnership of Falcon dated as of
December 30, 1997, as amended.
"Transaction Documents" means this Agreement, the Adjustment Escrow
Agreement (if applicable), the Put Agreement, the Registration Rights Agreement,
the Exchange Agreement, the Charter LLC Operating Agreement, the Amended Falcon
Partnership Agreement, and the other documents, agreements, certificates and
other instruments to be executed, delivered and performed by the parties in
connection with the transactions contemplated by this Agreement.
"Transferable Franchise Area" means any Franchise Area with respect to
which (A) any Consent necessary under a Franchise (including an expired
Franchise pursuant to which a Falcon Company is operating) in connection with
the consummation of the transactions contemplated by this Agreement shall have
been obtained or shall have been deemed obtained by operation of law in
accordance with the provisions of the Cable Act, or (B) no Consent is necessary
under a Franchise in connection with the consummation of the transactions
contemplated by this Agreement, provided that, with respect to any expired
Franchise for which, as of the date hereof, the Franchising Authority has not
granted to the applicable Falcon Company continuing operation authority and the
Franchise Area serves greater than 350 Subscribers and pursuant to which Consent
was not required prior to its expiration, a true and complete list of which is
set forth on Schedule 1.1(f), the corresponding Franchise Area shall not be a
Transferable Franchise Area unless and until the applicable Franchising
Authority has either (i) consented to the consummation of the transactions
contemplated by this Agreement, (ii) renewed such Franchise, or (iii) granted to
the applicable Falcon Company continuing operating authority to the effect that
such Falcon Company has authority to operate under such Franchise until such
time as a final decision has been made with respect to the renewal of such
Franchise, such consent, renewal or continuing operating authority being
referred to as a "Designated Consent"), or (C) no Franchise is required to
provide cable television service pursuant to applicable Legal Requirements,
which Franchise Areas referred to in this clause (C) are listed on Schedule 3.8,
or (D) with respect to the Franchises marked with an asterisk on Schedule 3.8,
the applicable Franchising Authority has either (i) evidenced its acknowledgment
and approval of the consummation of the transactions contemplated by this
Agreement, or (ii) has not requested
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additional information from Falcon or Buyer regarding such transactions within
30 days of receiving the notification referred to in Section 6.4(h).
"Upset Date" means November 30, 2000, subject to extension as provided
in Section 8.1(a)(3) and 8.1(a)(4).
1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, and in addition to (i) the definitions set forth in the first
paragraph hereof and in Section 1.1, and (ii) certain defined terms that are
used solely within the section in which they are defined, the following terms
have the meanings set forth in the sections indicated:
Term Section
---- -------
Adjustment Escrow Amount Section 2.5(a)(2)
Adlink Recital A
Aggregate Consideration Section 2.3(a)
Allocation Agreements Section 6.10(h)
Allocation Notice Section 2.1(b)
Antitrust Division Section 6.5
Amended Falcon Partnership Agreement Section 6.6(c)
Assumed Liabilities Section 2.2(a)
Capital Expenditure Budget Section 3.23
Cause Section 6.9(c)
Charter Allocation Agreement Section 6.10(h)
Charter Corporate Subsidiary Section 6.10(h)
Cash Consideration Section 2.3
Charter Financial Statements Section 5.9(a)
Closing Cash Payment Section 2.5
Closing Equivalent Subscribers Section 2.4(a)
Closing Net Liabilities Section 2.4(b)
Closing Payment Section 2.5(b)
Confidentiality Agreement Section 6.2(a)
Contributed Interest Section 2.1(b)
Current Assets Section 2.4(b)(2)
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Current Liabilities Section 2.4(b)(3)
Designated Consent Definition of Transferable Franchise Area
DOL Section 3.13(d)(ix)
Enstar Recital A
Enstar Finance Recital A
Equity Consideration Section 2.1(b)
Equity Value Section 2.3(b)
Falcon 401(k) Plan Section 6.9(g)
Falcon Allocation Agreement Section 6.10(h)
Falcon Financial Statements Section 3.5(a)
Fee Properties Section 3.9
Final Closing Statement Section 2.6(a)
FTC Section 6.5
Inventory Section 3.19
Investment Person Section 3.3(a)
Minimum Contributed Interest Section 2.1(b)
Net Closing Payment Section 2.5(b)
NYNEX Litigation Section 2.1(c)
Options Section 8.2(h)
Pending Acquisitions Section 6.1(c)(3)
Preliminary Closing Statement Section 2.5(a)
Preliminary Dispute Notice Section 2.5(a)
Purchased Interests Section 2.1
Referee Section 2.5(a)(1)
Tax Partnership Section 3.12(b)(9)
Transferred Headquarters Employees Section 6.9(b)
Working Capital Section 2.4(b)(1)
Year 0000 Xxxxxxx Xxxxxxx 3.22
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Year 0000 Xxxx Xxxxxxx 3.22
1.3 Rules of Construction. Words used in this Agreement, regardless of
the gender and number specifically used, shall be deemed and construed to
include any other gender and any other number as the context requires. As used
in this Agreement, the word "including" is not limiting, and the word "or" is
not exclusive. Except as specifically otherwise provided in this Agreement in a
particular instance, a reference to a Section is a reference to a Section of
this Agreement, a reference to an Exhibit is a reference to an Exhibit to this
Agreement, and the terms "hereof," "herein," and other like terms refer to this
Agreement as a whole, including the Disclosure Schedules and the Exhibits to
this Agreement, and not solely to any particular part of this Agreement. The
descriptive headings in this Agreement are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
SECTION 2 SALE AND PURCHASE OF PURCHASED INTERESTS; CONTRIBUTION OF
CONTRIBUTED INTEREST; ASSUMPTION OF LIABILITIES;
CONSIDERATION.
2.1 Agreement to Sell and Buy Purchased Interests and to Contribute
Contributed Interest. Subject to the terms and conditions set forth in this
Agreement,
(a) Sellers hereby agree to sell, transfer, convey and deliver
to Buyer at the Closing, and Buyer hereby agrees to purchase at the Closing, the
Equity Interests specified below (the "Purchased Interests"), free and clear of
all Encumbrances, other than the pledges disclosed on Schedule 4.3 and subject
to the Legal Restrictions:
(1) from TCI, its entire partnership interest in
Falcon;
(2) from FHGLP, that portion of its partnership
interest in Falcon that is not represented by the Contributed Interest;
(3) from FC Trust, its entire partnership interest in
Falcon Video Communications Investors, L.P.;
(4) from FHGI, its entire partnership interest in
each of Falcon Media Investors Group, a California Limited Partnership, Falcon
Community Investors, L.P., Falcon Telecable Investors Group, a California
Limited Partnership, and Falcon Investors Group, Ltd. a California Limited
Partnership;
(5) from FHGLP, all of the capital stock in Enstar
and its entire membership interest in Enstar Finance Company, LLC; and
(6) from DHN, its entire membership interest in
Adlink.
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(b) FHGLP agrees to contribute to Charter LLC, free and clear
of all Encumbrances, other than the pledges disclosed on Schedule 4.3 and
subject to the Legal Restrictions, a portion of its partnership interest in
Falcon (the "Contributed Interest"). The percentage of FHGLP's partnership
interest in Falcon represented by the Contributed Interest shall be set forth in
Part I of a written notice delivered to Buyer at least two days prior to Closing
substantially in the form set forth in Exhibit F (the "Allocation Notice"). In
exchange for such contribution to Charter LLC, FHGLP shall receive Units in
Charter LLC as provided in the Charter LLC Operating Agreement (the "Equity
Consideration"). The Contributed Interest shall not be less than 44.5% of
FHGLP's partnership interest in Falcon (the "Minimum Contributed Interest") and
it shall not be greater than that percentage of FHGLP's partnership interest in
Falcon that would cause the Equity Value to equal Five Hundred Fifty Million
Dollars ($550,000,000) provided, however, (i) if receipt of the Equity
Consideration may result in Taxes being recognized by the equity owners of
FHGLP, as reasonably determined by counsel to FHGLP, then FHGLP may elect to
contribute to Charter LLC a portion of its partnership interest in Falcon that
is less than the Minimum Contributed Interest, or may elect to not contribute
any portion of its partnership interest in Falcon to Charter LLC, in which event
FHGLP's entire partnership interest in Falcon (or the portion not so
contributed) shall be sold to Buyer pursuant to Section 2.1(a) hereof and
otherwise treated as a Purchased Interest hereunder; (ii) if prior to the
Closing Buyer, Charter LLC, or Charter Holdings takes an action (other than
dispositions of obsolete equipment or other equipment deemed to be unnecessary
in the ordinary operations of Charter Holdings' business) that results in a
reduction in the assets of Charter LLC or Charter Holdings, then (in addition to
the right of FHGLP and Buyer to mutually agree to an appropriate adjustment to
the number of units in Charter LLC received by FHGLP as set forth in Exhibit D)
FHGLP may elect not to contribute any portion of its partnership interest in
Falcon to Charter LLC, in which event FHGLP's entire partnership interest in
Falcon shall be sold to Buyer pursuant to Section 2.1(a) hereof and otherwise
treated as a Purchased Interest hereunder; and (iii) if FHGLP makes the election
to receive a cash payment pursuant to Section 6.6(c) hereof, FHGLP's entire
partnership interest in Falcon shall be sold to Buyer pursuant to Section 2.1(a)
hereof and otherwise treated as a Purchased Interest hereunder. If the status or
qualification of the recipient of the Equity Consideration from FHGLP would
cause the issuance of the Equity Consideration hereunder to require public
registration of the Equity Consideration, as reasonably determined by Buyer,
Buyer may elect to require FHGLP to not distribute the Equity Consideration to
such recipient.
(c) FHGLP hereby agrees to assign or cause to be assigned to
Buyer at the Closing all of its rights and interest in Case No. BC193800,
Superior Court of the State of California, County of Los Angeles, Falcon
Britannia, L.P. and Camelot Cable, Inc. v. NYNEX Corporation, NYNEX U.K.
Telephone and Cable T.V. Holding Company Limited, and Cable & Wireless
Communications plc, and all related rights and claims (the "NYNEX Litigation").
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(d) Subject to the terms and conditions set forth in Section
6.4(f) and this Agreement, FHGLP and TCI hereby agree to cause 100% of the joint
venture interests in Pacific Microwave Joint Venture to be assigned to Falcon at
or prior to the Closing.
2.2 Assumption of Obligations; Effect on Partnership Agreement of
Falcon.
(a) In consideration of the sale of the Purchased Interests
and the contribution of the Contributed Interest, concurrently with the Closing,
Buyer shall assume and be responsible for (and shall indemnify and hold Sellers
harmless from and against) all obligations and liabilities associated with the
Purchased Interests purchased by Buyer and the Contributed Interest contributed
to Charter LLC by FHGLP, whether such obligations and liabilities arose prior to
Closing or arise after the Closing, including (and notwithstanding any provision
of applicable law to the contrary) all obligations and liabilities arising out
of the ownership of a general partnership interest in any Falcon Company
(collectively, the "Assumed Liabilities"), it being the intent of the parties
that Sellers be protected against liabilities of the Falcon Companies as if the
Sellers were stockholders in a corporation or members in a limited liability
company; provided that Buyer shall not be deemed to have assumed directly any
obligations and liabilities of the Falcon Companies vis-a-vis any Person that is
not a party to this Agreement, and no such Person shall have any greater rights
vis-a-vis Buyer or any of the Falcon Companies than as a result of Buyer's and
the Falcon Companies' status as a general partner of the Falcon Companies.
(b) It is understood and agreed by Buyer that from and after
the Closing, none of Sellers or their partners or Shareholders or TCI
Communications, Inc. (or any successor thereto) shall have any further rights
(subject to and without limiting their indemnification and exculpation rights as
provided in Section 6.13), obligations or responsibilities of any nature
whatsoever pursuant to the provisions of the Amended and Restated Agreement of
Limited Partnership of Falcon Communications, L.P. dated as of December 30,
1997, as amended, or the Contribution and Purchase Agreement dated as of
December 30, 1997 among Falcon, FHGLP, TCI and certain other parties, as
amended, irrespective of when such obligations or responsibilities may have
arisen or be deemed to have arisen.
2.3 Consideration for Purchased Interests and Contributed Interest.
(a) The consideration for the Purchased Interests and the
Contributed Interest shall be Three Billion Four Hundred Eighty-One Million
Dollars ($3,481,000,000) in the aggregate, subject to adjustment in accordance
with Sections 2.4, 2.5 and 2.6 (the "Aggregate Consideration"). The Aggregate
Consideration shall be determined by Falcon based on the Preliminary Closing
Statement and set forth in Part II of the Allocation Notice. The Buyer shall pay
a portion of the Aggregate Consideration in cash (the "Cash Consideration"), and
the balance of the Aggregate Consideration shall be represented by the Equity
Consideration delivered to FHGLP pursuant to Section 2.1(b). The value of the
Aggregate Consideration shall be allocated among the Sellers as determined by
the Sellers and set forth in Part III of the Allocation Notice.
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(b) The amount of the Cash Consideration shall equal the
Aggregate Consideration reduced by the "Equity Value", which shall equal the
product of (i) the value of the Aggregate Consideration allocated to FHGLP in
Part III of the Allocation Notice, and (ii) the percentage of FHGLP's
partnership interest in Falcon that is contributed to Charter LLC pursuant to
Section 2.1(b). The Equity Value shall be set forth in Part IV of the Allocation
Notice.
(c) Each Seller acknowledges that upon payment of the
Aggregate Consideration to the accounts or Persons designated by the Sellers in
accordance with this Agreement, Buyer shall have no additional liability or
obligation to the Sellers with respect to the allocation of the Aggregate
Consideration among the Purchased Interests and the Contributed Interest and the
Sellers, and each Seller agrees to indemnify and hold Buyer harmless from and
against any claim by a Seller (or a partner, shareholder or member of such
Seller) arising out of the allocation of the Aggregate Consideration.
(d) The Sellers and Buyer agree to allocate the Cash
Consideration among the Sellers of the Purchased Interests as follows:
(1) $1 shall be paid to FHGLP for all of its capital
stock in Enstar,
(2) $1 shall be paid to DHN for its entire membership
interest in Adlink, and
(3) the balance of the Cash Consideration allocated
to each Seller of the other Purchased Interests shall equal the sum of (x) the
cash portion of the Net Closing Payment paid to such Seller as set forth in Part
V of the Allocation Notice, plus (y) the portion of the Adjustment Escrow Amount
paid to such Seller pursuant to Section 2.6(b)(1)(B) hereof (if any).
2.4 Adjustments.
(a) Closing Equivalent Subscribers. The Aggregate
Consideration shall be decreased by the number, if any, by which the number of
Closing Equivalent Subscribers is less than 979,700 multiplied by $3,516. For
purposes of this Agreement, "Closing Equivalent Subscribers" means the total
number of Equivalent Subscribers for all of the Systems as of the Closing Date,
subject to the provisions of Sections 2.4(c) and 6.1(c)(3).
(b) Closing Net Liabilities. The Aggregate Consideration shall
be decreased by the amount of the Closing Net Liabilities. For purposes of this
Agreement, "Closing Net Liabilities" means:
(i) the Senior Discount Debentures
Accreted Value; plus
(ii) the Senior Debentures Amount; plus
(iii) the Senior Debt Amount; plus
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(iv) the principal amount and any accrued
but unpaid interest as of the
Adjustment Time in respect of any
other indebtedness for borrowed
money (not included in the foregoing
clauses (b)(i), (ii) and (iii) of
this Section 2.4), if any, of the
Falcon Companies as of the
Adjustment Time (in each case of the
foregoing clauses (b)(i), (ii),
(iii) and (iv) of this Section 2.4,
prior to giving effect to any
repayment of such indebtedness by
Buyer at the Closing); plus
(v) the absolute value of Working
Capital if such number is less than
zero; plus
(vi) expenses of the Falcon Companies
relating to the consummation of the
transactions contemplated by this
Agreement, including fees and
expenses of attorneys, accountants,
financial advisors and broker fees,
if such fees and expenses are paid
after the Closing Date and were not
otherwise reflected as a Current
Liability or Closing Net Liability
in the computation of Aggregate
Consideration or paid by the
Sellers, but excluding any expenses
that Buyer agrees to pay or is
obligated to pay pursuant to this
Agreement; plus
(vii) without limiting Falcon's
obligations under Section 6.9, all
amounts to be paid by Falcon or the
Falcon Companies at or before the
Closing pursuant to Section 6.9(b)
if such amounts are not so paid on
or prior to the Closing Date and are
not otherwise reflected as a Current
Liability or Closing Net Liability
in the computation of Aggregate
Consideration or paid by the
Sellers; minus
(viii) one-half of the amount paid by
Falcon at or before the Closing in
respect of severance to the
Headquarters Employees pursuant to
Section 6.9(b), provided that the
maximum adjustment pursuant to this
clause (viii) shall be $4,500,000
and Buyer shall have no other
obligation in respect of such
payments other than the adjustment
provided in this clause (viii);
minus
(ix) Working Capital if such number is
greater than zero; minus (x) the
amount provided for in Section
6.1(c)(3) (Pending Acquisitions);
minus
(xi) the $2,500,000 investment made by
Falcon Community Cable, L.P. in the
Bend, Oregon joint venture; minus
(xii) that portion of the capital
expenditures provided for in Section
6.1(b)(7) (Capital Expenditures).
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(1) Subject to the other provisions of this Section
2.4(b), "Working Capital" means Current Assets as of the Adjustment Time minus
Current Liabilities as of the Adjustment Time.
(2) Subject to the other provisions of this Section
2.4(b), "Current Assets" means the total current assets of the Falcon Companies
as defined for purposes of GAAP, and prepayments in respect of performance bonds
and long term rights of way with a maturity in excess of one year, computed for
the Falcon Companies as of the Adjustment Time on a consolidated basis and
without duplication in accordance with GAAP.
(3) Subject to the other provisions of this Section
2.4(b) and Section 3.12(a), "Current Liabilities" means the total current
liabilities of the Falcon Companies as defined for purposes of GAAP, including
vacation pay and sick pay, computed for the Falcon Companies as of the
Adjustment Time on a consolidated basis and without duplication in accordance
with GAAP; provided, however, that notwithstanding GAAP, or anything to the
contrary in this Agreement, Current Liabilities shall not include and no
adjustment to the Aggregate Consideration shall be made in respect of: (A) any
amount payable in respect of or pursuant to the Debt Documents or any
indebtedness for borrowed money referred to in clause (b)(iv) above; (B) any
prepayment penalty or premium, breakage costs, change of control penalty or
premium or other payment arising out of or resulting from the consummation of
the transactions contemplated by this Agreement, including the termination of
any Contract, under or pursuant to the Debt Documents or any other Contract or
other obligation to which any of the Falcon Companies is a party or by which it
may be bound, including any swap or interest rate hedge Contract; (C) any Taxes
to be paid by the Buyer pursuant to Section 6.10; (D) any amounts paid or to be
paid by Falcon or the Falcon Companies in respect of severance to the
Headquarters Employees pursuant to the provisions of Section 6.9 hereof except
as provided in the preceding provisions of this Section 2.4(b); and (E) any
liability that is otherwise included in Closing Net Liabilities.
(c) Right of First Refusal Sale. If prior to the Closing
hereunder any Franchising Authority notifies any Falcon Company or Buyer in
writing of such Franchising Authority's intent to purchase the assets of any
System (or portion thereof) that serves the Franchise Area covered by the
Franchise granted by such Franchising Authority pursuant to any right of first
refusal or similar right in such Franchise that is triggered by the consummation
of the purchase and sale of the Purchased Interests and contribution of the
Contributed Interest, and the Franchising Authority does not rescind such notice
prior to the Closing, then (1) at the Closing the amount of the Aggregate
Consideration shall be reduced by an amount equal to the product of (A) the
number of Closing Equivalent Subscribers represented by the Subscribers served
in such Franchise Area (determined as if the effective time of the consummation
of the respective sale of such system to the Franchising Authority were the
Adjustment Time hereunder) multiplied by (B) $3,516, and the target number of
979,700 Closing Equivalent Subscribers referred to in Section 2.4(a) shall be
reduced by the number of Closing Equivalent Subscribers referred to in clause
(A) above; (2) upon consummation of such purchase by the Franchising Authority
prior to the date the Aggregate Consideration is finally determined pursuant to
Section 2.6(a), Buyer shall promptly remit (or cause the Falcon
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Companies to remit) to Sellers the aggregate amount of sale proceeds received by
Buyer or the Falcon Companies; and (3) if the Aggregate Consideration is finally
determined pursuant to Section 2.6(a) prior to the consummation of such purchase
by the Franchising Authority, Buyer shall pay to the Sellers in cash the amount
by which the Aggregate Consideration was reduced pursuant to clause (1) above
within three business days after the date on which the amount of the Aggregate
Consideration is finally determined.
2.5 Payments at Closing.
(a) No later than ten (10) days prior to the date scheduled
for the Closing, Falcon shall prepare and deliver to Buyer a written report (the
"Preliminary Closing Statement") setting forth Falcon's estimates of Closing Net
Liabilities, Closing Equivalent Subscribers, and the Aggregate Consideration,
determined in accordance with Section 2.4. The Preliminary Closing Statement
shall be prepared by Falcon in good faith and shall be certified by Falcon to be
its good faith estimate of the Closing Net Liabilities, Closing Equivalent
Subscribers and the Aggregate Consideration as of the date thereof. Falcon shall
make available to Buyer such information as Buyer shall reasonably request
relating to the matters set forth in the Preliminary Closing Statement. If Buyer
does not agree with the Closing Net Liabilities, Closing Equivalent Subscribers
or Aggregate Consideration set forth in the Preliminary Closing Statement, then
on or prior to the third (3rd) day prior to the date scheduled for the Closing,
Buyer may deliver to Falcon a written report (the "Preliminary Dispute Notice")
setting forth in reasonable detail Buyer's good faith estimates (supported by
substantial evidence) of any amount set forth in the Preliminary Closing
Statement with which Buyer disagrees. In the case of any such estimated amount
set forth in the Preliminary Dispute Notice, Falcon and Buyer shall endeavor in
good faith to agree prior to the Closing on the appropriate amount of such
estimates to be used in calculating the Closing Payment (as defined below). If
Falcon and Buyer do not agree on any such amounts by the business day prior to
the date scheduled for the Closing, Falcon, at its election, may either:
(1) Elect to postpone the Closing and retain Price
Waterhouse Coopers (Los Angeles, California office) (the "Referee") to make a
determination as to the appropriate treatment for purposes of agreeing on
estimates to be made at Closing of any amounts under dispute and the Closing
shall thereafter take place on the third business day following resolution of
such dispute, subject to satisfaction or waiver of all applicable conditions
precedent. The Referee shall endeavor to resolve the dispute as promptly as
practicable and the Referee's resolution of the dispute shall be final and
binding on the parties for purposes of the estimates to be made at Closing;
provided, however, that in no event shall such resolution result in (i) amounts
less than the amounts therefor (in the case of liabilities) or greater than the
amounts therefor (in the case of assets) set forth in the Preliminary Closing
Statement or (ii) amounts greater than the amounts therefor (in the case of
liabilities) or less than the amounts therefor (in the case of assets) set forth
in the Preliminary Dispute Notice. The costs and expenses of the Referee and its
services rendered pursuant to this Section 2.5 shall be borne one-half by Buyer
and one-half by Sellers; or
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(2) Elect to proceed to Closing and cause Buyer, at
the Closing, to deposit an amount in cash equal to the difference (the
"Adjustment Escrow Amount") between the Aggregate Consideration, adjusted
pursuant to Section 2.4(a) and (b) that would be calculated using the estimates
set forth in the Preliminary Closing Statement (with any changes thereto
mutually agreed to by Buyer and Falcon) and the Aggregate Consideration adjusted
pursuant to Section 2.4(a) and (b) that would be calculated using the estimates
set forth in the Preliminary Dispute Notice (with any changes thereto mutually
agreed to by Buyer and Falcon), to the Adjustment Escrow Agent, to be held and
disbursed in accordance with the terms of the Adjustment Escrow Agreement and
Section 2.6.
(b) At Closing, Buyer shall pay cash and FHGLP shall receive
the Equity Consideration as follows:
(1) if Falcon has made the election in Section
2.5(a)(2) above, Buyer shall pay cash to the Adjustment Escrow Agent in an
amount equal to the Adjustment Escrow Amount, such cash to be held by the
Adjustment Escrow Agent in escrow on behalf of the parties in accordance with
the terms of the Adjustment Escrow Agreement and Section 2.6;
(2) Buyer shall pay cash to the Sellers in an
aggregate amount equal to the excess of (i) the amount of the Aggregate
Consideration pursuant to Section 2.4(a) and (b), as determined pursuant to this
Section 2.5 (including as determined pursuant to Section 2.5(a) and as mutually
agreed by Buyer and Falcon) over (ii) the sum of (x) the amount of the Equity
Value (as set forth in Part IV of the Allocation Notice), and (y) the aggregate
amount paid under clause (1), if applicable, to the Adjustment Escrow Agent; and
(3) FHGLP shall contribute the Contributed Interest
to Charter LLC in exchange for the Equity Consideration.
The sum of the cash paid to Sellers pursuant to clause (2) above and the Equity
Value represented by the Equity Consideration received by FHGLP pursuant to
clause (3) above is referred to as the "Net Closing Payment" and the sum of the
Net Closing Payment and the Adjustment Escrow Amount is referred to as the
"Closing Payment."
(c) None of the Adjustment Escrow Amount will be available for
any purpose, other than as described in Section 2.6(b), and the Adjustment
Escrow Amount shall not be available to satisfy any other obligations of Sellers
under this Agreement or otherwise.
2.6 Post-Closing Payment of Aggregate Consideration Adjustments.
(a) Final Closing Statement. Within ninety (90) days after the
Closing Date, Buyer shall prepare and deliver to FHGLP a written report (the
"Final Closing Statement") setting forth Buyer's final estimates of Closing Net
Liabilities, Closing Equivalent Subscribers and the Aggregate Consideration,
determined in accordance with Section 2.4. The Final Closing Statement
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shall be prepared by Buyer in good faith and shall be certified by Buyer to be,
as of the date prepared, its good faith estimate of the Closing Net Liabilities,
Closing Equivalent Subscribers and Aggregate Consideration. Buyer shall allow
FHGLP and its agents access at all reasonable times after the Closing Date to
copies of the books, records and accounts of the Falcon Companies and make
available to FHGLP such information as FHGLP reasonably requests to allow FHGLP
to examine the accuracy of the Final Closing Statement. Within thirty (30) days
after the date that the Final Closing Statement is delivered by Buyer to FHGLP,
FHGLP shall complete its examination thereof and may deliver to Buyer a written
report setting forth any proposed adjustments to any amounts set forth in the
Final Closing Statement; provided, however, that if Buyer does not comply with
its obligations pursuant to the preceding sentence, such thirty (30) day period
shall run from the day after the date on which Buyer complies with such
obligations. After submission of the Final Closing Statement, Buyer shall have
no right to raise further adjustments in its favor and after submission of
FHGLP's report of any proposed adjustments, FHGLP shall have no right to raise
further adjustments in Sellers' favor. If FHGLP notifies Buyer of its acceptance
of the amounts set forth in the Final Closing Statement, or if FHGLP fails to
deliver its report of any proposed adjustments within the period specified in
the second preceding sentence, the amounts set forth in the Final Closing
Statement shall be conclusive, final and binding on the parties as of the last
day of such period. Buyer and FHGLP shall use good faith efforts to resolve any
dispute involving the amounts set forth in the Final Closing Statement. If FHGLP
and Buyer fail to agree on any amount set forth in the Final Closing Statement
within fifteen (15) days after Buyer receives FHGLP's report pursuant to this
Section 2.6, then FHGLP shall retain the Referee to make the final
determination, under the terms of this Agreement, of any amounts under dispute.
The Referee shall endeavor to resolve the dispute as promptly as practicable and
the Referee's resolution of the dispute shall be final and binding on the
parties, and a judgment may be entered thereon in any court of competent
jurisdiction; provided that in no event shall such resolution result in (i)
amounts less than the amounts therefor (in the case of liabilities) or more than
the amounts therefor (in the case of assets) set forth in FHGLP's written report
pursuant to this Section 2.6(a) or (ii) amounts greater than the amounts
therefor (in the case of liabilities) or less than the amounts therefor (in the
case of assets) set forth in the Final Closing Statement. The costs and expenses
of the Referee and its services rendered pursuant to this Section 2.6 shall be
borne one-half by Buyer and one-half by Sellers.
(b) Payment of Aggregate Consideration Adjustments.
(1) After the amount of the Aggregate Consideration
is finally determined pursuant to Section 2.6(a), payments shall be made as
follows:
(A) If the amount of the Aggregate
Consideration as finally determined pursuant to Section 2.6(a) exceeds the
Closing Payment, then within three business days after the date the amount of
Aggregate Consideration is finally determined pursuant to Section 2.6(a), (i)
Buyer will pay to Sellers in cash the amount of such excess by wire or accounts
transfer of immediately available funds to an account or accounts designated by
FHGLP by written notice to Buyer and (ii) Buyer and FHGLP will direct the
Adjustment Escrow Agent to pay to Sellers in
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cash the Adjustment Escrow Amount, if any, to an account or accounts designated
by FHGLP by written notice to the Adjustment Escrow Agent.
(B) If the amount of the Closing Payment
exceeds the amount of the Aggregate Consideration as finally determined pursuant
to Section 2.6(a), then within three business days after the date on which the
amount of the Aggregate Consideration is finally determined pursuant to Section
2.6(a), (i) FHGLP will direct the Adjustment Escrow Agent to pay to Buyer in
cash the amount of such excess to the extent of the Adjustment Escrow Amount, if
any, and (ii) if such excess is greater than the amount paid to Buyer from the
Adjustment Escrow Amount, Sellers will pay to Buyer in cash the amount of such
excess to the extent not paid from the Adjustment Escrow Amount, by wire or
accounts transfer of immediately available funds to an account designated by
Buyer by written notice to FHGLP. If any portion of the Adjustment Escrow
Amount, if any, remains after payment to Buyer of any amounts pursuant to the
preceding sentence, Buyer and FHGLP will direct the Adjustment Escrow Agent to
promptly pay such amounts to Sellers in accordance with the percentage interests
set forth in Part VI of the Allocation Notice.
(2) Any amount which becomes payable pursuant to this
Section 2.6 will constitute an adjustment to the Purchase Consideration for all
purposes.
SECTION 3: REPRESENTATIONS AND WARRANTIES OF FALCON
Subject to any provisions of this Agreement limiting, qualifying or
excluding any of the representations or warranties made herein, and to the
disclosures set forth in Falcon's Disclosure Schedules, as such schedules are
referenced herein, Falcon hereby represents and warrants to Buyer as set forth
in this Section 3.
3.1 Organization and Authority. Each of the Falcon Companies was duly
formed and is validly existing and in good standing under the laws of the state
of its organization or formation. Each of the Falcon Companies has the requisite
partnership, limited liability company or corporate (as the case may be) power
and authority to own, lease and operate its properties, to carry on its business
in the places where such properties are now owned, leased or operated and in the
manner in which such business is now conducted, and, in the case of Falcon, to
execute, deliver and perform this Agreement and the other Transaction Documents
to which it is a party according to their respective terms.
3.2 Authorization and Binding Obligation. The execution, delivery and
performance by Falcon of this Agreement and the other Transaction Documents to
which it is a party have been duly authorized by all necessary partnership
action on its part. This Agreement and the other Transaction Documents to which
Falcon is a party has been duly executed and delivered by Falcon (or in the case
of Transaction Documents to be executed and delivered at Closing, when executed
and delivered will be duly executed and delivered) and constitute (or, in the
case of Transaction Documents to be executed and delivered at Closing, when
executed and delivered will constitute) the legal, valid, and
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binding obligation of Falcon in accordance with their terms, except as the
enforceability of this Agreement and such other Transaction Documents may be
limited by Enforceability Exceptions.
3.3 Organization and Ownership of Falcon Companies.
(a) Schedule 3.3 sets forth the name of each Falcon Company,
including the jurisdiction of incorporation or formation (as the case may be) of
each. Each Falcon Company is duly qualified, validly existing and in good
standing as a foreign corporation, partnership or limited liability company, as
the case may be, in each jurisdiction listed in Schedule 3.3, which are all
jurisdictions in which such qualification is required. Except as disclosed in
Schedule 3.3, no Falcon Company, directly or indirectly, owns, of record or
beneficially, any outstanding securities or other interest in any Person (each
such Person described in Schedule 3.3 other than a company listed on Schedule
1.1(a), an "Investment Person") or has the right or obligation to acquire, any
Equity Interests, outstanding securities or other interest in any Person. Except
as set forth in Schedule 3.3, the owner of the Equity Interests of each
Investment Person owns such Equity Interests free and clear of all Encumbrances,
but subject to the Legal Restrictions (except that no representation is made in
this Section 3 as to the Purchased Interests held by Sellers).
(b) Schedule 3.3 sets forth the record and beneficial owner of
each issued and outstanding Equity Interest of each of the Falcon Companies, and
the ownership chart of Falcon and the other Falcon Companies included in
Schedule 3.3 is true and correct in all material respects. Upon the Closing,
Buyer will acquire, directly or indirectly, beneficial ownership of all of the
issued and outstanding Equity Interests of all of the Falcon Companies, free and
clear of all Encumbrances and options to purchase, other than the pledges
disclosed in Schedule 3.3 and Encumbrances created by the Buyer and subject to
the Legal Restrictions. All of such issued and outstanding Equity Interests of
the Falcon Companies have been validly issued, are fully paid and non-assessable
and have not been issued in violation of any federal or state securities laws.
Except as set forth in Schedule 3.3, the owner of the Equity Interests of each
Falcon Company owns such Equity Interests free and clear of all Encumbrances and
options to purchase, but subject to the Legal Restrictions (except that no
representation is made in this Section 3 as to the Purchased Interests held by
Sellers). Except as disclosed in Schedule 3.3, there are no (1) outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings or (2) outstanding stock appreciation, phantom
equity or similar rights of any kind to which any Falcon Company is a party or
by which any of them is bound obligating such Falcon Company to issue, deliver
or sell, or cause to be issued, delivered or sold, any additional Equity
Interests of such Falcon Company or obligating such Falcon Company to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. The Falcon Companies have
delivered to Buyer complete and correct copies of the Organizational Documents
of each Falcon Company as in effect on the date hereof.
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3.4 Absence of Conflicting Agreements; Consents. Except for the
expiration or termination of any applicable waiting period under the HSR Act, or
as set forth in Schedule 3.4 or Schedule 3.8 or as would not impair the ability
of Falcon to perform its obligations under the Transaction Documents to which it
is a party, the execution, delivery and performance by Falcon and Sellers of
this Agreement and the other Transaction Documents to which they are a party
(with or without the giving of notice, the lapse of time, or both): (a) do not
require any Consent of, declaration to , notice to, or filing with any
Governmental Authority or any other Person under any Franchise, FCC License or
Material Contract; (b) will not conflict with any provision of the
Organizational Documents of any Falcon Company, each as currently in effect; (c)
assuming receipt of all Consents listed in Schedule 3.4 or Schedule 3.8, will
not conflict with, in any material way, result in a material breach of, or
constitute a material default under any Legal Requirement to which any Falcon
Company is bound; (d) assuming receipt of all Consents listed in Schedule 3.4 or
Schedule 3.8, will not conflict with, constitute grounds for termination of,
result in a breach of, constitute a default under, or accelerate or permit the
acceleration of any performance required by the terms of any Franchise, FCC
License, or Material Contract; and (e) assuming receipt of all Consents, will
not result in the creation of any Encumbrance upon the Assets or the Purchased
Interests. Notwithstanding the foregoing, Falcon makes no representation or
warranty regarding any of the foregoing that may result from the specific legal
or regulatory status of Buyer or its Affiliates or as a result of any other
facts that specifically relate to the business or activities in which Buyer or
its Affiliates is or proposes to be engaged other than the cable television
business.
3.5 Financial Statements.
(a) Falcon has delivered to Buyer true and complete copies of
the audited consolidated financial statements of Falcon (including the notes
thereto) for the year ended December 31, 1998 and the unaudited consolidated
financial statements of Falcon for the three months ended March 31, 1999
(collectively, the "Falcon Financial Statements").
(b) The Falcon Financial Statements: (1) have been prepared
from the books and records of the Falcon Companies to which they relate; (2)
have been prepared in accordance with GAAP consistently applied (except as
indicated in the notes thereto and except, in the case of the unaudited Falcon
Financial Statements, for the omission of footnotes and changes resulting from
customary and recurring year-end adjustments); and (3) subject to the addition
of footnotes and changes resulting from customary and recurring year-end
adjustments in the case of the unaudited Falcon Financial Statements which in
the aggregate are not expected to be material, present fairly in all material
respects the financial condition of the Falcon Companies to which they relate as
at December 31, 1998, or March 31, 1999, as the case may be, and the results of
operations for the period then ended.
3.6 Absence of Undisclosed Liabilities.
(a) None of the Falcon Companies has any indebtedness,
liability or obligation of a type required by GAAP to be reflected on a balance
sheet that is not reflected or reserved against
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in the balance sheet of the Falcon Companies included in the Falcon Financial
Statements, other than indebtedness, liabilities and obligations that were
incurred in the ordinary course of business after December 31, 1998, or that
would not, in the aggregate, reasonably be expected to be material in accordance
with GAAP.
(b) As of the date hereof, except as provided in or arising
pursuant to the loan or credit agreements, notes, bonds, indentures and other
agreements and instruments listed in Schedule 3.6, or under certain of the
property leases listed in Schedule 3.8, the Falcon Companies have no
Indebtedness.
3.7 Absence of Certain Changes. Between December 31, 1998 and the date
of this Agreement, except as disclosed in Schedule 3.7 and except for matters
occurring after the date hereof that are permitted by the provisions of this
Agreement or consented to by Buyer, no Falcon Company has:
(a) made any sale, assignment, lease or other transfer of
assets other than in the ordinary course of business;
(b) issued any note, bond or other debt security or created,
incurred, assumed or guaranteed any Indebtedness;
(c) made or promised any material increase in the salary or
other compensation payable or to become payable to any executive officer or
other employee of any Falcon Company other than in the ordinary course of
business or as contemplated under any employment or bonus arrangement currently
in effect;
(d) entered into any transaction, other than transactions
entered into in the ordinary course of business, which would be required to be
presented in the audited financial statements of the Falcon Companies and the
notes thereto prepared in conformity with GAAP, applied in a manner consistent
with the past practices of the Falcon Companies relating to the preparation of
audited financial statements of the Falcon Companies;
(e) amended or terminated any Material Contract, or any
material License, agreement or understanding to which any Falcon Company is a
party, except in the ordinary course of business;
(f) waived or released any material right or claim relating to
any Falcon Company or the Systems except in the ordinary course of business;
provided, however, that all material rights or claims related to any Falcon
Company or the Systems waived or released between December 31, 1998 and the date
of this Agreement are set forth on Schedule 3.7; or
(g) entered into an agreement to do any of the things
described in the preceding clauses (a) through (f).
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3.8 Franchises, Licenses, Material Contracts. Schedule 3.8 contains a
list of the Franchises (including the Franchising Authority which granted each
Franchise and the stated expiration date of each Franchise), the System to which
the Franchise applies, FCC Licenses and Material Contracts in effect on the date
hereof, each pending application for a Franchise and a list of any System or
portion thereof owned or operated by the Falcon Company which does not require a
Franchise authorizing the installation, construction, development, ownership or
operation of the same in such Franchise Area; which list is true, correct and
complete. Except as set forth on Schedule 3.8, the Falcon Companies possess all
Franchises and FCC Licenses necessary to operate their business as currently
conducted. Without material exception, except as set forth on Schedule 3.8, the
Falcon Companies possess all other Licenses necessary to operate their business
as currently conducted. Falcon has delivered or made available to Buyer true and
complete copies of all Franchises, FCC Licenses and Material Contracts as in
effect on the date hereof. Except as set forth on Schedule 3.8, the Franchises,
FCC Licenses and Material Contracts are in full force and effect (subject to
Franchises which have already expired and expiration at the end of their current
term, which expired Franchises are identified on Schedule 3.8, together with the
approximate number of Subscribers served in the Franchise Areas related to such
Franchises) and, subject to such expiration, are valid, binding and enforceable
upon the Falcon Company that is a party thereto and, to Falcon's Knowledge, the
other parties thereto in accordance with their terms, except to the extent such
enforceability may be affected by Enforceability Exceptions. Except as disclosed
in Schedule 3.8, the Falcon Companies are in compliance with the terms of the
Franchises, FCC Licenses and Material Contracts, except for such noncompliance
which in the aggregate is immaterial to the Falcon Companies, taken as a whole,
or would not prevent the operation of the business of the Falcon Companies as
currently conducted, and, as of the date of this Agreement, none of the Falcon
Companies has received any written notice from a Franchising Authority, a
consultant representing a Franchising Authority, any state cable regulatory
authority or the FCC to the effect that any of the Falcon Companies are not
currently in compliance with the terms of the Franchise granted by such
Franchising Authority or with any FCC License. Except as set forth in Schedule
3.8, a valid request for renewal has been timely filed under Section 626(a) of
the Cable Act with the proper Franchising Authority with respect to each
Franchise that has expired prior to, or will expire within thirty months after,
the date of this Agreement.
3.9 Title to and Condition of Real Property and Tangible Personal
Property. Schedule 3.9 will, when delivered to Buyer no later than 60 days after
the execution of this Agreement, list the street address for all Real Property
owned in fee by any of the Falcon Companies as of the date of this Agreement
(excluding easements, rights-of-way, and similar authorizations) (the "Fee
Properties"). A true and correct copy of (i) each deed pursuant to which any of
the Falcon Companies acquired any Fee Property, any survey and title insurance
policies issued to such Falcon Company, (ii) any leases under which any Falcon
Company is the lessor affecting such Fee Property or (iii) any other easements,
rights-of-way, covenants, conditions and restrictions, document or agreement
affecting title to such Fee Property (and, in the case of this clause (iii), in
the possession of the Falcon Companies) will have been delivered or made
available to Buyer within 60 days after the execution of this Agreement (or, in
the case of deeds, will be made available or delivered to
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Buyer prior to Closing). Schedule 3.9 will, when delivered to Buyer within 60
days after the execution of this Agreement, list the street address for the
material Real Property sites leased by any of the Falcon Companies, as lessee,
as of the date of this Agreement and will set forth the parties to the
applicable lease and any amendments, supplements or modifications thereto.
Except as disclosed in Schedule 3.9: (a) the Falcon Company that owns a fee
estate in a Real Property parcel has good and marketable title thereto; (b) the
Falcon Company that owns any material item of Tangible Personal Property has
good and valid title thereto; (c) the Falcon Company that leases any material
Real Property site has a valid leasehold interest therein (subject to expiration
of such lease in accordance with its terms), except to the extent that the
failure to have any such valid leasehold interests would not impair the
operation of the Systems in any material respect; and (d) the Falcon Company
that leases any material item of Tangible Personal Property has a valid
leasehold interest therein (subject to expiration of such lease in accordance
with its terms), in each case of (a), (b), (c) and (d) above, free and clear of
all Encumbrances, other than Permitted Encumbrances and subject to the Legal
Restrictions. Except as disclosed on Schedule 3.9, the Falcon Companies own,
lease or otherwise have rights to use all real property (excluding easements,
rights-of-way and similar authorizations) and tangible personal property
necessary to operate the Systems as presently operated by the Falcon Companies
in all material respects. Notwithstanding the express language of this Section
3.9 or as may otherwise be provided in this Agreement, no representation or
warranty is being made as to title to the internal wiring, house drops and
unrecorded dwelling-unit easements, rights of entry or rights-of-way held or
used by the Falcon Companies.
3.10 Intangibles. Schedule 3.10 contains a true and correct description
and list of the Intangibles (exclusive of those required to be listed in
Schedule 3.8), that are owned or leased by any of the Falcon Companies and that
are necessary for the conduct of the business or operations of the Systems as
currently conducted. Except as to potential copyright liability arising from the
performance, exhibition or carriage of any music on the Systems or as disclosed
in Schedule 3.10, no Falcon Company is infringing upon any trademarks, trade
names, copyrights or similar intellectual property rights of others.
3.11 Information Regarding the Systems.
(a) Subscribers. Schedule 3.11 sets forth the approximate
number of Equivalent Subscribers as of the date indicated therein (including the
approximate number of Equivalent Subscribers served by each headend) and sets
forth a true, complete and correct statement of all Subscribers' rates, tariffs
and other charges for cable television and other services provided by any Falcon
Company, and a list of all free, discount or other promotional service
obligations (other than those obligations which are regularly offered or arise
in the ordinary course of the business and operations of the Falcon Companies
and free accounts offered to lessors under Real Property leases) of any Falcon
Company, with respect to the Systems as of the date of this Agreement. The
Falcon Companies' billing records are prepared by Cable Services Group, Inc. in
accordance with its customary practices.
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(b) Certain Systems Information. Schedule 3.11 sets forth the
approximate number of plant miles (aerial and underground) for each headend, the
approximate bandwidth capability of each headend, the channel lineup for each
headend, and the monthly rates charged for each class of service offered by each
headend, the stations and signals carried by each headend and the channel
position of each such signal and station, which information is true and correct
in all material respects, in each case as of the applicable dates specified
therein and subject to any qualifications set forth therein. Except as described
in Schedule 3.11, each of the respective channel lineups set forth in Schedule
3.11 is capable of being viewed in its entirety by each Subscriber in the
applicable System (subject to ordinary course service interruptions).
(c) Franchise and FCC Matters. Except as set forth in Schedule
3.11, all reports or other documents, payments or submissions required to be
filed by any of the Falcon Companies with any of the Franchising Authorities or
the FCC have been duly filed and were correct in all material respects when
filed. Except as set forth in Schedule 3.11, the Falcon Companies are permitted
under all applicable Franchises and FCC Regulations to distribute the television
broadcast signals distributed by the Systems and to utilize all carrier
frequencies generated by the operations of the Systems, and are licensed to
operate in all material respects all the facilities of the Systems required by
Legal Requirements to be licensed.
(d) Request for Signal Carriage. Except for nonduplication and
blackout notices received in the ordinary course of business, none of the Falcon
Companies has received any FCC order requiring any System to carry a television
broadcast signal or to terminate carriage of a television broadcast signal with
which it has not complied, and, except as disclosed in Schedule 3.11, the Falcon
Companies have complied in all material respects with all written and bona fide
requests or demands received from television broadcast stations to carry or to
terminate carriage of a television broadcast signal on a System.
(e) Rate Regulatory Matters. Schedule 3.11 sets forth a list
of all Governmental Authorities that are certified to regulate rates of the
Systems pursuant to the Cable Act and FCC Regulations as of the date of this
Agreement. Except as disclosed in Schedule 3.11, no pending rate complaints have
been filed with the FCC against the Systems. Except as disclosed in Schedule
3.11, as of the date of this Agreement, none of the Falcon Companies has
received any written notice and, to Falcon's Knowledge, any notice (other than
written notice) from any Governmental Authority that it has any obligation or
liability to refund to subscribers of the Systems any portion of the revenue
received by such Falcon Company from subscribers of the Systems (excluding
revenue with respect to deposits for converters, encoders, decoders and related
equipment and other prepaid items) that has not been resolved.
(f) Insurance. The Systems and Assets are insured against
claims, loss or damage in amounts generally customary in the cable television
industry and consistent with the Falcon Companies' past practices. All such
policies are with financially sound insurers and are each outstanding and in
full force and effect on the date hereof. Except as set forth on Schedule 3.11,
as of the date hereof, within the past two (2) years no insurance carrier has
denied any claim for
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insurance made by any Falcon Company in respect of any of the Systems and Assets
or refused to renew any policy issued in respect of any of the Systems and
Assets.
(g) Right of First Refusal. No Person (excluding Governmental
Authorities) has any right to acquire any interest in any of the Systems
(including any right of first refusal or similar right). Except as will be
disclosed in Schedule 3.11 (which will be delivered to Buyer within 30 days
after the execution of this Agreement), no Governmental Authority has any right
to acquire any interest in any of the Systems (including any right of first
refusal or similar right), other than rights of condemnation or eminent domain
afforded by law or upon the termination of or default under any Franchise.
3.12 Taxes.
(a) Without material exception, the Falcon Companies have
filed or have caused to be filed in a timely manner all required Tax Returns
with the appropriate Governmental Authorities in all jurisdictions in which such
Tax Returns are required to be filed by the Falcon Companies (except Tax Returns
for which the filing date has not expired or has been extended and such
extension period has not expired). All Taxes shown on any Tax Returns required
to be filed by the Falcon Companies (other than sales, use and property Taxes in
an aggregate amount not to exceed $350,000) have been properly accrued or paid
to the extent such Taxes have become due and payable. Schedule 3.12 lists all
jurisdictions where material Tax Returns are required to be filed with respect
to the Falcon Companies. Falcon has delivered or made available to Buyer true,
correct and complete copies of such Tax Returns (in the form filed) for fiscal
years ending after December 31, 1992. The Falcon Financial Statements reflect an
adequate reserve in accordance with GAAP (without regard to any amounts reserved
for deferred taxes) for all material unpaid Taxes payable by the Falcon
Companies for all Tax periods and portions thereof through the date of such
Financial Statements. All material unpaid Taxes of the Falcon Companies (other
than (i) any Taxes referred to in Section 6.10(d) and (ii) Taxes attributable to
Buyer's actions on the Closing Date that are not in the ordinary course of
business) for all Pre-Closing Tax Periods shall be included as Current
Liabilities in the computation of Closing Net Liabilities to the extent that
such unpaid Taxes are not reflected on the Falcon Financial Statements. There
are no material Tax liens on any assets of the Falcon Companies, other than
liens for current Taxes not yet due and payable and liens for Taxes that are
being contested in good faith by appropriate proceedings and are disclosed on
Schedule 3.12.
(b) Except as disclosed in Schedule 3.12,
(1) none of the Falcon Companies has executed any
waiver or extension of any statute of limitations on the assessment or
collection of any Tax or with respect to any liability arising therefrom;
(2) none of the federal, state or local income Tax
Returns filed by the Falcon Companies with respect to fiscal years ending after
December 31, 1992 have been audited by any taxing authority;
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(3) neither the Internal Revenue Service nor any
other taxing authority has asserted, or to Falcon's Knowledge, threatened to
assert any deficiency or claim for additional Taxes (other than sales, use and
property Taxes in an aggregate amount not to exceed $350,000) against, or any
adjustment of Taxes (other than sales, use and property Taxes in an aggregate
amount not to exceed $350,000) relating to, any of the Falcon Companies and, to
Falcon's Knowledge, no basis exists for any such deficiency, claim or
adjustment;
(4) there are no proposed reassessments of any
property owned by any of the Falcon Companies that would affect the Taxes of any
of the Falcon Companies;
(5) none of the Falcon Companies has any liability
for the Taxes of any person (other than any Falcon Company) pursuant to Section
1.1502-6 of the Treasury Regulations promulgated under the Code or comparable
provisions of any taxing authority in respect of a consolidated, combined or
unitary Tax Return;
(6) none of the Falcon Companies was included or is
includible in any consolidated, combined or unitary Tax Return with any entity;
(7) no consent under Section 341(f) of the Code has
been filed with respect to any of the Falcon Companies;
(8) each of the Falcon Companies has had since its
inception and will continue to have through the Closing Date the federal tax
status (i.e. partnership or C corporation) such entity reported on its 1997
federal Tax Returns except as results from any actions taken pursuant to this
Agreement;
(9) none of the Falcon Companies has been at any time
a member of any partnership, joint venture or other arrangement or contract
which is treated as a partnership for federal, state, local or foreign tax
purposes (a "Tax Partnership") or the holder of a beneficial interest in any
trust for any period for which the statute of limitations for any Tax has not
expired, except for a Tax Partnership which is a Falcon Company;
(10) there are no tax sharing agreements or similar
arrangements with respect to or involving any of the Falcon Companies;
(11) none of the Falcon Companies has any (a) income
reportable for a period ending after the Closing Date but attributable to a
transaction (e.g., an installment sale) occurring in or a change in accounting
method made for a period ending on or prior to the Closing Date which resulted
in a deferred reporting of income from such transaction or from such change in
accounting method (other than a deferred intercompany transaction), or (b)
deferred gain or loss arising out of any deferred intercompany transaction;
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(12) each Falcon Company that is a Tax Partnership
has a valid section 754 election in effect; and
(13) None of the Falcon Companies has entered into
any compensatory agreements with respect to the performance of services which
payment thereunder would result in a non-deductible expense to any Falcon
Company pursuant to Section 280G of the Code or an excise Tax to the recipient
of such payment pursuant to Section 4999 of the Code.
3.13 Employee Plans.
(a) Employee Plans. Schedule 3.13 contains a list of all
Employee Plans and material Compensation Arrangements. The Falcon Companies have
delivered or made available to Buyer (or, in accordance with Section 6.1(b),
will deliver or make available to Buyer following execution of this Agreement)
true, complete and correct copies of each Employee Plan and each Compensation
Arrangement, if any, together with any other material documents relating to such
Employee Plan or Compensation Arrangement, including, without limitation, any
governmental filings, all annual reports together with any schedules or
attachments thereto, each auditor's report, if any, and all other material
documents relating to such Employee Plan or Compensation Arrangement. Except as
disclosed in Schedule 3.13, none of the Falcon Companies or any of their ERISA
Affiliates is or has been required to contribute to any "multiemployer plan," as
defined in ERISA Section 3(37), nor has any Falcon Company or any such ERISA
Affiliate experienced a complete or partial withdrawal, within the meaning of
ERISA Section 4203 or 4205, from such a "multiemployer plan." Except as
disclosed on Schedule 3.13 or as required under Code Section 4980B or ERISA
Sections 601-609, no Employee Plan provides health, life insurance or medical
coverage to former employees of the Falcon Companies.
(b) Qualified Plans. Except as disclosed in Schedule 3.13,
with respect to each Employee Plan, and after taking into consideration the
effect of the payments to be made with respect to the Employee Plans: (1) each
such Employee Plan that is intended to be tax-qualified is the subject of a
favorable determination letter, and no such determination letter has been
revoked, and to the best of Falcon's Knowledge, no revocation has been
threatened, no event has occurred and no circumstances exist that would
adversely affect the tax-qualification of such Employee Plan; (2) no Employee
Plan is , or within the past six years has been, subject to Section 302 or Title
IV of ERISA or Section 412 of the Code; (3) no non-exempt prohibited
transaction, within the definition of Section 4975 of the Code or Title 1, Part
4 of ERISA, has occurred which would subject the Falcon Companies to any
material liability; (4) there is no termination or partial termination, or
requirement to provide security with respect to any Employee Plan; (5) the fair
market value of the assets of any Employee Plan would equal or exceed the value
of all liabilities and obligations of such Employee Plan if such plan were to
terminate on the Closing Date; and (6) the transactions contemplated by this
Agreement will not result in liability under ERISA to any Falcon Companies or
Buyer, or any of their respective ERISA Affiliates, or any entitlement to any
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any Employee Plan of any Falcon Company for any employee of any
Falcon Company.
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(c) Plan Administration. Each Employee Plan and each
Compensation Arrangement has been operated and administered in all material
respect in accordance with its terms and all applicable laws, including ERISA
and the Code. No Falcon Company has received notice of any investigations by any
governmental agency or other claims (except claims for benefits payable in the
normal operation of any Employee Plan), suits or proceedings against or
involving any Employee Plan or asserting any rights to or claims for benefits
under any Employee Plan that could give rise to any material liability, and
there are not any facts that could give rise to any material liability in the
event of such investigation, claim, suit or proceeding.
(d) Welfare Plan Funding. The list of Employee Plans in
Schedule 3.13 discloses whether each Plan that is an "employee welfare benefit
plan" as defined in section 3(1) of ERISA is (i) unfunded, (ii) funded through a
"welfare benefit fund," as such term is defined in section 419(e) of the Code,
or other funding mechanism or (iii) insured.
(e) Employee Classification. Each of the Falcon Companies and
their ERISA Affiliates have properly classified individuals providing services
to any Falcon Company or any ERISA Affiliates as employees or non-employees
except to the extent that a misclassification would not be material.
(f) Labor Unions. As of the date of this Agreement, other than
as disclosed in Schedule 3.13, none of the Falcon Companies is party to or bound
by any collective bargaining agreement. As of the date of this Agreement, other
than as disclosed in Schedule 3.13, to Falcon's Knowledge, (1) none of the
employees of the Falcon Companies is presently a member of any collective
bargaining unit related to his or her employment and (2) no collective
bargaining unit has filed a petition for representation of any of the employees
of the Falcon Companies.
(g) Employment Contracts. The Falcon Companies do not have any
employment agreements with any employee of the Falcon Companies.
3.14 Environmental Laws. Except as disclosed in Schedule 3.14: (a) the
Falcon Companies' operations with respect to the Systems comply in all material
respects with all applicable Environmental Laws as in effect on the Closing
Date; and (b) none of the Falcon Companies has used the Real Property for the
manufacture, transportation, treatment, storage or disposal of Hazardous
Substances except for gasoline and diesel fuel and such use of Hazardous
Substances (in cleaning fluids, solvents and other similar substances) customary
in the construction, maintenance and operation of a cable television system and
in amounts or under circumstances that would not reasonably be expected to give
rise to material liability for remediation. Except as disclosed in Schedule
3.14, as of the date of this Agreement, no Environmental Claim has been filed or
issued against the Falcon Companies and Falcon does not have Knowledge of any
matter that would reasonably be expected to give rise to material liability for
remediation. To Falcon's Knowledge, the Falcon Companies' operations with
respect to the Systems have complied with all
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applicable Environmental Laws, except such non-compliance that would not
reasonably be expected to have a Material Adverse Effect.
3.15 Claims and Litigation. Except as disclosed in Schedule 3.15, as of
the date of this Agreement, there is no claim, legal action, arbitration or
other legal, administrative or tax proceeding, order, decree, or judgment or
complaint or, to Falcon's Knowledge, investigation, dispute or controversy
reasonably likely to result in, or, to Falcon's Knowledge, any other reasonable
basis for, litigation against or relating to the Falcon Companies (or any of
their respective Affiliates, directors, officers, employees or agents related to
the business or operations of any Falcon Companies) or the business or
operations of any of the Systems (other than FCC and other proceedings generally
affecting the cable television industry and not specific to the Falcon Companies
and other than rate complaints or certifications filed by customers or
Franchising Authorities), other than routine collection matters or ordinary
course matters expected to be covered by insurance policies maintained by the
Falcon Companies, subject to applicable deductibles.
3.16 Compliance With Laws. Except as disclosed in Schedule 3.16 and
except for any such noncompliance as has been remedied, each of the Falcon
Companies, the Systems and the Assets are in compliance in all material respects
with all Legal Requirements (including, without limitation, (i) the Code, ERISA,
the National Labor Relations Act, the Cable Act, FCC Regulations, and the
Copyright Act and (ii) the FCC's Cumulative Leakage Index). Falcon has delivered
or made available to Buyer complete and correct copies of all FCC forms relating
to rate regulation filed by the Falcon Companies with any Governmental Authority
with respect to the Systems and copies of all correspondence from or to the
Falcon Companies with any Governmental Authority relating to rate regulation
generally and any other Rate Regulatory Matter or specific rates charged to
subscribers of the Systems, and any other documentation prepared by the Falcon
Companies supporting an exemption from the rate regulation provisions of the
Cable Act claimed by any Falcon Company with respect to any of the Systems.
Falcon has made available to Buyer, to the extent in the possession of the
Falcon Companies, copies of all FCC forms relating to rate regulation filed with
any Governmental Authority with respect to the Systems by parties other than the
Falcon Companies and copies of all correspondence from or to parties other than
the Falcon Companies with any Governmental Authority relating to rate regulation
generally and any other Rate Regulatory Matter or specific rates charged to
subscribers of the Systems, and any other documentation supporting any exemption
from the rate regulation provisions of the Cable Act claimed by the Systems by
parties other than the Falcon Companies.
3.17 Transactions with Affiliates. Except to the extent disclosed in
the Falcon Financial Statements and the notes thereto or Schedule 3.17, none of
the Falcon Companies is involved in any business arrangement or business
relationship or is a party to any agreement, contract, commitment or transaction
with any Affiliate of any of the Falcon Companies (other than another Falcon
Company), and no Affiliate of any of the Falcon Companies (other than another
Falcon Company) owns any property or right, tangible or intangible, that is used
in the business of the Falcon Companies (other than in its capacity as a direct
or indirect equity or debt holder of the Falcon Companies).
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3.18 Certain Fees. No finder, broker, agent, financial advisor or other
intermediary has acted on behalf of any Falcon Company in connection with this
Agreement, any Transaction Document or the transactions contemplated hereby or
thereby, or is entitled to any payment in connection herewith or therewith
which, in either case, would result in any obligation or liability to Buyer or
any Falcon Company.
3.19 Inventory. Each Falcon Company has inventory, spare parts and
materials relating to the Systems of the type and nature and maintained at a
level consistent with past practice (the "Inventory"), and such Inventory will
be sufficient to operate their respective businesses in the ordinary course for
at least thirty (30) days after the Closing.
3.20 Overbuilds; Competition. Except as set forth in Schedule 3.20, as
of the date of this Agreement, (i) no construction programs have been undertaken
by any Governmental Authority or other Person or other active cable television,
multichannel multipoint distribution system (as defined by the rules and
regulations of FCC), or multipoint distribution system provider in any of the
Franchise Areas and, to Falcon's Knowledge, without investigation but upon
inquiry of its regional managers and as should reasonably be known to a
reasonable cable television operator, no such construction programs are proposed
or threatened to be undertaken; (ii) no franchise or other applications or
requests of any Person to provide cable television service in the Franchise
Areas have been filed more than two (2) weeks prior to the date hereof or, to
Falcon's Knowledge (subject to the same limitation referred to in clause (i)
above), have been filed less than two (2) weeks prior to the date hereof or are
pending, threatened, or proposed; (iii) there is no other cable television or
other video services provider within any of the Franchise Areas which is
providing or, to Falcon's Knowledge (subject to the same limitation referred to
in clause (i) above), has applied for a franchise to provide cable television
services or other video services to any of the Franchise Areas in competition
with any of the Falcon Companies; and (iv) none of the Falcon Companies has
received any written notice that any other provider of cable television services
or other existing or prospective video service provider intends to provide such
cable television or other video service in competition with any Falcon Company.
Notwithstanding the foregoing, it is understood that Falcon makes no
representation or warranty in this Section 3.20 or this Agreement regarding
competition or potential competition by satellite master antenna television
systems or direct broadcast satellite systems. Except as set forth in Schedule
3.20, no Falcon Company is, nor is any Affiliate of any Falcon Company, a party
to any agreement restricting the ability of any Falcon Company or Buyer to
operate cable television systems or any other video programming distribution
business within any of the Franchise Areas.
3.21 Disconnections. Schedule 3.21 sets forth (i) the approximate
aggregate number of Subscribers which the Falcon Companies have disconnected
from service during each of the months specified thereon and (ii) a general
description of the Falcon Companies' policies relating to the disconnection of
Subscribers from service.
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3.22 Year 2000. Each Falcon Company has (i) initiated a review and
assessment of all areas within its business that would reasonably be expected to
be adversely affected by "Year 2000 Matters" (that is, the risk that computer
applications used by such Falcon Company may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan (the "Year 2000 Plan") for
addressing Year 2000 Matters on a timely basis, and (iii) to date, implemented
the Year 2000 Plan.
3.23 Budgets. Schedule 3.23 sets forth true, correct and complete
copies of the Falcon Companies' capital expenditure budgets for the period from
June 1, 1999 to December 31, 1999 (the "Capital Expenditure Budget"); it being
understood that the obligations of the parties with respect to capital
expenditures is subject to Section 6.1(b)(7).
3.24 SEC Reports. The statements made by Falcon in the public documents
previously filed by it with the SEC were true and correct in all material
respects as of the date made in light of the circumstances in which they were
made.
3.25 Foreign Corrupt Practices Act. No Falcon Company has, directly or
indirectly, used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds,
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended,
or made any bribe, rebate, payoff, influence payment, kickback or other similar
unlawful payment.
3.26 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances which constitute or cause a breach of
a representation or warranty of Falcon (as modified by Falcon's Disclosure
Schedules) on the date such representation or warranty is made shall be deemed
not to constitute a breach of such representation or warranty if such event or
circumstance is cured on or prior to the Closing Date or the earlier termination
of this Agreement.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to any provisions of this Agreement limiting, qualifying or
excluding any of the representations or warranties made herein, and to the
disclosures set forth in Falcon's Disclosure Schedules, as such Schedules are
referenced herein, each Seller severally represents and warrants to Buyer (with
respect to such Seller and not with respect to any other Seller, and only FHGLP
makes the representations and warranties in Sections 4.4(b) and 4.7) as set
forth in this Section 4.
4.1 Organization. Such Seller is a corporation, partnership or limited
liability company (as the case may be) duly organized, validly existing and in
good standing under the laws of the state of its organization or formation.
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4.2 Authorization and Binding Obligation. Such Seller has the requisite
partnership, limited liability company or corporate (as the case may be) power
and authority to execute, deliver and perform this Agreement and the other
Transaction Documents to which it is a party according to their respective
terms. The execution, delivery, and performance by such Seller of this Agreement
and the other Transaction Documents to which such Seller is a party have been
duly authorized by all necessary action on the part of such Seller. This
Agreement and the other Transaction Documents to which such Seller is a party
have been duly executed and delivered by such Seller (or, in the case of
Transaction Documents to be executed and delivered at Closing, when executed and
delivered will be duly executed and delivered) and constitute (or, in the case
of Transaction Documents to be executed and delivered at Closing, when executed
and delivered will constitute) the legal, valid, and binding obligation of such
Seller enforceable against such Seller in accordance with their terms, except as
the enforceability of this Agreement and such other Transaction Documents may be
limited by Enforceability Exceptions.
4.3 Absence of Conflicting Agreements; Consents. Except for the
expiration or termination of any applicable waiting period under the HSR Act, or
as set forth in Schedule 4.3 or as would not impair the ability of such Seller
to perform its obligations under this Agreement and the Transaction Documents to
which it is a party, the execution, delivery and performance by Seller of this
Agreement and the other Transaction Documents to which it is a party (with or
without the giving of notice, the lapse of time, or both): (a) do not require
any consent of, declaration to, notice to, or filing with any Governmental
Authority or any other Person under any material agreement or instrument to
which such Seller is bound; (b) will not conflict with any provision of the
Organizational Documents of such Seller as currently in effect; (c) assuming
receipt of all Consents, will not conflict in any material way with, result in
any material breach of, or constitute a default in any material respect under
any Legal Requirement to which such Seller is bound; (d) assuming receipt of all
Consents, will not conflict with, constitute grounds for termination of, result
in a breach of, constitute a default under, or accelerate or permit the
acceleration of any performance required by the terms of any material agreement
or instrument to which such Seller is bound; and (e) assuming receipt of all
Consents, will not result in the creation of any Encumbrance, but subject to the
Legal Restrictions, upon the Purchased Interests held by such Seller.
Notwithstanding the foregoing, no Seller makes any representation or warranty
regarding any of the foregoing that may result from the specific legal or
regulatory status of Buyer or its Affiliates or as a result of any other facts
that specifically relate to the business or activities in which any of Buyer or
its Affiliates is or proposes to be engaged other than the cable television
business.
4.4 Title to Purchased Interests.
(a) Such Seller holds all legal and beneficial rights to the
Purchased Interests held by such Seller, free and clear of all Encumbrances and
options to purchase, other than the pledges disclosed in Schedule 4.4 and
subject to the Legal Restrictions, and upon the Closing Buyer will acquire legal
and beneficial ownership of such Purchased Interests, free and clear of all
Encumbrances and options to purchase, other than the pledges disclosed in
Schedule 4.4 and subject to the Legal Restrictions and any Encumbrances created
by Buyer.
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(b) Except as disclosed in Schedule 4.4, Enstar does not,
directly or indirectly, own, of record or beneficially, any outstanding
securities or other interest in any Person or have the right or obligation to
acquire, any Equity Interests, outstanding securities or other interest in any
Person. Except as set forth in Schedule 4.4, Enstar owns such Equity Interests
free and clear of all Encumbrances, but subject to the Legal Restrictions.
4.5 Claims and Litigation. Except as disclosed in Schedule 4.5, as of
the date of this Agreement, there is no claim, legal action, arbitration or
other legal, administrative or tax proceeding pending or threatened in writing
or, to such Seller's Knowledge, threatened (other than in writing), nor is there
outstanding any order, decree or judgment against such Seller that, if adversely
determined, would materially impair such Seller's ability to perform its
obligations under this Agreement.
4.6 Certain Fees. Except as disclosed in Schedule 4.6, no finder,
broker, agent, financial advisor or other intermediary has acted on behalf of
such Seller in connection with this Agreement or the transactions contemplated
by this Agreement, or is entitled to any payment in connection herewith or
therewith which, in either case, would result in any obligation or liability to
Buyer or any Falcon Company.
4.7 Investment Purpose; Investment Company. FHGLP is acquiring the
Equity Consideration for investment for its own account and not with a view to
the sale or distribution of any part thereof within the meaning of the
Securities Act (other than tranfers by FHGLP to its partners). FHGLP (either
alone or together with its advisors) has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Equity Consideration and is capable of bearing
the economic risks of such investment. FHGLP is an informed and sophisticated
purchaser, and has engaged expert advisors, experienced in the evaluation and
purchase of equity interests such as contemplated hereunder. FHGLP has
undertaken such investigation and has been provided with and has evaluated such
documents and information as it has deemed necessary to enable it to make an
informed and intelligent decision with respect to the execution, delivery and
performance of this Agreement. FHGLP acknowledges that Buyer has given FHGLP
complete and open access to the key employees, documents and facilities of Buyer
and its Subsidiaries. FHGLP will undertake prior to Closing such further
investigation and request such additional documents and information as it deems
necessary. FHGLP agrees to accept the Equity Consideration based upon its own
inspection, examination and determination with respect thereto as to all
matters, and without reliance upon any express or implied representations or
warranties of any nature made by or on behalf of or imputed to Buyer, except as
expressly set forth in this Agreement. FHGLP will not be an "investment company"
as defined in the Investment Company Act of 1940, as amended.
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4.8 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances which constitute or cause a breach of
a representation or warranty of such Seller (as modified by Falcon's Disclosure
Schedules) on the date such representation or warranty is made shall be deemed
not to constitute a breach of such representation or warranty if such event or
circumstance is cured on or prior to the Closing Date or the earlier termination
of this Agreement.
SECTION 5: REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Falcon and Sellers as set forth in
this Section 5.
5.1 Organization. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Buyer has
the requisite corporate power and authority to own, lease and operate its
properties, to carry on its business in the places where such properties are now
owned, leased or operated and such business is now conducted and to execute,
deliver and perform this Agreement and the other Transaction Documents to which
Buyer is a party according to their respective terms. Buyer is duly qualified
and in good standing as a foreign corporation in each jurisdiction in which such
qualification is required. Charter LLC will be a limited liability company
formed under the laws of the State of Delaware. When formed Charter LLC will
have the requisite limited liability company power and authority to perform this
Agreement and the other Transaction Documents to which it is a party according
to their respective terms.
5.2 Authorization and Binding Obligation. The execution, delivery and
performance by Buyer of this Agreement and the other Transaction Documents to
which it is a party have been duly authorized by all necessary corporate,
shareholder or other action on the part of Buyer. This Agreement and the other
Transaction Documents to which Buyer is a party have been duly executed and
delivered by Buyer (or, in the case of Transaction Documents to be executed and
delivered at Closing, when executed and delivered will be duly executed and
delivered) and constitute (or, in the case of Transaction Documents to be
executed and delivered at Closing, when executed and delivered will constitute)
the legal, valid, and binding obligation of Buyer, enforceable against Buyer in
accordance with their terms, except as the enforceability of this Agreement and
such other Transaction Documents may be limited by Enforceability Exceptions.
When executed and delivered by Charter LLC, the Transaction Documents to be
executed and delivered by Charter LLC will have been duly authorized by all
necessary limited liability company action on the part of Charter LLC and will
be duly executed and delivered and will constitute the legal, valid, and binding
obligation of Charter LLC, enforceable against Charter LLC in accordance with
their terms, except as the enforceability of such Transaction Documents may be
limited by Enforceability Exceptions.
5.3 Absence of Conflicting Agreements; Consents. Except for the
expiration or termination of any applicable waiting period under the HSR Act,
and the filing by Buyer with the SEC of any reports required to be filed in
connection with the consummation of the transactions contemplated hereby, the
execution, delivery and performance by Buyer of this Agreement and the other
Transaction Documents to which Buyer is a party, and the execution, delivery and
performance by Charter LLC of the Transaction Documents to which Charter LLC
will be a party (with or
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without the giving of notice, the lapse of time, or both): (a) do not require
any Consent, declaration to, or filing with any Governmental Authority or any
other Person that has not been obtained; (b) will not conflict with any
provision of the Organizational Documents of Buyer as currently in effect or the
Organizational Documents of Charter LLC as then in effect; (c) will not conflict
with, result in a material breach of, or constitute a default in any material
respect under any Legal Requirement to which Buyer is bound or Charter LLC will
be bound; and (d) will not conflict with, constitute grounds for termination of,
result in a breach of, constitute a default under, or accelerate or permit the
acceleration of any performance required by the terms of any material agreement
or instrument to which Buyer is a party or bound or Charter LLC will be a party
or bound. Notwithstanding the foregoing, Buyer makes no representation or
warranty regarding any of the foregoing that may result from the specific legal
or regulatory status of any Falcon Company or any Seller or as a result of any
other facts that specifically relate to the business or activities in which any
Falcon Company or Seller is or proposes to be engaged other than the cable
television business.
5.4 Claims and Litigation. Except as disclosed in Schedule 5.4, as of
the date of this Agreement, there is no claim, legal action, arbitration,
governmental investigation or other legal, administrative or tax proceeding
pending, or threatened in writing or, to Buyer's Knowledge, threatened (other
than in writing), nor is there outstanding any order, decree or judgment against
Buyer that, if adversely determined, would materially impair Buyer's or Charter
LLC's ability to perform its obligations under this Agreement.
5.5 Investment Purpose; Investment Company. Buyer is acquiring the
Purchased Interests and Charter LLC is acquiring the Contributed Interest for
investment for its own account and not with a view to the sale or distribution
of any part thereof within the meaning of the Securities Act. Buyer (either
alone or together with its advisors) has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Purchased Interests and Charter LLC's investment
in the Contributed Interest and is capable of bearing the economic risks of such
investment. Buyer is an informed and sophisticated purchaser, and has engaged
expert advisors, experienced in the evaluation and purchase of companies such as
the Falcon Companies as contemplated hereunder. Buyer has undertaken such
investigation and has been provided with and has evaluated such documents and
information as it has deemed necessary to enable it to make an informed and
intelligent decision with respect to the execution, delivery and performance of
this Agreement. Buyer acknowledges that Falcon and Sellers have given Buyer
complete and open access to the key employees, documents and facilities of the
Falcon Companies. Buyer will undertake prior to Closing such further
investigation and request such additional documents and information as it deems
necessary. Buyer agrees for itself and Charter LLC to accept the Purchased
Interests and the Contributed Interest and the Systems in the condition they are
in on the Closing Date based upon its own inspection, examination and
determination with respect thereto as to all matters, and without reliance upon
any express or implied representations or warranties of any nature made by or on
behalf of or imputed to Falcon or Sellers, except as expressly set forth in this
Agreement. Buyer is not and Charter LLC will not be an "investment company" as
defined in the Investment Company Act of 1940, as amended.
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5.6 Ownership of Buyer and its Subsidiaries. The ownership chart of
Buyer and its Subsidiaries included as Schedule 5.6 is (or, with respect to
CCI's ownership of Charter Holdings, will be within five days after execution of
this Agreement) true and correct in all material respects. Without limiting the
generality of the foregoing, Buyer is or will be within five days after
execution of this Agreement, and as of the Closing either Buyer or Charter LLC
will be, the record and beneficial owner of all of the issued and outstanding
Equity Interests of Charter Holdings, and as of the formation of Charter LLC and
as of the Closing, Buyer will be the record and beneficial owner of all of the
issued and outstanding Equity Interests of Charter LLC.
5.7 Certain Fees. No finder, broker, agent, financial advisor or other
intermediary has acted on behalf of Buyer in connection with this Agreement or
the transactions contemplated by this Agreement, or is entitled to any payment
in connection herewith or therewith which, in either case, would result in any
obligation or liability to Falcon or Sellers.
5.8 Availability of Funds. Buyer has, as of the date hereof, the
ability to obtain, and will have, as of the Closing Date, sufficient cash, lines
of credit or other immediately available funds to enable it to consummate the
transactions contemplated hereby.
5.9 Financial Statements.
(a) Buyer has delivered to Falcon true and complete copies of
the audited consolidated financial statements of Charter Holdings (including the
notes thereto) for the year ended December 31, 1998 (by inclusion of such
financial statements in the Form S-4 referred to in Section 5.10) and the
unaudited consolidated financial statements of Charter Holdings for the three
months ended March 31, 1999, in each case that are described on Schedule 5.9
(collectively, the "Charter Financial Statements").
(b) Except as disclosed in Schedule 5.9, the Charter Financial
Statements: (1) have been prepared from the books and records of the Buyer and
its Subsidiaries to which they relate; (2) have been prepared in accordance with
GAAP consistently applied (except as indicated in the notes thereto and except,
in the case of the unaudited Charter Financial Statements, for the omission of
footnotes and changes resulting from customary and recurring year-end
adjustments); and (3) subject to the addition of footnotes and changes resulting
from customary and recurring year-end adjustments in the case of the unaudited
Charter Financial Statements which in the aggregate are not expected to be
material, present fairly in all material respects the financial condition of
Buyer and its Subsidiaries to which they relate as at December 31, 1998, or
March 31, 1999, as the case may be, and the results of operations for the period
then ended.
5.10 Private Offering Memorandum and S-4. Buyer has delivered to Falcon
true and complete copies of each of the Offering Circular dated March 12, 1999
relating to the offering by Charter Holdings and Charter Communications Holdings
Capital Corporation of 8.25% Senior Notes due 2007, 8.625% Senior Notes due
2009, and 9.920% Senior Discount Notes due 2011 and the Form S-4 dated May 12,
1999 relating to an exchange offer in respect of such securities. The
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statements made by Charter Holdings in each of the Offering Circular and Form
S-4 referred to in the previous sentence were true and correct in all material
respects as of the date made in light of the circumstances in which they were
made.
5.11 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances which constitute or cause a breach of
a representation or warranty of Buyer on the date such representation or
warranty is made shall be deemed not to constitute a breach of such
representation or warranty if such event or circumstance is cured on or prior to
the Closing Date or the earlier termination of this Agreement.
SECTION 6: SPECIAL COVENANTS AND AGREEMENTS
6.1 Operation of Business Prior to Closing. Except as required by
applicable Legal Requirements or as contemplated by Schedule 6.1 or Section
6.1(c), and subject to Falcon's obligation to comply with the terms and
conditions hereof and the operation of the Falcon Companies' business in the
ordinary course, and except as consented to by Buyer, between the date hereof
and the Closing Date, Falcon will cause the Falcon Companies to operate the
Systems in the ordinary course of business (subject to, and except as modified
by, compliance with the following negative and affirmative covenants) and abide
by the following negative and affirmative covenants:
(a) Negative Covenants. The Falcon Companies shall not do any
of the following between the date hereof and the Closing Date:
(1) Franchises. Fail to timely file a valid request
for renewal in accordance with Section 626(a) of the Cable Act, or fail to use
commercially reasonable efforts to renew on substantially the same or on other
commercially reasonable terms any Franchise that has expired or will expire
after the date hereof and prior to the date which is thirty (30) months after
the Closing Date in accordance with its terms (it being understood that the
Falcon Companies shall not be required to take any steps necessary to obtain
renewals of any Franchise earlier than such steps are required to be taken by
applicable FCC Regulations, and obtaining renewals of any Franchise shall not be
a condition precedent to Buyer's or Falcon's obligations hereunder).
(2) Contracts. Modify or amend in any material
respect, except in the ordinary course of business or in connection with
payments to employees as provided in Section 6.9(a), any Contract that shall
survive the Closing; or enter into any new Contracts that will be binding on the
Falcon Companies following the Closing except: (A) agreements for the provision
of services to customers; (B) the renewal or extension of any existing Contract
on its existing terms, in all material respects, in the ordinary course of
business; (C) with respect to utility pole attachment agreements, Contracts with
terms as customarily required by the utility whose poles are utilized; (D)
Contracts in connection with capital expenditures made in accordance with
Section 6.1(b)(7); or (E) any other contracts or commitments entered into in the
ordinary course of business that are terminable on not more than sixty days
prior notice without the payment of any penalty or that do not involve
post-Closing obligations in excess of One Hundred Fifty Thousand Dollars
($150,000)
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per year in any one case or in excess of One Million Dollars ($1,000,000) per
year in the aggregate; provided that the Falcon Companies shall not enter into
any employment agreements or new Contracts for the acquisition or disposition of
cable television systems without the prior consent of Buyer or amend any
existing employment agreement or Contract for the acquisition or disposition of
cable television systems without the prior consent of Buyer, such consent with
respect to amendments not to be unreasonably withheld or delayed.
(3) Disposition of Assets. Sell, assign, lease, swap
or otherwise transfer or dispose of any of the Assets, except for Assets
consumed or disposed of in the ordinary course of business.
(4) Encumbrances. Create, assume or permit to exist
any Encumbrance upon the Assets, except for Permitted Encumbrances or other
Encumbrances disclosed in Schedule 3.9 and subject to the Legal Restrictions on
any Equity Interests owned by the Falcon Companies.
(5) Indebtedness. Permit the Falcon Companies to
incur any additional indebtedness for borrowed money, except to the extent (if
not repaid at or prior to the Closing) included in the computation of Closing
Net Liabilities; provided that any such incurrence shall be in the ordinary
course of business and the Falcon Companies shall give Buyer prior notice of
such borrowing;
(6) Compensation. Increase annually recurring
compensation by more than 5%, on average, for the Falcon Companies' employees
retained in connection with the conduct of the business or operation of the
Systems, except for customary merit or time-in-grade increases for qualifying
employees or otherwise in accordance with the Falcon Companies' employee
policies.
(7) Waivers. Waive any material right relating to the
Systems or the Assets.
(8) Marketing Plan. Implement any new marketing plans
that are materially different from marketing plans previously implemented by the
Falcon Companies, except as consented to by Buyer, such consent not to be
unreasonably withheld.
(9) Affiliate Transactions. Enter into any new
business arrangements or business relationships that would be required to be
disclosed on Schedule 3.17 or modify, revise or alter any existing such
arrangements or relationships if it would have an adverse economic effect on the
Falcon Companies or would be binding on the Falcon Companies after the Closing.
(b) Affirmative Covenants. Falcon shall, and shall cause the
Falcon Companies to, do the following between the date hereof and the Closing
Date:
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(1) Access to Information. Subject to Buyer's and
Charter's obligations hereunder and under the Confidentiality Agreement with
respect to confidentiality, allow Buyer and its authorized representatives
reasonable access during normal business hours to the Assets and the physical
plant, offices, properties and records of the Falcon Companies for the purpose
of inspection, and furnish or cause to be furnished to Buyer or its authorized
representatives all information with respect to the Assets or the Falcon
Companies that Buyer may reasonably request. Any investigation or request for
information shall be conducted in such a manner as not to interfere with the
business or operations of the Falcon Companies and the Systems.
(2) Insurance. Maintain the existing insurance
policies on the Systems and the Assets (or comparable replacement policies).
(3) Books and Records. Maintain the Falcon Companies'
books and records substantially in accordance with past practices.
(4) Financial Information. Furnish to Buyer (i)
within forty-five days after the end of each calendar quarter between the date
hereof and the Closing Date, an unaudited consolidated balance sheet and
statement of operations for the Falcon Companies for each such calendar quarter
and (ii) any other information (including management notes) furnished to the
Falcon Companies' senior lenders or filed by the Falcon Companies with the SEC,
which financial information shall be prepared from the Falcon Companies' books
and records maintained in the ordinary course of business substantially in
accordance with past practices;
(5) Compliance with Laws. Comply with all Legal
Requirements applicable to the Falcon Companies and the operation of the
Systems, except to the extent of matters of non-compliance which in the
aggregate would not be material to the Falcon Companies taken as a whole.
(6) Keep Organization Intact. Except with respect to
any departure of any of the Falcon Companies' employees between the date hereof
and Closing, or the termination of employment of certain Falcon Company
employees as provided in Section 6.9(a), use commercially reasonable efforts to
preserve intact the Falcon Companies' business and organization relating to the
Systems and preserve for Buyer the goodwill of the Falcon Companies' suppliers,
customers and others having business relations with them.
(7) Capital Expenditure Program. After the execution
of this Agreement Falcon will cause the Falcon Companies to use commercially
reasonable efforts to make capital expenditures, including maintenance and
rebuild and upgrade expenditures, materially consistent with the Capital
Expenditure Budget, subject to applicable contractual restrictions. If requested
by Buyer, subject to applicable contractual restrictions and Falcon's approval,
which approval will not be unreasonably withheld, Falcon will cause the Falcon
Companies to use commercially reasonable efforts to make capital expenditures in
excess of the Capital Expenditure Budget at the written request of Buyer, so
long as the timing and manner of the expenditures so requested by Buyer are
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reasonable. As provided for in Section 2.4(b)(xii), at the Closing, the Closing
Net Liabilities shall be decreased by the total amount of capital expenditures
made by the Falcon Companies after the date of this Agreement (other than
routine maintenance capital expenditures), but only to the extent the Falcon
Companies have made an actual payment in respect thereof or a liability for
payment is reflected in the computation of Closing Net Liabilities.
(c) Certain Permitted Actions. Notwithstanding anything in
this Agreement (including Sections 6.1(a) and (b) above) to the contrary, Buyer
consents and agrees as follows:
(1) Contractual Commitments. The Falcon Companies may
comply with all of their contractual commitments under their existing Contracts
and under any Contracts entered into after the date of this Agreement in
compliance with Section 6.1(a)(2) or with Buyer's (in each case, as such
Contracts may be in effect from time to time in accordance with Section
6.1(a)(2) or with Buyer's and Charter's consent). The Falcon Companies may take
such actions as are contemplated by the other Sections of this Agreement and
otherwise comply with their obligations under the other Sections of this
Agreement.
(2) Excluded Assets. Buyer acknowledges that the
artwork and photography throughout Falcon's Westwood and Pasadena corporate
offices and the furniture and furnishings in Xxxx Xxxxxxxxx'x office and certain
other furniture in Falcon's Westwood and Pasadena corporate offices are personal
assets of Xxxx Xxxxxxxxx that will be retained by him and are not and will not
become assets of Buyer or the Falcon Companies.
(3) Pending Acquisitions. The Falcon Companies may
consummate the transactions contemplated by the acquisition agreements set forth
in Schedule 6.1 of Falcon's Disclosure Schedule substantially in accordance with
such acquisition agreements as currently in effect (such transactions, the
"Pending Acquisitions"). As provided for in Section 2.4(b)(x), at the Closing,
the Closing Net Liabilities shall be decreased by the amounts paid by the Falcon
Companies to the sellers under such agreements (plus reasonable out-of-pocket
costs and expenses incurred in connection with consummating such transactions),
but only to the extent the Falcon Companies have made an actual payment in
respect thereof or a liability for payment is reflected in the computation of
Closing Net Liabilities. Buyer acknowledges that none of the representations and
warranties made by Falcon or any Seller in this Agreement applies to the assets,
systems, or liabilities acquired in the Pending Acquisitions or any other matter
relating to such assets, systems, and liabilities, other than the
representations and warranties made by Falcon in Section 3.4 with respect to
Material Contracts. The parties agree and acknowledge that the subscribers
acquired in the Pending Acquisitions shall not be counted for purposes of
determining the subscriber adjustment pursuant to Section 2.4(a) or for purposes
of determining whether the condition in Section 7.1(c) has been satisfied.
(4) Other Matters. The Falcon Companies may take the
other actions contemplated in Schedule 6.1 of Falcon's Disclosure Schedule.
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6.2 Confidentiality; Press Release.
(a) Buyer and Falcon are parties to a Confidentiality
Agreement dated May 4, 1999 (the "Confidentiality Agreement"). Notwithstanding
the execution, delivery and performance of this Agreement, or the termination of
this Agreement prior to Closing, the Confidentiality Agreement shall remain in
full force and effect in accordance with its terms, but shall expire
concurrently with the Closing hereunder.
(b) No party will issue any press release or make any other
public announcements concerning this Agreement or the transactions contemplated
hereby except with the prior approval (not to be unreasonably withheld) of the
other parties, except that if any such disclosure is required by law, no party
will make such disclosure without first providing to the other parties an
advance copy of any such disclosure and a reasonable opportunity to review and
comment.
6.3 Cooperation; Commercially Reasonable Efforts. Without limiting any
of the obligations of the parties hereunder, the parties shall cooperate with
each other and their respective counsel, accountants, agents and other
representatives in all commercially reasonable respects in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and otherwise use their commercially reasonable efforts to consummate
the transactions contemplated hereby and to fulfill their obligations hereunder
as expeditiously as practicable. Buyer shall provide to Falcon such information
relating to Buyer and its Subsidiaries and their businesses and operations as
Falcon shall reasonably request.
6.4 Consents and Notices.
(a) Following the execution hereof, until the Closing Date,
Falcon shall use its commercially reasonable efforts, and shall cause the Falcon
Companies to use their commercially reasonable efforts, and Buyer shall use its
commercially reasonable efforts, to obtain as expeditiously as possible all
Consents and Designated Consents required to be obtained by the Falcon
Companies, including Consents and Designated Consents under the Franchises, FCC
Licenses and Contracts of the Falcon Companies. Falcon shall, and shall cause
the Falcon Companies to, and Buyer shall, prepare and file, or cause to be
prepared and filed, within thirty (30) days after the date hereof (subject to
extension for a period of up to an additional fifteen (15) days, if reasonably
necessary for a party to complete its application), all applications (including
FCC Forms 394 or other appropriate forms) required to be filed with the FCC and
any Franchising Authority that are necessary for the transfer of control to
Buyer in connection with the consummation of the transactions contemplated by
this Agreement of the Franchises and the FCC Licenses identified in Schedule
3.4. The parties shall also make appropriate requests, as soon as practicable
after the date hereof, for any Consents required under any Contract (other than
the Debt Documents, which shall be governed by Section 6.7). If, notwithstanding
their commercially reasonable efforts, Falcon and the other Falcon Companies are
unable to obtain any of the Consents or Designated Consents, none of the Falcon
Companies nor Sellers shall be liable to Buyer for any breach of covenant, and,
for the avoidance of doubt, after the Closing, Sellers shall not have any
obligation or any liability for the failure of
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such Consents or Designated Consents to be obtained. Except as expressly
provided herein, nothing herein shall require the expenditure or payment of any
funds (other than in respect of normal and usual attorneys fees, filing fees or
other normal costs of doing business) or the giving of any other consideration
by Sellers or the Falcon Companies.
(b) Buyer agrees that if in connection with the process of
obtaining any Consent or Designated Consent, a Governmental Authority or other
Person purports to require any condition, change or additional or different
terms to a Franchise, License or Contract to which such Consent or Designated
Consent relates that would be applicable to any of Buyer or any Falcon Company
as a requirement for granting its Consent or Designated Consent, Buyer may
negotiate jointly with Falcon with such Governmental Authority or other Person,
as appropriate, with respect to such condition or change, and each agrees that
neither Sellers, the Falcon Companies nor Buyer shall have any obligation to
bear any monetary obligations to a Governmental Authority or other Person as a
condition to obtaining any required Consent or Designated Consent therefrom;
provided, however, that either Sellers or Buyer may elect, in its sole
discretion, to satisfy such monetary obligations, in which case, Buyer will
accept (and agree that Falcon may cause any Falcon Company to accept) any
condition or change in the Franchise, License or Contract to which such Consent
or Designated Consent relates to the extent provided herein (but, in the case of
Sellers electing to satisfy any such monetary obligations, Buyer and the Falcon
Companies will be deemed to have accepted such condition or change only to the
extent Sellers reimburse the Falcon Companies or give Buyer credit against the
Aggregate Consideration at the Closing for the amount of such monetary
obligations, as determined by the mutual agreement of Buyer and Sellers, each
acting reasonably); and provided further that Buyer will accept and comply with
any commercially reasonable non-monetary obligation imposed by any such
Governmental Authority or other Person.
(c) Each of Falcon and Buyer shall make its representatives
available (at its own expense) to attend one or more meetings of a Governmental
Authority from whom a Consent is requested and shall promptly furnish to any
Governmental Authority or other Person from whom a Consent is requested such
accurate and complete information regarding it and its Subsidiaries, including
financial information concerning Buyer and other information relating to the
cable and other media operations of Buyer, as a Governmental Authority or other
Person may reasonably require in connection with obtaining any Consent. The
parties shall promptly consult with each other regarding any prospective meeting
or information request and promptly furnish to each other a copy of any such
information provided to a Governmental Authority or other Person, and any other
information concerning Buyer as Falcon may reasonably request in connection with
obtaining any Consent. To the extent Falcon is required to supply such
information as to Buyer and its Subsidiaries to Persons from whom Consents are
sought, Falcon may supply such information and shall have no obligation to Buyer
with respect to the disclosure or use of such information by such Persons.
(d) It is understood and agreed that nothing herein shall
prevent Buyer (or their employees, agents, representatives and any other Person
acting on behalf of Buyer) from making statements or inquiries to, attending
meetings of, making presentations to, or from responding to
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requests initiated by, Governmental Authorities or other Persons from which a
Consent is sought, and Buyer shall use commercially reasonable efforts to
apprise Falcon of all such requests.
(e) After the Closing, Sellers will cooperate in all
reasonable respects with Buyer and the Falcon Companies to obtain any of the
Consents that were not obtained prior to the Closing, provided that such
cooperation will not require the Sellers to make any expenditure or payment of
any funds and Buyer will reimburse Sellers for any expenditure or payment that
Sellers voluntarily make.
(f) Following the execution hereof, until the Closing Date,
FHGLP and TCI shall use their commercially reasonable efforts to obtain as
expeditiously as possible all consents necessary for the joint venture interests
in Pacific Microwave Joint Venture to be assigned to Falcon, it being understood
that receipt of such consents and the assignment of such joint venture interests
shall not be a condition precedent to Buyer's obligation to consummate the
transactions to be consummated hereunder and that, if such consents shall not
have been obtained prior to the Closing, such joint venture interests will not
be assigned to Falcon at the Closing, but provided that in such event FHGLP and
TCI shall continue to use their commercially reasonable efforts after the
Closing to obtain such consents and until such time as the joint venture
interests are assigned to Falcon they shall cause the benefits that are
currently made available to the Systems by the Pacific Microwave Joint Venture
to be made available to Buyer at no cost to Buyer.
(g) Following the execution hereof, until the Closing Date,
FHGLP shall use its commercially reasonable efforts, and shall cause the Enstar
Partnerships to use their commercially reasonable efforts, and Buyer shall use
its commercially reasonable efforts, to obtain as expeditiously as possible all
Franchise Consents that FHGLP and Buyer mutually agree, each acting reasonably,
are required to be obtained by the Enstar Partnerships in connection with the
transfer of control to Buyer in connection with the consummation of the
transactions contemplated by this Agreement. FHGLP shall, and shall cause the
Enstar Partnerships to, and Buyer shall, prepare and file, or cause to be
prepared and filed, within thirty (30) days after the date hereof (subject to
extension for a period of up to an additional fifteen (15) days, if reasonably
necessary for a party to complete its application), all FCC Forms 394 required
to be filed in accordance with the preceding sentence. It is expressly
understood that the receipt of such Consents is not a condition precedent to
Buyer's obligation to consummate the transactions contemplated by this Agreement
and that if, notwithstanding their commercially reasonable efforts, FHGLP and
the Enstar Partnerships are unable to obtain any of such Consents, FHGLP shall
not be liable to Buyer for any breach of covenant, and, for the avoidance of
doubt, after the Closing, FHGLP shall not have any obligation or any liability
for the failure of such Consents to be obtained. Nothing herein shall require
the expenditure or payment of any funds (other than in respect of normal and
usual attorneys fees, filing fees or other normal costs of doing business) or
the giving of any other consideration by FHGLP or the other Sellers or the
Enstar Partnerships or the Falcon Companies.
(h) Following the execution hereof, without acknowledging that
any notice or consent is required with respect to such Franchises, Falcon shall,
and shall cause the Falcon
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Companies to, and Buyer shall, prepare and file, or cause to be prepared and
filed, within thirty (30) days after the date hereof (subject to extension for a
period of up to an additional fifteen (15) days, if reasonably necessary for the
parties to complete such notices), a notification to the appropriate Franchising
Authority with respect to each Franchise marked with an asterisk in Schedule
3.8, such notification to be in a form mutually and reasonably satisfactory to
Falcon and Buyer. Each of Falcon and Buyer shall promptly furnish to any of such
Franchising Authorities such additional information as it may reasonably require
in connection with the transactions contemplated by this Agreement.
6.5 HSR Act Filing. As soon as practicable after the execution of this
Agreement, but in any event no later than thirty (30) days after such execution
(subject to extension for a period of up to an additional ten (10) days, if
reasonably necessary for a party to complete its notification and report if not
filed by the expiration of such thirty (30) day period) the parties will each
complete and file, or cause to be completed and filed, any notification and
report required to be filed under the HSR Act; and each such filing shall
request early termination of the waiting period imposed by the HSR Act. The
parties shall use commercially reasonable efforts to respond as promptly as
reasonably practicable to any inquiries received from the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") for additional information or documentation and to
respond as promptly as reasonably practicable to all inquiries and requests
received from any other Governmental Authority in connection with antitrust
matters. The parties shall use commercially reasonable efforts to overcome any
objections which may be raised by the FTC, the Antitrust Division or any other
Governmental Authority having jurisdiction over antitrust matters.
6.6 No Inconsistent Actions; Charter LLC.
(a) No party hereto, nor any of their respective Affiliates,
will take any action that is inconsistent with its obligations under this
Agreement or which does, or would reasonably be expected to, hinder or delay the
consummation of the transaction contemplated by this Agreement. Without limiting
the generality of the foregoing, at all times between the date hereof and the
Closing Date, Buyer will take all necessary or advisable actions to ensure, and
Buyer will ensure, that Buyer is able to deliver the Cash Consideration and the
Equity Consideration at Closing.
(b) Buyer shall form Charter LLC as a Delaware limited
liability company as soon as practicable after the execution of this Agreement
and in any event prior to the filing of any Consent applications to be filed
pursuant to Section 6.4. Buyer shall cause Charter LLC to execute such
applications as the transferee as appropriate and to take all appropriate
actions with respect to any such applications. Buyer shall cause Charter LLC to
take all appropriate actions necessary for Buyer and Charter LLC to perform
their obligations under this Agreement and the other Transaction Documents.
(c) Within 60 days after the date hereof, Buyer and FHGLP
shall negotiate in good faith (1) the definitive Charter LLC Operating Agreement
to be effective upon the Closing in
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accordance with the terms set forth on Exhibit D and such additional terms as
Buyer and FHGLP may mutually agree, (2) the definitive Exchange Agreement in
accordance with the terms set forth on Exhibit E and such additional terms as
Buyer and FHGLP may mutually agree, (3) a form of amended and restated limited
partnership agreement of Falcon Communications, L.P. to be effective immediately
after the Closing (the "Amended Falcon Partnership Agreement"), which agreement
shall provide for pro rata and nondiscriminatory treatment of its partners and
shall otherwise be reasonably acceptable to FHGLP, (4) the definitive Put
Agreement to be effective upon the Closing in accordance with Exhibit B and such
additional terms as Buyer and FHGLP may mutually agreement, and (5) the
definitive Registration Rights Agreement to be effective in accordance with
Exhibit C and such additional terms as FHGLP and Buyer may mutually agree. If
Buyer and FHGLP do not agree on a definitive Charter LLC Agreement and/or a
definitive Exchange Agreement and/or a definitive Amended Falcon Partnership
Agreement and/or a definitive Put Agreement and/or a definitive Registration
Rights Agreement prior to the Closing, the terms set forth in Exhibits B, C, D
and E and the preceding sentence (with respect to the Amended Falcon Partnership
Agreement) shall be binding on each of Buyer, Charter LLC and FHGLP, except that
FHGLP may elect at its sole option to receive a cash payment in lieu of the
Equity Consideration and not to contribute any portion of its partnership
interest in Falcon to Charter LLC, in which event FHGLP's entire partnership
interest in Falcon shall be sold to Buyer pursuant to Section 2.1(a) hereof and
otherwise treated as a Purchased Interest hereunder and the terms set forth in
Exhibits B, C, D and E and the preceding sentence (with respect to the Amended
Falcon Partnership Agreement) shall not be binding on any of Buyer, Charter LLC
or FHGLP.
(d) On or prior to the Closing, Buyer shall contribute all of
its interest in Charter Holdings to Charter LLC in accordance with the terms of
Exhibit D hereto and the Charter LLC Operating Agreement.
(e) Prior to the Closing and issuance of the Equity
Consideration to FHGLP, Buyer shall not cause or permit Charter Holdings or
Charter LLC to dispose of its assets other than in the ordinary course of its
business or other than for fair market value.
(f) If the entity defined as "Charter" in the Registration
Rights Agreement ("PublicCo") is formed prior to the Closing, Buyer shall cause
PublicCo to execute and deliver the Registration Rights Agreement and the
Exchange Agreement at the Closing. If PublicCo is formed after the Closing,
Buyer will cause PublicCo to execute and deliver the Registration Rights
Agreement and the Exchange Agreement at the time of the formation of PublicCo.
6.7 Falcon Company and Enstar Debt Obligations.
(a) Buyer acknowledges and agrees that all obligations of the
Falcon Companies with respect to Indebtedness, including the Senior Discount
Debentures, the Senior Debentures, the Senior Debt, the MONY Notes, and swap and
interest rate hedging Contracts (including all principal, accrued and unpaid
interest and all other amounts), shall remain obligations of the Falcon
Companies through and after Closing, and Buyer will cooperate with the Falcon
Companies with
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respect to any information relating to Buyer that shall be reasonably requested
by any of the holders of the Senior Debt or MONY Notes.
(b) After the Closing, Buyer agrees to cause the Falcon
Companies to commence an Offer to Purchase (as defined in the Indenture) in
accordance with the terms and conditions of the Indenture and to discharge all
of their obligations under the Indenture in accordance with its terms, and Buyer
agrees that Sellers shall not have any liability or obligation in respect
thereof, including any change of control penalty or premium or other payment
arising out of or resulting from the consummation of the transactions
contemplated by this Agreement under or pursuant to the Indenture, the Senior
Debentures or the Senior Discount Debentures.
(c) Buyer will either (1) prior to the Closing procure from
the lenders under the Credit Agreement and from the purchasers under the MONY
Agreement a written waiver, in form and substance reasonably satisfactory to
Sellers, that will permit the transactions contemplated by this Agreement to be
consummated without a default or an event of default thereunder being caused
thereby, that will permit the sale and transfer of the Purchased Interests and
the Contributed Interest to Buyer and Charter LLC as contemplated by this
Agreement and the receipt by the Sellers of the Aggregate Consideration therefor
free and clear of the pledges under the Credit Agreement, and that will release
Sellers from any obligations and restrictions they may have under the Senior
Debt and the Credit Agreement and the MONY Notes and the MONY Agreement and
related Debt Documents, or (2) simultaneously with the Closing and without
limiting any other obligations of Buyer, satisfy and discharge all obligations
of the Falcon Companies in respect of the Senior Debt and the Credit Agreement
and the MONY Notes and the MONY Agreement and related Debt Documents (including
all principal, accrued and unpaid interest and all other amounts, including any
prepayment penalty or premium or any breakage costs) that become due and payable
concurrently with, or as a result of, the consummation of the Closing.
(d) Buyer acknowledges and agrees that all obligations of
Enstar Finance with respect to Indebtedness, including the Enstar Credit
Agreement (including all principal and unpaid interest and all other amounts)
shall remain obligations of Enstar Finance through and after the Closing, and
Buyer will cooperate with Enstar Finance with respect to any information
relating to Buyer that shall be reasonably requested by the lenders under the
Enstar Credit Agreement.
(e) Buyer will either (1) prior to the Closing procure from
the lenders under the Enstar Credit Agreement a written waiver, in form and
substance reasonably satisfactory to Falcon, that will permit the receipt by the
applicable Sellers of the Aggregate Consideration therefor free and clear of the
pledges under the Enstar Credit Agreement, and that will release the applicable
Sellers from any obligations and restrictions they may have under the Enstar
Credit Agreement and related Enstar Debt Documents, or (2) simultaneously with
the Closing and without limiting any other obligations of Buyer, satisfy and
discharge all obligations of Enstar Finance in respect of the Enstar Credit
Agreement and related Enstar Debt Documents (including all principal, accrued
and unpaid interest and all other amounts, including any prepayment penalty or
premium or any breakage costs)
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that become due and payable concurrently with, or as a result of, the
consummation of the Closing.
6.8 Retention and Access to the Falcon Companies' Records. Except as
provided in Section 6.10(c)(1), Sellers shall, for a period of four years from
the Closing Date, have access to, and the right to copy, at its expense, during
usual business hours upon reasonable prior notice to Buyer, all of the books and
records relating to the Falcon Companies, Assets and Systems that were
transferred to Buyer pursuant to this Agreement. Buyer shall retain and preserve
all such books and records for such four year period. Subsequent to such four
year period, Buyer shall only destroy such books and records if there is no
ongoing litigation, governmental audit or other proceeding, and subsequent to
thirty days' notice to Sellers of their right to remove and retain such books
and records or to copy such books and records prior to their destruction.
6.9 Employee Matters.
(a) Falcon shall terminate, effective as of the Adjustment
Time, the employment of each Headquarters Employee who remains in employment as
of the Closing other than those Headquarters Employees designated in a written
notice delivered by Buyer to Sellers not later than 60 days after the date of
this Agreement. Seller shall provide affected Headquarters Employees, and other
parties entitled to receive notice, such notice as may be required under the
Worker Adjustment and Retraining Notification Act promptly following receipt of
written notice from Buyer described in the preceding sentence. Buyer shall
indemnify and hold harmless Sellers from and against any and all liability
arising out of either Buyer's failure to provide such notice not later than 60
days after the date of this Agreement or the termination of the employment of
any Headquarters Employee, except for the payment of compensation and severance
benefits, as provided in Section 6.9(b) below.
(b) On or prior to Closing, Falcon shall pay any and all
compensation owing to Headquarters Employees for any time period prior to and
including the Closing, including any wages, salaries, bonuses and payments under
any Compensation Arrangement owing to such employees. On or prior to the
Closing, subject to the adjustment provided in 2.4(b)(viii), Falcon will pay
each of the Headquarters Employees (including Headquarters Employees who decline
continued employment with Buyer), other than (i) those employees identified on
Schedule 6.9 and (ii) those Headquarters Employees whose employment will not be
terminated in accordance with Section 6.9(a) above (the "Transferred
Headquarters Employees"), severance pay on such terms and in such amounts as
Falcon may determine in its sole discretion. On or prior to the Closing, Falcon
will terminate the Falcon Communications, L.P. 1993 Incentive Performance Plan
and provide for the payment of all benefits due under the terms of such plan and
provide for the payment of any amounts due under the Falcon Communications, L.P.
Key Executive Equity Program and any such program sponsored by any Falcon
Company.
(c) At Closing, Falcon shall provide Buyer a schedule setting
forth a severance pay amount for each Transferred Headquarters Employee. Upon
the termination of employment for
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any reason other than for Cause of any Transferred Headquarters Employee within
six months after the Closing, Buyer shall pay such Transferred Headquarters
Employee severance pay in an amount not less than the severance pay amount
identified in the schedule of severance pay described in the foregoing sentence.
For purposes of this Section, "Cause" shall mean (i) conviction of a felony or a
crime involving moral turpitude, or (ii) engaging in acts constituting willful
dishonesty, fraud and/or willful failure to carry out the employee's job
responsibilities.
(d) Except as otherwise required in this Section 6.9, all
employees of the Falcon Companies who continue in employment following the
Closing shall be employed on such terms and conditions as are substantially
similar in the aggregate to the terms and conditions of employment of Buyer's
and Charter's employees. Each such employee shall receive credit for all
purposes other than benefit accrual purposes under any retirement plan or
program under any Employee Plan or Compensation Arrangement of the Buyer for
past service with any Falcon Company and, to the extent credited under any
Employee Plan or Compensation Arrangement of any Falcon Company, for past
service with any predecessor employer.
(e) Buyer shall offer group health plan coverage to all of the
employees of the Falcon Companies and to the spouse and dependents of such
employees who become employed by the Buyer or any ERISA Affiliate of the Buyer
as of the Closing on terms and conditions generally applicable to all of Buyer's
similarly situated employees. For purposes of providing such coverage, Buyer
shall waive all preexisting condition limitations for all such employees covered
by the health care plan of any Falcon Company as of the Closing and shall
provide such health care coverage effective as of the Closing without the
application of any eligibility period for coverage. In addition, Buyer shall
credit all employee payments toward deductible, out-of-pocket and co-payment
obligation limits under the Falcon Companies' health care plans for the plan
year which includes the Closing Date as if such payments had been made for
similar purposes under Buyer's health care plans during the plan year which
includes the Closing Date, with respect to employees of the Falcon Companies and
the spouse and any dependents of such employees who become employed by Buyer as
of the Closing Date.
(f) Buyer shall assume full responsibility and liability for
offering and providing "continuation coverage" to any "covered employee" and any
"qualified beneficiary" who is covered by a "group health plan" sponsored or
contributed to by any of the Falcon Companies who has experienced a "qualifying
event" or is receiving "continuation coverage" on or prior to the Closing.
"Continuation coverage," "covered employee," "qualified beneficiary,"
"qualifying event" and "group health plan" all shall have the meanings given
such terms under Section 4980B of the Code and Section 601 et seq. of ERISA.
(g) Notwithstanding anything in this Agreement to the
contrary, on or prior to the Closing Date, Falcon shall take such action as may
be necessary or appropriate to cause each participant in the Falcon
Communications, L.P. "Smart" 401(k) Plan and each participant in the Enstar
Cable Corporation "Smart" 401(k) Plan (the "Falcon 401(k) Plans") to become
fully vested in his or her benefit under such plans. Notwithstanding the
foregoing or anything in this Agreement
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to the contrary, Sellers will take such actions as may be necessary to adopt
resolutions to terminate the Falcon 401(k) Plans effective on or prior to the
Closing Date; provided after the Closing Buyer shall take such actions as may be
necessary or appropriate to complete the termination of the Falcon 401(k) Plans
and provide for the distribution of benefits thereunder. Upon distribution of
benefits following the termination of the Falcon 401(k) plans, a tax-qualified
retirement plan sponsored by Buyer or an entity required to be combined with
Buyer under Code Sections 414(b) or (c) shall accept rollover contributions with
respect to any person who remains an employee of any Falcon Company following
the Closing and as of the date of distribution of cash and promissory notes that
relate to loans made to participants from the Falcon 401(k) plans.
6.10 Tax Matters.
(a) Tax Periods Ending on or Before the Closing Date. FHGLP
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for the Falcon Companies (i) that are due on or before the Closing Date,
or (ii) that relate to taxable periods ending on or prior to the Closing Date
but are required to be filed after the Closing Date. Such Tax Returns shall be
prepared in accordance with each Falcon Company's past custom and practice, and
allocations of items of income and gain and loss and deduction shall be made
using the closing-of-the-books method. In the case of any Falcon Company that is
a partnership or a limited liability company, such Tax Returns shall be prepared
in accordance with the Organizational Documents of such Falcon Company as in
effect immediately prior to the Closing. In preparing each Falcon Company's Tax
Returns, FHGLP shall consult with Buyer in good faith and shall provide Buyer
with drafts of such Tax Returns (together with the relevant back-up information)
for review and consent (which consent shall not be unreasonably withheld) at
least twenty days prior to filing; provided, however, if Buyer has not provided
comments on such Tax Returns to FHGLP within such twenty-day period, then such
consent shall be deemed to be given and, if Buyer's comments or refusal to
provide such consent results in any penalties imposed upon FHGLP or any Falcon
Company for failing to file a timely Tax Return, then Buyer shall be liable for
and shall pay, such penalties; provided further, however, if any such penalties
for failure to file a timely Tax Return could be avoided by filing an extension
to file such Tax Return with the applicable Governmental Authority, FHGLP shall,
or shall cause the appropriate Falcon Company to, timely file such extension.
After the Closing, Buyer shall not prepare or cause to be prepared or file or
cause to be filed any Tax Return for the Falcon Companies for any period ending
on or prior to the Closing Date.
(b) Tax Periods Beginning Before and Ending After the Closing
Date. Buyer shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the Falcon Companies for Tax periods which begin before the
Closing Date and end after the Closing Date. Such Tax Returns shall be prepared
in accordance with each Falcon Company's past custom and practice but, except as
otherwise provided in this Agreement, allocations of items of income and gain
and loss and deduction shall be made using the closing-of-the-books method. In
preparing such Tax Returns, Buyer shall consult with FHGLP in good faith and
shall provide FHGLP with drafts of such Tax Returns (together with the relevant
back-up information) for review at least ten days prior to filing.
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(c) Cooperation on Tax Matters.
(1) Buyer and FHGLP shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section 6.10 and any audit, litigation,
or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Buyer and FHGLP agree (A) to retain all books and records with
respect to Tax matters pertinent to the Falcon Companies relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or FHGLP, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, Buyer or FHGLP,
as the case may be, shall allow the other party to take possession of such books
and records to the extent they would otherwise be destroyed or discarded,
subject to a confidentiality agreement provided by the party turning over such
books and records and reasonably acceptable to the other party.
(2) Buyer and FHGLP further agree, upon request, to
use commercially reasonable efforts to obtain any certificate or other document
from any Governmental Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including Taxes
with respect to the transactions contemplated hereby).
(d) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with the transactions consummated pursuant to
this Agreement shall be paid by Buyer. Buyer and FHGLP will cooperate in all
reasonable respects to prepare and file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees. Buyer shall be liable for any Taxes
attributable to any election made by Buyer or any Affiliate of Buyer with
respect to any of the Falcon Companies under Section 338 of the Code or any
comparable provision of state or local law.
(e) Buyer covenants that it will not, and it will not cause or
permit any Falcon Company or any Affiliate of Buyer, (i) to take any action on
or after the Closing Date, including the distribution of any dividend or the
effectuation of any redemption, that could give rise to any tax liability of any
Seller or any direct or indirect holder of equity interests in any Seller or
(ii) to make or change any tax election, amend any Tax Return or take any tax
position on any Tax Return, take any action, omit to take any action or enter
into any transaction that results in any increased tax liability of any Seller
or any direct or indirect holder of equity interests in any Seller in respect of
any Pre-Closing Tax Period.
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(f) Except to the extent taken into account in Closing Net
Liabilities, Buyer shall promptly pay or cause to be paid to Sellers all refunds
of taxes and interest thereon received by Buyer, any Affiliate of Buyer, or any
Falcon Company attributable to taxes paid by Sellers or any Falcon Company with
respect to any Pre-Closing Tax Period.
(g) From and after the date of this Agreement, Sellers and
each Falcon Company shall not without the prior written consent of the Buyer
(which consent shall not be unreasonably withheld) make, or cause or permit to
be made, any Tax election that would adversely affect any of the Falcon
Companies or Buyer.
(h) Allocation of Purchase Price. The sum of (i) the Cash
Consideration allocable (pursuant to Section 2.3(d)) to the partnership
interests in Falcon other than the Contributed Interest, (ii) the Equity Value,
and (iii) liabilities of the Falcon Companies allocable pursuant to Section 752
of the Code to the partnership interests in Falcon, shall be allocated among the
assets of the Falcon Companies that are Tax Partnerships in accordance with an
agreement (the "Falcon Allocation Agreement"), and the aggregate gross value of
all the membership interests in Charter Holdings (including liabilities of
Charter Holdings and its Subsidiaries) shall be allocated among the assets of
Charter Holdings and its Subsidiaries in accordance with an agreement ("the
Charter Allocation Agreement" and together with the Falcon Allocation Agreement,
the "Allocation Agreements"). Each of the Allocation Agreements shall be
prepared in accordance with the rules under Section 704(c), 743(b), 751 and 755
of the Code, as applicable. Buyer shall deliver a draft of the Allocation
Agreements to Falcon within 90 days after the execution of the Purchase and
Contribution Agreement for approval and consent, and Buyer and Falcon shall
mutually agree upon the Allocation Agreements prior to the Closing Date. In this
regard, Buyer and Falcon agree that (x) for purposes of the Falcon Allocation
Agreement, each asset of any Falcon Company that is a Tax Partnership that is a
Class I Asset, Class II Asset, or Class III Asset (as defined in Treasury
Regulation Section 1.338(b)-2T) (other than the stock of FFI) shall be allocated
value equal to its net book value, the stock of FFI shall be allocated value
equal to the value determined by the mutual agreement of Buyer and Falcon, and
any remaining value shall be allocated to Franchises of the Falcon Companies
that are Tax Partnerships, and (y) for purposes of the Charter Allocation
Agreement, each asset of Charter Holdings and its Subsidiaries that is a Class I
Asset, Class II Asset, or Class III Asset (other than the Equity Interests in
any Subsidiary of Charter Holdings that is not a Tax Partnership or a
disregarded entity for federal income tax purposes (a "Charter Corporate
Subsidiary")) shall be allocated value equal to its net book value, the Equity
Interests in any Charter Corporate Subsidiary shall be allocated value equal to
the value determined by the mutual agreement of Buyer and Falcon, and any
remaining value shall be allocated to Franchises of Charter Holdings and its
Subsidiaries (other than Franchises of Charter Corporate Subsidiaries). Neither
Falcon nor Buyer shall unreasonably withhold its approval and consent with
respect to the Allocation Agreements. Unless otherwise required by applicable
law, Buyer and Sellers agree to act, and cause their respective affiliates to
act, in accordance with the Allocation Agreements in any relevant Tax Returns or
similar filings, and shall make any filings required by Code Sections 704(c),
743(b), 751, 755 and 1060 (if any) in accordance with the Allocation Agreements.
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(i) Buyer will cause Charter LLC to file a Section 754
election with respect to its first taxable year. Buyer will not revoke, and will
not cause to be revoked, the Section 754 election in effect for itself or for
any of the Falcon Companies and will administer, or cause to be administered,
the elections so as to reflect (A) gain recognized by the Sellers with respect
to the sale of the Purchased Interests and the contribution of the Contributed
Interest, and (B) gain recognized by holders of membership interests in Charter
LLC arising from dispositions of their interests.
6.11 Falcon Name. The parties agree that the Falcon Companies shall
retain the right to use the names "Falcon" and "Falcon Cable TV" and any and all
derivations thereof with respect to the domestic U.S. cable television and
related businesses conducted by the Falcon Companies from and after the Closing
and that the Sellers shall retain the right to use the name "Falcon" and "Falcon
International" and any and all derivatives thereof with respect to the non-U.S.
cable television and related businesses conducted by certain Falcon entities.
6.12 No Recourse; Release of Claims. Anything in this Agreement or
applicable law to the contrary notwithstanding, other than claims against
Sellers as and to the extent expressly provided for in Section 9.4 and Section
10 of this Agreement (and other than any claim for fraud or criminal conduct),
neither Buyer nor any of the Falcon Companies will have any claim or recourse
against any of the Released Parties as a result of the breach of any
representation, warranty, covenant or agreement of Falcon or Sellers contained
herein or otherwise arising in connection with the transactions contemplated by
the Transaction Documents or the business or operations of the Falcon Companies
prior to the Closing. Effective as of the Closing, Buyer and each of its
Subsidiaries hereby releases and forever discharges each of the Released Parties
from all actions, causes of action, suits, debts and claims (other than claims
for fraud or criminal conduct) arising out of facts or circumstances prior to
the Closing, whether at law or in equity or otherwise, which Buyer or any of the
Falcon Companies ever had or now or hereafter may have for, upon or by reason of
any matter, cause or thing whatsoever related to the Falcon Companies, whether,
contingent, accrued or otherwise arising out of facts or circumstances prior to
the Closing; provided that the foregoing shall not limit Buyer's rights provided
for in Section 10.
6.13 Exculpation and Indemnification. After the Closing, Buyer and the
Falcon Companies will be bound by and will assume the same obligations to
satisfy (and Buyer will cause the Falcon Companies to continue to satisfy) the
rights of exculpation, indemnification and advancement of expenses to which the
present and former partners, members, stockholders, directors, representatives,
officers, employees and agents of the Falcon Companies and any of their
respective Affiliates are entitled with respect to any matter existing or
occurring prior to the Closing and/or with respect to this Agreement and the
Transaction Documents, under each such Falcon Company's Organizational
Documents, by contract or agreement or by resolution of the Board of
Representatives or Board of Directors or other similar governing entity (as the
case may be) of such Falcon Company, in accordance with the terms and conditions
of any such exculpation and indemnification provisions as in effect on the date
of this Agreement. Without limiting the foregoing, Buyer agrees to maintain in
place for a period of not less than six years from the Closing, for the benefit
of the parties mentioned in the foregoing sentence, directors' and officers'
insurance,
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on substantially the same terms and to the same extent as presently in effect
for the Falcon Companies; provided that Buyer's obligation pursuant to this
sentence only shall lapse on the third anniversary of the Closing if the cost of
maintaining such insurance has increased more than twofold since the Closing
Date and the beneficiaries of such insurance do not elect to reimburse Buyer for
the amount of any such cost increase.
6.14 Rate Regulatory Matters. Buyer acknowledges that, except as
expressly represented and warranted in Section 3.11(e) and Section 3.16, Falcon
is not making any representation or warranty regarding any Rate Regulatory
Matter (including with respect to compliance with any Legal Requirements dealing
with, limiting or affecting the rates which can be charged by cable television
systems to their customers (whether for programming, equipment, installation,
service or otherwise)). Accordingly, except for any right or remedy that Buyer
may have arising out of a breach of the representations and warranties made by
Falcon in Section 3.11(e) and Section 3.16, no Rate Regulatory Matter and no
matter relating to, in connection with or resulting or arising from any Rate
Regulatory Matter, or any actions taken prior to or after the date hereof by any
Falcon Company to comply with or in a good faith attempt to comply with any Rate
Regulatory Matter (including any rate reduction, refund, penalty or similar
action having the effect of reducing the rates previously or subsequently paid
by subscribers, whether instituted or implemented by or imposed on any Falcon
Company and changes to rate practices instituted or implemented by or imposed on
any Falcon Company), shall: (a) cause or constitute, directly or indirectly, a
breach by Falcon or Sellers of any of their representations, warranties,
covenants or agreements contained in this Agreement or any other Transaction
Document (and such representations, warranties, covenants, and agreements shall
hereby be deemed to be modified appropriately to reflect and permit the impact
and existence of such Rate Regulatory Matters and to permit any action by any
Falcon Company to comply with or attempt in good faith to comply with such Rate
Regulatory Matters); (b) otherwise cause or constitute, directly or indirectly,
a default or breach by any Falcon Company or Sellers under this Agreement or any
other Transaction Document; (c) result in the failure of any condition precedent
to the obligations of Buyer under this Agreement or any other Transaction
Document; (d) otherwise excuse Buyer's performance of its obligations under this
Agreement or any other Transaction Document; or (e) give rise to any claim for
(i) any adjustment to the Aggregate Consideration or other compensation or (ii)
indemnification or other claim.
6.15 Disclosure Schedules. The parties acknowledge and agree that (i)
Falcon's Disclosure Schedules and Charter's Disclosure Schedules may include
certain items and information solely for informational purposes for the
convenience of the parties hereto and (ii) the disclosure of any matter in
Falcon's Disclosure Schedules or Charter's Disclosure Schedules shall not be
deemed to constitute an acknowledgment by Falcon or Sellers, in the case of
Falcon's Disclosure Schedules, or Buyer in the case of Charter's Disclosure
Schedules, that the matter is material.
6.16 Environmental Reports. At any time after the date hereof, Buyer
shall have the right to engage an environmental consultant to conduct a Phase I
environmental audit and to prepare a Phase I environmental report, and if
recommended in such Phase I environmental report, a Phase II environmental audit
and Phase II environmental report for any Real Property site. The cost of Phase
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I and Phase II environmental audits and reports shall be borne by Buyer. The
Falcon Companies shall cooperate with Buyer in all reasonable respects in
connection with such Phase I and Phase II environmental audits and reports,
including providing all reasonable access to their respective properties and
facilities.
6.17 Year 2000 Matters. The Falcon Companies shall have taken
commercially reasonable actions to implement the Year 2000 Plan and to complete
implementation of the Year 2000 Plan as soon as is reasonably practicable. The
Falcon Companies shall cooperate with Buyer prior to the Closing with respect to
the Year 2000 Matters. Such cooperation shall include providing Buyer with
status reports as Buyer may reasonably request regarding Year 2000 Matters,
assisting Buyer in the refinement and implementation of the Year 2000 Plan,
assisting Buyer in developing and implementing plans for Buyer to continue the
Year 2000 Plan after the Closing, and using commercially reasonable efforts to
implement all solutions identified as reasonably necessary to the implementation
of the Year 2000 Plan by vendors, distributors and manufacturers of the Falcon
Companies' computer applications.
6.18 TCI Arrangements. At the Closing, the business arrangements
specified on Schedule 6.18 between the Falcon Companies and TCI or Affiliates of
TCI will be terminated, except as provided in Schedule 6.18.
6.19 Restructuring. Falcon will in good faith cooperate with Buyer in
examining a restructuring to be effected at or after Closing of Falcon and
certain Falcon Companies, as contemplated by Buyer; provided that neither Falcon
nor any of the Falcon Companies will be required to undertake any actions that
would, or could reasonably be expected to (as determined by Falcon in its
reasonable discretion): (i) have an adverse economic effect on Falcon, any of
the Falcon Companies, any Seller or any direct or indirect equity holder of any
Seller for which Buyer does not make any such party economically whole, or (ii)
more than immaterially delay the Closing.
SECTION 7: CONDITIONS TO OBLIGATIONS
7.1 Conditions to Obligations of the Buyer. All obligations of Buyer at
the Closing hereunder are subject to the fulfillment (or waiver at the option of
Buyer) prior to or at the Closing of each of the following conditions:
(a) Representations and Warranties of Falcon and Sellers. As
to the representations and warranties of Falcon set forth in Section 3 and of
Sellers set forth in Section 4, (1) those representations and warranties set
forth in Section 3 and Section 4 which are expressly stated to be made solely as
of the date of this Agreement or another specified date shall be true and
correct in all respects as of such date (without regard to the materiality or
material adverse effect qualifiers set forth therein), and (2) all other
representations and warranties of Falcon or Sellers set forth in Section 3 and
Section 4 respectively, shall be true and correct in all respects at and as of
the time of the Closing as though made at and as of that time (without regard to
the materiality or material adverse effect qualifiers set forth therein);
provided that for purposes of each of clauses (1)
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and (2) above, the representations and warranties shall be deemed true and
correct in all respects to the extent that the aggregate effect of the
inaccuracies in such representations and warranties as of the applicable times
does not constitute a Material Adverse Effect.
(b) Covenants. Falcon and Sellers shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by them prior to or at the
Closing.
(c) Consents. The Material FCC Consents shall have been
obtained. The aggregate number of Equivalent Subscribers as of any applicable
date, in those Franchise Areas that are Transferable Franchise Areas shall be at
least eighty-seven and one-half percent (87 1/2%) of the aggregate number of
Equivalent Subscribers in all Franchise Areas as of the most recent month ended
prior to satisfaction of this condition.
(d) Xxxx-Xxxxx-Xxxxxx. The requisite waiting period under the
HSR Act shall have expired or been terminated, without the FTC or the Antitrust
Division, as applicable, taking any action which has not been terminated or
resolved.
(e) Judgment. There shall not be in effect on the date on
which the Closing is to occur any judgment, decree, order or other prohibition
of a court of competent jurisdiction having the force of law that would prevent
the Closing, provided that Buyer shall have used commercially reasonable efforts
to prevent the entry of any such judgment, decree, order or other prohibition
and to appeal as expeditiously as possible any such judgment, decree, order or
other prohibition that may be entered.
(f) Deliveries. Falcon and Sellers shall have made or stand
willing to make all the deliveries to Buyer described in Section 8.2.
(g) Compliance with FIRPTA. Sellers shall have provided the
Buyer with a statement, in a form reasonably satisfactory to the Buyer, pursuant
to Section 1.1445-2(b)(2) of the Treasury Regulations, certifying that Sellers
are not foreign persons.
(h) Material Adverse Effect. From and after the date of this
Agreement until the Closing Date, no event shall have occurred which has had a
Material Adverse Effect.
(i) Falcon Franchise Notice. Falcon shall have delivered to
Buyer a notice that the condition set forth in the second sentence of Section
7.1(c) has been satisfied at least two (2) business days prior to the date
scheduled for Closing.
7.2 Conditions to Obligations of Sellers.
All obligations of Sellers at the Closing hereunder are subject to the
fulfillment (or waiver at the option of Sellers) prior to or at the Closing of
each of the following conditions:
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(a) Representations and Warranties. As to the representations
and warranties of Buyer set forth in Section 5, (1) those representations and
warranties set forth in Section 5 which are expressly stated to be made solely
as of the date of this Agreement or another specified date shall be true and
correct in all material respects as of such date, and (2) all other
representations and warranties shall be true and correct in all material
respects at and as of the Closing as though made at and as of that time.
(b) Covenants. Buyer shall have performed and complied with in
all material respects all covenants and agreements required by this Agreement to
be performed or complied with by them prior to or at the Closing.
(c) Xxxx-Xxxxx-Xxxxxx. The requisite waiting period under the
HSR Act shall have expired or been terminated, without the FTC or the Antitrust
Division, as applicable, taking any action which has not been terminated or
resolved.
(d) Judgment. There shall not be in effect on the date on
which the Closing is to occur any judgment, decree, order or other prohibition
of a court of competent jurisdiction having the force of law that would prevent
the Closing, provided that Falcon and Sellers shall have used commercially
reasonable efforts to prevent the entry of any such judgment, decree, order or
other prohibition and to appeal as expeditiously as possible any such judgment,
decree, order or other prohibition that may be entered.
(e) Deliveries. Buyer shall have made or stand willing to make
all the deliveries described in Section 8.3.
(f) Release. Sellers shall have been released from any
obligations they may have under the Debt Documents and Enstar Debt Documents,
pursuant to documents in form and substance reasonably satisfactory to Sellers.
SECTION 8: CLOSING AND CLOSING DELIVERIES
8.1 Closing.
(a) Closing Date.
(1) Subject to satisfaction or, to the extent
permitted by law, waiver, of the closing conditions described in Section 7, and
subject to Section 8.1(a)(2), 8.1(a)(3) and 8.1(a)(4), the Closing shall take
place on the date specified by FHGLP by notice to Buyer, which specified date
shall be no earlier than two business days and no later than five business days
after satisfaction or waiver of the conditions set forth in Sections 7.1(c) and
(d) and Sections 7.2(c), or on such earlier or later date as FHGLP and Buyer
shall mutually agree; provided, however, (A) if pursuant to Section 2.1(b) and
6.6(b), Sellers elect a cash payment, the Closing will take place on
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at least 10 days notice from FHGLP, and (B) subject to Section 8.1(a)(3) and
8.1(a)(4), the Closing shall not take place beyond the Upset Date.
(2) If on the date on which the Closing would
otherwise be required to take place pursuant to Section 8.1(a)(1) (A) there
shall be in effect any judgment, decree, order or other prohibition of a court
of competent jurisdiction having the force of law that would prevent or make
unlawful the Closing, or (B) any other circumstance beyond the reasonable
control of the Falcon Companies, Sellers, or Buyer (which shall in no event
include any matters relating to financing of the transactions contemplated
hereby) shall exist that would prevent the Closing or the satisfaction of any of
the conditions precedent to any party set forth in Section 7, then either
Sellers or Buyer may, at its option, postpone the date on which the Closing is
required to take place until such date, to be set by the party that elects to
postpone the date for Closing pursuant to this subsection (2) on at least five
business days' written notice to the other party, as soon as practicable after
such judgment, decree, order or other prohibition ceases to be in effect, or
such other circumstance ceases to exist; provided, however, that any
postponement of the date on which the Closing is required to take place to a
date beyond the Upset Date shall require the consent of both Sellers and Buyer
(it being agreed that the Upset Date shall be extended one day for each day up
to one year that a judgment, decree, order or other prohibition referenced in
clause (A) above remains in effect).
(3) Notwithstanding anything in this Agreement to the
contrary, if on the date scheduled for Closing, the Closing has not occurred
because any notice period required by Section 8.1(a)(1) or (2) has not lapsed,
the Upset Date shall be extended until one business day after the lapse of such
period.
(4) If the date on which the Closing would otherwise
be required to take place pursuant to Section 8.1(a)(1), 8.1(a)(2) or 8.1(a)(3)
the Referee shall not have completed its determination pursuant to Section
2.5(a) of any of the amounts disputed by FHGLP and Buyer, then FHGLP may, at its
option, postpone the date on which the Closing is required to take place until
the third (3rd) business day after the date the Referee makes its final
determination pursuant to Section 2.5(a); provided, however, that if such
postponement results in the Closing taking place on a date after the Upset Date,
the Upset Date shall be extended until one business day after the date of the
Closing as postponed pursuant to this Section 8.1(a)(4).
(b) Closing Place. The Closing shall be held at the offices of
Irell & Xxxxxxx, LLP, 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx,
Xxxxxxxxxx, or any other place or time as FHGLP and Buyer shall mutually agree.
8.2 Deliveries by Sellers. Sellers shall deliver or cause to be
delivered to Buyer the following:
(a) Purchased Interests and Contributed Interest. An assignment
agreement providing for the assignment of the Purchased Interests and
Contributed Interest (if applicable) by
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Sellers to Buyer, in a form reasonably satisfactory to Buyer. An assignment
agreement providing for the assignment of all of FHGLP's rights and interest in
the NYNEX Litigation.
(b) Certificate of Falcon. A certificate executed by a duly
authorized representative on behalf of Falcon, dated as of the Closing Date,
certifying that the closing conditions specified in Sections 7.1(a) and (b) have
been satisfied as to Falcon, except as disclosed in said certificate.
(c) Certificate of Sellers. A certificate executed by each
Seller, dated as of the Closing Date, certifying that the closing conditions
specified in Sections 7.1(a) and (b) have been satisfied as to such Seller,
except as disclosed in such certificate.
(d) Secretaries' Certificate. A certificate executed by a duly
authorized representative on behalf of Falcon, dated as of the Closing Date,
providing, as attachments thereto, to the extent available, certificates of Good
Standing for each of the Falcon Companies certified by an appropriate state
official of the State of their organization, all certified by such state
officials as of a date not more than fifteen days before the Closing Date.
(e) Consents. Copies of Consents which have been obtained by
Falcon or any of the Falcon Companies prior to the Closing.
(f) Opinion of Counsel. An opinion of Dow, Xxxxxx & Xxxxxxxxx,
PLLC, counsel to Sellers (other than TCI), dated as of the Closing Date,
substantially in the form of Exhibit G-1 hereto; an opinion of Xxxxxxxxxx and
Xxxxx, L.L.P., counsel to Falcon, dated as of the Closing Date, substantially in
the form of Exhibit G-2 hereto; and an opinion of Xxxxxxx & Xxxxxx L.L.C.,
counsel to TCI, dated as of the Closing Date, substantially in the form of
Exhibit G-3.
(g) Adjustment Escrow Agreement. The Adjustment Escrow
Agreement, duly executed by Sellers and the Adjustment Escrow Agent, if required
pursuant to Section 2.5(b).
(h) Securities Releases. If, as of the Closing Date, there are
outstanding any options, warrants or other similar claims or securities in
respect of the Equity Interests of the Falcon Companies (collectively,
"Options"), other than Options held by any Falcon Company, releases, in form and
substance reasonably acceptable to Buyer, executed by each holder of such
Options, releasing and terminating such Options and all rights of such holder
thereunder.
(i) Releases. A release, duly executed by each Seller,
substantially in the form of Exhibit H hereto.
(j) Other Transaction Documents. If FHGLP contributes the
Contributed Interest to Charter LLC pursuant to Section 2.1(b), the Put
Agreement, the Registration Rights Agreement, the Charter LLC Operating
Agreement, and the Exchange Agreement (to the extent each is agreed to prior to
Closing), each duly executed by FHGLP or the appropriate distributee of FHGLP.
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8.3 Deliveries by Buyer. Prior to or at the Closing, Buyer shall
deliver, or cause to be delivered, to Sellers the following:
(a) Aggregate Consideration.
(1) An assumption agreement providing for the
assumption by Buyer of the Assumed Liabilities, in a form reasonably
satisfactory to Sellers.
(2) As provided in Section 2.6, the cash portion of
the Net Closing Payment to Sellers, by wire or accounts transfer of immediately
available funds to one or more accounts designated by FHGLP in Part V of the
Allocation Notice.
(3) As and to the extent provided by Section 2.5(b),
the Adjusted Escrow Amount to the Adjustment Escrow Agent, by wire or accounts
transfer of immediately available funds to the account specified in the
Adjustment Escrow Agreement.
(4) As provided in Section 6.7, if applicable,
satisfaction and discharge of all obligations of the Falcon Companies and the
Sellers in respect of the Senior Debt and the Credit Agreement, the MONY Notes
and the MONY Agreement, and the related Debt Documents, and the Enstar Credit
Agreement, and the related Enstar Debt Documents.
(b) Officers' Certificate. A certificate executed by Buyer,
dated as of the Closing Date, certifying that the closing conditions specified
in Sections 7.2(a) and (b) have been satisfied, except as disclosed in said
certificate.
(c) Secretaries' Certificate. A certificate executed by Buyer,
dated as of the Closing Date, (1) certifying that the resolutions, as attached
to said certificate, were duly adopted by the Board of Directors and
shareholders (if applicable) of Buyer, authorizing and approving the execution
by Buyer of this Agreement and the other Transaction Documents to which it is a
party and the consummation of the transactions contemplated hereby and thereby
and that such resolutions remain in full force and effect; and (2) providing, as
attachments thereto, a Certificate of Good Standing for Buyer certified by an
appropriate state official of the State of Delaware, certified by such state
official as of a date not more than fifteen days before the Closing Date.
(d) Opinion of Counsel. An opinion of counsel to Buyer, dated
as of the Closing Date, substantially in the form of Exhibit I hereto.
(e) Adjustment Escrow Agreement. The Adjustment Escrow
Agreement, duly executed by Buyer and the Adjustment Escrow Agent if required
pursuant to Section 2.5(b).
(f) Releases. The releases of Sellers under the Debt Documents
and Enstar Debt Documents referred to in Section 6.7 and 7.2.
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(g) Other Transaction Documents. If FHGLP contributes the
Contributed Interests to Charter LLC pursuant to Section 2.1(b), the Put
Agreement, duly executed by Xxxx Xxxxx, the Registration Rights Agreement, duly
executed by PublicCo if required at the Closing by Section 6.6(f), the Charter
LLC Operating Agreement duly executed by Buyer and Charter LLC (if agreed to
prior to Closing) and the Exchange Agreement, duly executed by PublicCo if
required at the Closing by Section 6.6(f) (to the extent each is agreed to prior
to Closing); and the Amended Falcon Partnership Agreement, duly executed by
Buyer and Charter LLC, in a form reasonably acceptable to FHGLP.
SECTION 9: TERMINATION
9.1 Agreement between Sellers and Buyer. This Agreement may be
terminated at any time prior to the Closing and the purchase and sale of the
Purchased Interests abandoned, by written agreement among the parties hereto.
9.2 Termination by Sellers. This Agreement may be terminated at any
time prior to the Closing by Sellers and the purchase and sale of the Purchased
Interests abandoned, upon written notice to Buyer, upon the occurrence of any of
the following:
(a) Conditions. If on any date determined for the Closing in
accordance with Section 8.1, each condition set forth in Section 7.1 has been
satisfied (or will be satisfied by the delivery of documents at the Closing) or
waived in writing by Buyer on such date and either (i) a condition set forth in
Section 7.2 has not been satisfied (or will not be satisfied by the delivery of
documents at the Closing) or waived in writing by Sellers on such date or (ii)
Buyer has nonetheless refused to consummate the Closing, provided that Buyer
shall have five days to cure such matter after receipt of notice of Seller's
intent to terminate pursuant to this Section 9.2(a). Notwithstanding the
foregoing, Sellers may not rely on the failure of any condition set forth in
Section 7.2 to be satisfied if such failure was principally caused by Sellers'
or any Falcon Company's failure to act in good faith or a breach of or failure
to perform any of its representations, warranties, covenants or other
obligations in accordance with the terms of this Agreement.
(b) Upset Date. If the Closing shall not have occurred on or
prior to the Upset Date as extended as provided in Section 8.1(a)(3) or Section
8.1(a)(4), unless the failure of the Closing to occur was principally caused by
Sellers' or any Falcon Company's failure to act in good faith or a breach of or
failure to perform any of its representations, warranties, covenants or other
obligations in accordance with the terms of this Agreement.
9.3 Termination by Buyer. This Agreement may be terminated at any time
prior to the Closing by Buyer and the purchase and sale of the Purchased
Interests abandoned, upon written notice to Sellers, upon the occurrence of any
of the following:
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(a) Conditions. If on any date determined for the Closing in
accordance with Section 8.1, each condition set forth in Section 7.2 has been
satisfied (or will be satisfied by the delivery of documents at the Closing) or
waived in writing by Sellers on such date and either (i) a condition set forth
in Section 7.1 has not been satisfied (or will not be satisfied by the delivery
of documents at the Closing) or waived in writing by Buyer on such date or (ii)
Sellers have nonetheless refused to consummate the Closing; provided that
Sellers shall have five days to cure such matter after receipt of notice of
Buyer's intent to terminate pursuant to this Section 9.3(a). Notwithstanding the
foregoing, Buyer may not rely on the failure of any condition set forth in
Section 7.1 to be satisfied if such failure was principally caused by Buyer's or
Charter's failure to act in good faith or a breach of or failure to perform any
of its representations, warranties, covenants or other obligations in accordance
with the terms of this Agreement.
(b) Upset Date. If the Closing shall not have occurred on or
prior to the Upset Date as extended as provided in Section 8.1(a)(3) or Section
8.1(a)(4), unless the failure of the Closing to occur was principally caused by
any Buyer's or Charter's failure to act in good faith or a breach of or failure
to perform any of its representations, warranties, covenants or other
obligations in accordance with the terms of this Agreement.
9.4 Effect of Termination. If this Agreement is terminated as provided
in this Section 9, then this Agreement will forthwith become null and void and
there will be no liability on the part of any party to any other party or any
other Person in respect thereof, provided that:
(a) Surviving Obligations. The obligations of the parties
described in Sections 6.2, 9.4, 9.5 and 11.1 (and all other provisions of this
Agreement relating to expenses) will survive any such termination.
(b) Withdrawal of Applications. All filings, applications and
other submissions relating to the consummation of the transaction contemplated
hereby shall, to the extent practicable, be withdrawn from the Governmental
Authority or other Person to whom made.
(c) Willful Breach by Buyer. No such termination will relieve
Buyer from liability for a willful breach by Buyer of this Agreement (which
shall in all events include, without limitation, a failure to pay the Cash
Consideration or the Equity Consideration and discharge the Senior Debt and the
Credit Agreement). If Sellers terminate this Agreement pursuant to Section
9.2(a) because Buyer wrongfully refuses to close after all conditions precedent
to its obligations have been satisfied, (i) Buyer shall, immediately upon
written notice from Sellers of such breach, make a payment in cash (by wire
transfer of immediately available funds to an account or accounts designated by
Sellers) to Sellers of Two Hundred Million Dollars ($200,000,000); and (ii) in
addition to such payment, Sellers and Falcon shall have all rights and remedies
available at law and equity, including additional monetary damages (for example,
to compensate the Sellers for any diminution in the market value of the Falcon
Companies). Buyer agrees that the foregoing payment referred to in clause (i) of
the forgoing sentence is a reasonable estimate of the damages that will be
suffered by Sellers and the Falcon Companies in the event of such a breach by
Buyer as a result of
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the foregone opportunity to complete an initial public offering and other
commercial, partnership and corporate opportunities foregone as a result of
entering into the Purchase Agreement, that such payment does not include amounts
in respect of the category of damages referred to in clause (ii) above relating
to diminution in value and does not constitute a penalty, and Buyer hereby
waives any defense that such amount is a penalty or is otherwise not
enforceable. Sellers agree that notwithstanding the foregoing, any amounts paid
in respect of damages described in clause (i) above will be credited against any
payment required for damages described in clause (ii) above.
(d) Willful Breach by Falcon or Sellers. No such termination
will relieve Seller or Falcon from liability for a willful breach of this
Agreement. If Buyer terminates this Agreement pursuant to Section 9.3(a) because
Falcon wrongfully refuses to close after all conditions precedent to its
obligations have been satisfied, Buyer shall have all rights and remedies
available at law or equity, including the remedy of specific performance,
against Falcon. No such termination will relieve any Seller from liability for
its willful breach of this Agreement. If Buyer terminates this Agreement
pursuant to Section 9.3(a) because any Seller wrongfully refuses to close after
all conditions precedent to its obligations have been satisfied, Buyer shall
have all rights and remedies available at law or equity, including the remedy of
specific performance against such breaching Seller.
(e) No Recourse. Anything in this Agreement or applicable law
to the contrary notwithstanding, in the event this Agreement is terminated as
provided in this Section 9:
(1) Buyer will not have any claim or recourse against
any of the Sellers, or any of their respective officers, directors,
shareholders, members, partners, employees, agents or Affiliates (other than
Falcon) as a result of the breach of any representation, warranty, covenant or
agreement of Falcon contained herein or otherwise arising out of or in
connection with the transactions contemplated by this Agreement or the business
or operations of the Falcon Companies prior to the Closing. Buyer's sole
recourse shall be against Falcon.
(2) No Seller or Falcon Company will have any claim
or recourse against Buyer's respective officers, directors, shareholders,
members, partners, employees, agents or Affiliates as a result of the breach of
any representation, warranty, covenant or agreement of Buyer contained herein or
otherwise arising out of or in connection with the transactions contemplated by
this Agreement or the compliance by Buyer with its covenants prior to the
Closing. The Sellers' and Falcon's sole recourse shall be against Buyer.
9.5 Attorneys' Fees. Notwithstanding any provision in this Agreement
that may limit or qualify a party's remedies, in the event of a default by any
party that results in a lawsuit or other proceeding for any remedy available
under this Agreement, the prevailing party shall be entitled to reimbursement
from the defaulting party of its reasonable legal fees and expenses (whether
incurred in arbitration, at trial, or on appeal).
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SECTION 10: SURVIVAL
10.1 Survival.
None of the representations and warranties of Falcon or
Sellers set forth herein shall survive the Closing, except for: (i) the
representation and warranty of the respective Seller set forth in Section 4.4(a)
as to the title to the Purchased Interests of such Seller, which shall survive
indefinitely, and (ii) the representations and warranties of Falcon set forth in
the second and fifth sentences of Section 3.3(b), which shall also survive
indefinitely, and (iii) the representation of Falcon set forth in Section 3.12
with respect to income Taxes, which shall survive for the applicable statute of
limitations period. Sellers will indemnify and hold Buyer harmless from and
against all losses and damages arising out of any breach of any representation
and warranty that survives the Closing so long as such representation and
warranty survives as provided in the preceding sentence, provided that no Seller
shall have any liability for a breach by another Seller of the representation
and warranty referred to in clause (i) above, and each Seller's liability for a
breach by Falcon of the representations and warranties referred to in clauses
(ii) and (iii) above shall be limited to its proportionate share of the losses
and damages based on its proportionate share of the Aggregate Consideration.
None of the covenants and agreements of Sellers set forth herein shall survive
the Closing, other than the agreements of Sellers contained in Sections
2.6(b)(1)(B), 6.2(b), 6.4(e), 6.4(g) (if applicable), 6.10, 11.1, 11.2, 11.3,
11.4, 11.5, 11.6, 11.7, 11.8, 11.9, 11.10 and 11.11, which shall survive the
Closing until performed and discharged in full. None of the representations and
warranties of Buyer set forth herein shall survive the Closing. The covenants
and agreements of Buyer set forth herein to be discharged in full prior to the
Closing shall not survive the Closing. All covenants and agreements of Buyer set
forth herein to be performed in whole or in part after the Closing shall survive
the Closing until performed and discharged in full. Notwithstanding anything in
this Section 10.1 to the contrary, this Section 10.1 shall not apply to any
representations, warranties, covenants or agreements set forth in the other
Transaction Documents, which shall be governed by their respective terms.
SECTION 11: MISCELLANEOUS
11.1 Fees and Expenses. Except as otherwise provided in this Agreement,
each party shall pay its own expenses incurred in connection with the
authorization, preparation, execution, and performance of this Agreement,
including all fees and expenses of counsel, accountants, agents, and
representatives.
11.2 Notices. All notices, demands, and requests required or permitted
to be given under the provisions of this Agreement shall be in writing, may be
sent by telecopy (with automatic machine confirmation), delivered by personal
delivery, or sent by commercial delivery service or certified mail, return
receipt requested, shall be deemed to have been given on the date of actual
receipt, which may be conclusively evidenced by the date set forth in the
records of any commercial delivery service or on the return receipt, and shall
be addressed to the recipient at the address
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specified below, or with respect to any party, to any other address that such
party may from time to time designate in a writing delivered in accordance with
this Section 11.2:
If to Falcon or Sellers: Falcon Cable TV
00000 Xxxxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, CEO
and
Xxxxxxx Xxxxxxxxxx, Executive Vice
President and General Counsel
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
and
TCI Falcon Holdings, LLC
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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with a copy (which shall
not constitute notice) to: Dow, Xxxxxx & Xxxxxxxxx
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
and
Xxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
and
Xxxxxxx & Kagon
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
and
Xxxxxxx & Xxxxxx
000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to Buyer: Charter Communications, Inc.
00000 Xxxxxxxxxxx Xxxxx, Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, President & C.E.O.
(with a copy to Xxxxxx X. Xxxx, Senior Vice
President and General Counsel)
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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with a copy (which should
not constitute notice) to: Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
11.3 Benefit and Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto (and, in the case of Sections
6.9, 6.12 and 6.13, the parties specified therein) and their respective
successors and permitted assigns; provided that (a) neither this Agreement nor
any of the rights, interests or obligations hereunder may be assigned by Falcon
or Sellers without the prior written consent of Buyer (which consent shall not
be unreasonably withheld or delayed), and (b) neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by Buyer without
the prior written consent of Sellers (which consent shall not be unreasonably
withheld or delayed), except (i) Buyer may, upon notice to Sellers, assign all
or a portion of its rights, but not its obligations, hereunder to an Affiliate
of Buyer, as long as such assignment does not hinder or delay the consummation
of the transactions contemplated hereby and by the other Transaction Documents.
Consent shall be deemed to be reasonably withheld if the consenting party
reasonably determines that the assignment would be reasonably likely to hinder
or delay the Closing or adversely affect the payment of the Aggregate
Consideration at the Closing or the performance of any covenants or agreements
of Buyer. Buyer also agrees that Sellers may distribute the Purchase
Consideration or their right to receive the Purchase Consideration to their
respective stockholders, partners and members. This Agreement is not intended to
confer upon any Person other than the parties hereto (and, in the case of
Sections 6.9, 6.12 and 6.13, the parties specified therein) any rights or
remedies hereunder.
11.4 Further Assurances. After the Closing the parties shall take any
actions and execute any other documents that may be necessary or desirable to
the implementation and consummation of this Agreement upon the reasonable
request of any other party, at the expense of the requesting party.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
THE CHOICE OF LAW PROVISIONS THEREOF).
11.6 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION,
PERFORMANCE OR ENFORCEMENT HEREOF.
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11.7 Severability. Any provision (or portion thereof) of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portion of such provision or
the other provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by applicable law) not
invalidate or render unenforceable such provision in any other jurisdiction.
Notwithstanding the foregoing, in the event of any such determination the effect
of which is to affect materially and adversely any party, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled and consummated to the maximum extent
possible.
11.8 Entire Agreement. This Agreement, the Disclosure Schedules and the
Exhibits hereto, the other Transaction Documents to be delivered by the parties
pursuant to this Agreement and the Confidentiality Agreement collectively
represent the entire understanding and agreement between Buyer, Falcon and
Sellers with respect to the subject matter hereof and thereof and supersede all
prior agreements, understandings and negotiations between the parties. Buyer
acknowledges that none of Falcon or Sellers has made any, or makes any,
promises, representations, warranties, covenants or undertakings, express or
implied, other than those expressly set forth in this Agreement, the other
Transaction Documents and the Confidentiality Agreement.
11.9 Amendments; Waiver of Compliance; Consents. This Agreement may be
amended and any provision of this Agreement may be waived; provided that any
such amendment or waiver (a) will be binding upon Falcon or Sellers prior to the
Closing only if such amendment or waiver is set forth in a writing executed by
Falcon and Sellers, (b) will be binding upon Sellers after the Closing only if
such amendment or waiver is set forth in a writing executed by Sellers and (c)
will be binding upon Buyer only if such amendment or waiver is set forth in a
writing executed by Buyer.
11.10 Counterparts. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were upon the same
instrument.
11.11 Specific Performance. The parties recognize that in the event
Sellers should refuse to perform at the Closing any of its obligations under the
provisions of this Agreement, monetary damages alone will not be adequate. Buyer
shall therefore be entitled, in addition to any other remedies which may be
available, including money damages, to obtain specific performance of any of the
obligations of the Sellers under the provisions of this Agreement to be
performed at Closing, without the requirement of posting a bond or other
security. In the event of any action to enforce this Agreement specifically
pursuant to this Section 11.12, Sellers hereby waive the defense that there is
an adequate remedy at law.
11.12 Tax Consequences. No party to this Agreement makes any
representation or warranty, express or implied, with respect to the Tax
implications of any aspect of this Agreement on any other party to this
Agreement, and all parties expressly disclaim any such representation or
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warranty with respect to any Tax consequences arising under this Agreement. Each
party has relied solely on its own Tax advisors with respect to the Tax
implications of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURES ON FOLLOWING PAGES]
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IN WITNESS WHEREOF, this Agreement has been executed by each of Buyer,
Falcon and Sellers as of the date first written above.
SELLERS:
FALCON HOLDING GROUP, L.P.
By: Falcon Holding Group, Inc.,
General Partner
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Executive Vice President
TCI FALCON HOLDINGS, LLC
By: /s/ Xxxxx Xxxxx
------------------------------
Name: Xxxxx Xxxxx
Title: Vice President
FALCON HOLDING GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Executive Vice President
FALCON CABLE TRUST
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Trustee
DHN INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Executive Vice President
BUYER:
CHARTER COMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxx
-------------------------------
Name: Xxxxxx X. Xxxx
Title: Senior Vice President
FALCON:
FALCON COMMUNICATIONS, L.P.
By: Falcon Holding Group, L.P.,
General Partner
By: Falcon Holding Group, Inc.
General Partner
By: /s/ Xxxxxxx X. Xxxxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Executive Vice President
By: TCI Falcon Holdings, LLC,
General Partner
By: /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: Vice President
[THIS IS A SIGNATURE PAGE
TO THE PURCHASE AGREEMENT]
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EXHIBIT B
PUT AGREEMENT
This Put Agreement ("Agreement") is made as of the ___ day of _____, by
and between Xxxx X. Xxxxx, an individual ("Xxxxx"), and Falcon Holding Group,
L.P., a Delaware corporation (the "Holder"), with reference to the following
facts:
A. Charter Communications, Inc. ("Charter") is a party to that certain
Purchase and Contribution Agreement (the "Purchase and Contribution Agreement"),
dated May ____, 1999, pursuant to which Charter and its affiliates have acquired
all of the outstanding equity of Falcon Communications, L.P., and certain of its
affiliated entities. Xxxxx is the controlling stockholder of Charter and expects
to derive benefit from the transactions contemplated by the Purchase and
Contribution Agreement.
B. Under the Purchase and Contribution Agreement, the Holder has
acquired __________ units of limited liability company interests in __________
("Charter LLC"), which are exchangeable for shares of common stock of __________
("PublicCo").
C. As an inducement for the Holder to enter into the Purchase and
Contribution Agreement, Charter agreed that Xxxxx would grant the Holder the Put
Option provided for herein, and the execution and delivery of this Agreement by
Xxxxx was a condition to the Holder's performance of its obligations under the
Purchase and Contribution 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:
1. Definitions. As used in this Agreement, the following terms have the
following meanings:
"Closing Price" means, with respect to a share of PublicCo common
stock, (i) the last reported sales price, regular way, as reported on the
principal national securities exchange on which shares of PublicCo common stock
are listed or admitted for trading or (ii) if shares of PublicCo common stock
are not listed or admitted for trading on any national securities exchange, the
last reported sales price, regular way, as reported on the Nasdaq National
Market or, if shares of PublicCo common stock are not listed on the Nasdaq
National Market, the average of the highest bid and lowest asked prices as
reported on the Nasdaq Stock Market.
"Interests" means all limited liability company interests in Charter
LLC issued to the Holder pursuant to the Purchase and Contribution Agreement,
all shares of common stock of PublicCo issued in exchange for such limited
liability company interests in Charter LLC, and all other securities that
constitute "Interests" in accordance with Section 5 of this Agreement.
"IPO Price" means the price per share at which shares of common stock
of PublicCo are sold to the price in PublicCo's initial public offering (without
reduction for underwriters' fees, discounts, commissions, and other selling
expenses).
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"Issuer" means the issuer of the Interests.
"Minimum Amount" means the least of (i) Interests for which the
Purchase Price under this Agreement is at least $50,000,000, (ii) Interests
representing at least 50% of the equity represented by all Interests issued to
the Holder pursuant to the Purchase and Contribution Agreement, or (iii) all
Interests that are subject to the Holder's Put Option under this Agreement.
2. Put Option. Xxxxx hereby grants to the Holder the right and option
(the "Put Option"), exercisable from the date hereof through and including the
date of termination of the Put Option under Section 7 by written notice
delivered to Xxxxx, to sell to Xxxxx or his designee, from time to time, on one
or more occasions, all or any portion of the Holder's Interests that represents
at least the Minimum Amount. Upon the giving of such notice, Xxxxx shall be
obligated to buy or to cause his designee to buy and, subject to Section 5.4,
the Holder shall be obligated to sell, the amount of the Holder's Interests
specified in the Holder's notice pursuant to this Section 2, at the price and
upon the terms and conditions specified in Section 3.
3. Purchase Price; Closing.
3.1 The purchase price to be paid upon any exercise of the Put
Option (the "Purchase Price") shall be equal to $____ per unit of limited
liability company interests in Charter LLC 1 represented by the Interests to be
purchased and sold (calculated in accordance with Section 5, if applicable),
plus interest thereon at a rate of four and one-half percent (4.5%) per year,
compounded annually, for the period from the date of the closing under the
Purchase and Contribution Agreement through the closing of the purchase and sale
of the Interests hereunder (the "Closing").
3.2 At each Closing, (a) Xxxxx or his designee shall pay to the
Holder the Purchase Price in immediately available funds by wire transfer or
certified bank check; and (b) the Holder shall deliver to Xxxxx or his designee
one or more certificates evidencing the Interests to be purchased and sold at
such Closing (if such Interests are certificated securities), together with duly
executed assignments separate from certificate in form and substance sufficient
to effectuate the transfer of such Interests to Xxxxx or his designee, together
with a certificate of the Holder and its Permitted Transferee, if applicable,
reaffirming the representations in Section 4; provided, however, that the Holder
shall not be required to take any actions or deliver any documents to satisfy
any restrictions imposed by the Issuer on the transfer of the Interests.
3.3 Each Closing shall be held at the offices of Irell & Xxxxxxx in
Los Angeles, California, on the tenth business day after the Holder delivers the
written notice described above, or at such other time and place as the Holder
and Xxxxx may agree. The Holder and Xxxxx will cooperate so as to permit all
documents required to be delivered at the Closing to be delivered by mail,
delivery service or courier without requiring either party or his or its
representatives to be physically present at the Closing.
____________
(1) The amount per unit will be inserted upon execution and will equal
the Equity Value (as defined in the Purchase and Contribution Agreement) divided
by the total number of units issued to Falcon Holding Group, L.P. at the closing
under the Purchase and Contribution Agreement.
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4. Representations of the Holder. The Holder represents and warrants to
Xxxxx and any of his designees or assignees that on the date hereof and at each
Closing: (a) the Holder has full power and authority to execute and deliver this
Agreement and consummate the transactions contemplated hereby; (b) this
Agreement is the legal, valid and binding obligation of the Holder, enforceable
against the Holder in accordance with its terms; (c) at each Closing, the Holder
will own all of the Interests required to be purchased and sold at such 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 Interests), other than those
arising under applicable law and those arising under the organizational
documents of the Issuer; (d) upon the transfer of the Interests pursuant to
Section 3, Xxxxx or his designee will receive good title to the Interests, free
and clear of all liens, encumbrances and adverse interests created by the
Holder, other than those arising under applicable law or those arising under the
organizational documents of the Issuer.
5. Adjustment for Exchange, Reorganizations, Stock Splits, etc.
5.1 Upon the exchange of Interests consisting of units of limited
liability company interests in Charter LLC for Interests consisting of shares of
common stock of PublicCo, the Purchase Price per share for such shares of common
stock of PublicCo shall equal the aggregate Purchase Price for all Interests
immediately prior to such exchange, as specified in Section 3.1, as it may have
been adjusted pursuant to this Section 5, divided by the number of shares of
common stock of PublicCo issued in exchange for such units, subject to further
adjustment pursuant to this Section 5.
5.2 If the Interests are increased, decreased, changed into, or
exchanged for a different number or kind of shares or securities of the Issuer
through reorganization, recapitalization, reclassification, stock dividend,
stock split or reverse stock split, or other similar transaction, an appropriate
adjustment shall be made with respect to number and kind of shares or securities
subject to the Put Option, without change in the total price applicable to the
unexercised portion of the Put Option but with a corresponding adjustment in the
price for unit of any security covered by the Put Option. Any shares or
securities that become subject to the Put Option pursuant to this Section 5.2
shall constitute "Interests" for purposes of this Agreement.
5.3 Upon a reorganization, merger or consolidation of the Issuer
with one or more other corporations or entities (any of the foregoing, a
"Business Combination") pursuant to which the outstanding Interests are
converted into or exchanged for any other security ("Replacement Securities"),
the Put Option shall cease to be exercisable with respect to the securities that
previously constituted "Interests" and shall instead be automatically converted
into an option to sell such number of shares or units of Replacement Securities
issued in exchange for the Interests pursuant to such Business Combination at a
price per share or unit of Replacement Securities equal to the aggregate
Purchase Price for all Interests immediately prior to such effectiveness divided
by the number of shares or units of Replacement Securities subject to the Put
Option immediately following such effectiveness. Any Replacement Securities that
become subject to the Put Option pursuant to this Section 5.3 shall constitute
"Interests" for purposes of this Agreement.
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5.4 In the event of any proposed Business Combination pursuant to
which the outstanding Interests will be converted into a right to receive
consideration other than securities of the Issuer or Replacement Securities, (i)
Xxxxx will provide notice thereof to the Holder at least ten (10) days prior to
consummation of such Business Combination and (ii) the Put Option will expire
two days prior to such consummation except with respect to any Interests that
are specified in a notice delivered by the Holder pursuant to Section 2 prior to
such date. If the Holder delivers a notice pursuant to Section 2 after its
receipt of a notice from Xxxxx pursuant to this Section 5.4, the purchase and
sale of any of the Interests specified in the Holder's notice may be conditioned
at the Holder's option on the consummation of the Business Combination described
in Xxxxx'x notice pursuant to this Section 5.4.
6. Representations of Xxxxx. Xxxxx represents and warrants to the
Holder and each Permitted Transferee that on the date hereof and at all times
hereafter through the Closing: (a) Xxxxx has full power and authority to execute
and deliver this Agreement and consummate the transactions contemplated hereby;
and (b) this Agreement constitutes the legal, valid and binding obligation of
Xxxxx, enforceable against Xxxxx in accordance with its terms.
7. Termination of Put Option.
7.1 The Put Option shall terminate on the earliest of the following
dates, except with respect to any Interests that are specified in a notice
delivered by the Holder pursuant to Section 2 prior to such earliest date:
(a) the second anniversary of the date of the closing under the
Purchase and Contribution Agreement;
(b) the date specified in Section 5.4; and
(c) the first date on which both of the following conditions are
satisfied:
(i) the Closing Price of PublicCo common stock has exceeded
115% of the IPO Price for any 90 trading days during the preceding 100
consecutive trading days (which period of 100 trading days shall not have
commenced prior to the closing under the Purchase and Contribution Agreement);
and
(ii) all shares of PublicCo common stock then held by the
Holder and subject to the Put Option (or all shares of PublicCo common stock
that the Holder may then acquire in exchange for limited liability company
interests in Charter LLC that are held by the Holder and subject to the Put
Option) may be sold to the public in their entirety on such date (x) without
registration under the Securities Act of 1933, as amended (the "Act"), pursuant
to Rule 144 under the Act or another comparable provision or (y) pursuant to a
then effective registration statement under the Act.
7.2 The Put Option shall terminate as to any Interests on the date
on which such Interests are first transferred by the Holder to a person or
entity that is not a "Permitted Transferee."
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7.3 For purposes of determining whether the condition in Section
7.1(c)(i) is satisfied, appropriate adjustments will be made to take into
account any subdivision (by stock split or otherwise) or combination (by reverse
stock split or otherwise) of outstanding shares of PublicCo common stock
occurring after the consummation of PublicCo's initial public offering.
8. Miscellaneous.
8.1 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. This Agreement may not be amended, altered or modified
except by a writing signed by both parties.
8.2 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.
8.3 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 of 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 the Holder:
Falcon Holding Group, L.P.
00000 Xxxxxxxx Xxxx., 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx
Telecopy: (000) 000-0000
with a copy to:
Dow, Xxxxxx & Xxxxxxxxx
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxxx X. Xxxx
Telecopy: (000) 000-0000
If to Xxxxx:
Xxxx X. Xxxxx
c/o Xxxxxxx X. Xxxxx @ Vulcan Northwest
000 000xx Xxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
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with a copy to:
Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx
Telecopy: (000) 000-0000
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.
8.4 No Third-Party Benefits. None of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any person or entity
that is not a party to this Agreement, other than any Permitted Transferees of
the Holder.
8.5 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 alternation, modification or
impairment shall be implied by reason of any previous waiver, extension of time,
delay or omission in exercise or other indulgence.
8.6 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.
8.7 Undertakings. All authority herein conferred or agreed to be
conferred upon a party to this Agreement and all agreements of a party contained
herein shall survive the death or incapacity of such party (or any of them).
8.8 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 heirs, estates, personal representatives,
conservators, successors and permitted assigns.
8.9 Assignments.
(a) The Holder may transfer some or all of its Interests to any
person or entity that is a partner of the Holder at the time of the transfer
(each such person or entity, a "Permitted Transferee"), and the Holder may
assign its rights under this Agreement with respect to the transferred
Interests, without the consent of Xxxxx, to such Permitted Transferee.
(b) Upon the transfer of Interests to any Permitted Transferee
and the assignment to such Permitted Transferee of the Holder's rights under
this Agreement with
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respect to the transferred Interests, Xxxxx and the Permitted Transferee will
enter into a Put Agreement in the form of Attachment A-1 or Attachment A-2 to
this Agreement, and Xxxxx and the Permitted Transferee will thereupon have the
rights and be subject to the obligations set forth in such Put Agreement.
(c) Xxxxx is entitled, in his sole discretion, to assign his
rights to purchase any Interests under this Agreement to one or more entities
controlled by Xxxxx, but no such assignment will relieve Xxxxx of any of his
obligations under this Agreement.
8.10 Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without regard to any choice of law provisions of that state
or the laws of any other jurisdiction.
8.11 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.
8.12 Number and Gender. Throughout this Agreement, as the context may
require, (a) the masculine gender includes the feminine and neuter; and the
neuter gender includes the masculine and feminine; and (b) the singular tense
and number includes the plural, and the plural tense and number includes the
singular.
8.13 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.14 Costs. Except as otherwise provided in this Agreement, each party
will bear his or its own costs in connection with the exercise of the Holder's
right under this Agreement and the purchase and sale of any Interests pursuant
to this Agreement.
8.15 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 his or its costs and expenses, including reasonable attorney's
fees, from the non-prevailing party, regardless of whether such legal action is
prosecuted to completion.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
___________________________________
Xxxx X. Xxxxx, by Xxxxxxx X. Xxxxx,
attorney-in-fact
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HOLDER
Falcon Holding Group, L.P.
By: Falcon Holding Group, Inc., its general
partner
By: _________________________________
Name:
Title:
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EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
__________, is entered into by and among [Charter], a Delaware corporation
("Charter") and the other Persons executing this Agreement.
PRELIMINARY STATEMENTS
In connection with the consummation of the transactions contemplated by
the Purchase and Contribution Agreement, dated as of May __, 1999 (the "Purchase
Agreement"), among Charter Communications, Inc., Falcon Holding Group, L.P., and
certain other parties, Falcon Holding Group, L.P. acquired membership interests
in [New Charter LLC]. Falcon Holding Group, L.P. subsequently distributed the
membership interests in [New Charter LLC] to the parties to this Agreement
(other than [itself and] Charter). Pursuant to the Exchange Agreement, the
holder of a membership interest in [New Charter LLC] may exchange its membership
interest for shares of Common Stock.
As a result of such transactions, each of the parties to this Agreement
(other than Charter), either holds a membership interest in [New Charter LLC]
and has the right to exchange its membership interest in [New Charter LLC] for
shares of Common Stock or holds shares of Common Stock that were issued in
exchange for a membership interest in [New Charter LLC].
In the Purchase Agreement, Charter Communications, Inc. agreed that
Charter would enter into this Agreement to provide for certain registration
rights with respect to the shares of Common Stock issued or issuable in exchange
for membership interests in [New Charter LLC].
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement and covenants hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Certain Definitions.
1.1 Terms Defined in this Section. For purposes of this Agreement,
the following terms have the following meanings:
"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.
"Charter Indemnified Parties" means Charter, its officers, directors,
employees, and agents, and each Person, if any, who controls Charter within the
meaning of either the Securities Act or the Exchange Act, and the officers,
directors, employees, and agents of the foregoing parties.
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"Common Stock" means the [Series __] Common Stock, par value
$__________ per share, of Charter and any securities into or for which such
securities are converted or exchanged by Charter.
"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 Agreement" means __________.
"Indemnified Party" means a Person claiming a right to indemnification
pursuant to Section 6 of this Agreement.
"Indemnifying Party" means a Person required to provide indemnification
pursuant to Section 6 of this Agreement.
"IPO" means the initial primary underwritten public offering of shares
of Common Stock by Charter.
"Losses" means any losses, claims, damages, or liabilities, and any
related legal or other fees and expenses.
"Xxxxxxxxx Stockholder Group" means a group of Stockholders consisting
of each of the following Persons (so long as it is a Stockholder):
(i) Falcon Holding Group, Inc., Falcon Cable Trust, Xxxxxxxxx Family
Trust, Blackhawk Holding Company, Inc., Advance Company, Ltd., Advance TV of
California, Inc., Xxxx Xxxxxxxxx, Xxxxxxxx Xxxxxxxxxxxx, Xxxx X. Xxxxxxxxx, any
member of Xxxx X. Xxxxxxxxx'x family, any Person controlled by Xxxx X. Xxxxxxxxx
or one or more members of his family, and any trust or similar entity for the
benefit of Xxxx X. Xxxxxxxxx or one or more members of his family, and
(ii) any Person (other than Xxxxxxx X. Xxxxxxxxxx) to whom any
Registrable Securities or rights to acquire Registrable Securities are
transferred by any Person that was, immediately prior to such transfer, a member
of the Xxxxxxxxx Stockholder Group.
"Non-Xxxxxxxxx Stockholder Group" means a group of Stockholders
consisting of all Stockholders other than the members of the Xxxxxxxxx
Stockholder Group.
"Person" means any individual, corporation, partnership, limited
partnership, limited liability partnership, limited liability company, trust,
association, organization, or other entity.
"Prospectus" means the prospectus included in a Registration Statement
as of the date it becomes effective under the Securities Act and, in the case of
references to the Prospectus as of a date subsequent to the effective date of
the Registration Statement, as amended or supplemented as of such date,
including all documents incorporated by reference therein, each as amended, and
each applicable prospectus supplement relating to the offering and sale of any
of the Registrable Securities pursuant to such Registration Statement.
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"Registrable Securities" means:
(i) any shares of Common Stock that are issued or issuable to a
Stockholder in exchange for membership interests in [New Charter LLC], pursuant
to the Exchange Agreement, and
(ii) any securities of Charter or its successors issued or issuable
with respect to any shares referred to in paragraph (i) whether by way of
conversion, exchange, dividend, or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation, or other
reorganization or otherwise.
Securities that are Registrable Securities will cease to be Registrable
Securities:
(i) when a registration statement with respect to the sale of such
securities has become effective under the Securities Act and such securities
have been disposed of in accordance with such registration statement,
(ii) when such securities shall have been sold pursuant to Rule 144
or Rule 145 (or any successor provisions) under the Securities Act or in any
other transaction in which the applicable purchaser does not receive "restricted
securities" (as that term is defined for purposes of Rule 144 under the
Securities Act),
(iii) on the first date on which such securities can be sold without
regard to the volume and manner of sale limitations set forth in Rule 144 (or
any successor provision), or
(iv) when such securities cease to be outstanding.
"Registration Statement" means a registration statement (including the
related Prospectus) of Charter under the Securities Act on any form selected by
Charter for which Charter then qualifies and which permits the sale thereunder
of the number and type of Registrable Securities (and any other securities of
Charter) to be included therein in accordance with this Agreement by the
applicable sellers in the manner described therein. The term "Registration
Statement" shall also include all exhibits, financial statements, and schedules
and all documents incorporated by reference in such Registration Statement when
it becomes effective under the Securities Act, and in the case of the references
to the Registration Statement as of a date subsequent to the effective date, as
amended or supplemented as of such date.
"Rule 144-Eligible Securities" means Registrable Securities that can
then be sold by the Stockholder owning such Registrable Securities without
registration under the Securities Act pursuant to Rule 144 (or any successor
provision) under the Securities Act. Except as provided in Section 3.1(d), any
reference in this Agreement to "Registrable Securities" that does not expressly
exclude Rule 144-Eligible Securities shall be interpreted as a reference to all
Registrable Securities, including all Rule 144-Eligible Securities.
"SEC" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act or the Exchange Act.
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"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.
"Selling Stockholder" means any Stockholder whose Registrable
Securities are included at the request of such Stockholder in any Registration
Statement pursuant to Section 2 or Section 3.
"Stockholder" means each party to this Agreement who owns Registrable
Securities or has the right to acquire Registrable Securities pursuant to the
Exchange Agreement and any other Person:
(i) to whom any Registrable Securities or any rights to acquire any
Registrable Securities are transferred by any Person that was, immediately prior
to such transfer, a Stockholder,
(ii) who continues to hold such Registrable Securities or the right
to acquire such Registrable Securities,
(iii) to whom the transferring Stockholder has assigned any of its
rights under this Agreement, in whole or in part, in accordance with the
provisions of Section 8.6 of this Agreement with respect to such Registrable
Securities, and
(iv) who has executed a counterpart hereof in connection with the
transfer of such Registrable Securities.
"Stockholder Group" means the Xxxxxxxxx Stockholder Group or the
Non-Xxxxxxxxx Stockholder Group.
"Stockholder Indemnified Parties" means each Selling Stockholder, its
officers, directors, employees, and agents, each Person (if any) who controls
such Selling Stockholder within the meaning of either the Securities Act or the
Exchange Act, and the officers, directors, employees, and agents of the
foregoing parties.
"Third-Party Demand Stockholder" means any Person having the right to
require that Charter effect a registration under the Securities Act of
securities owned by such Person, other than pursuant to this 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:
Term Section
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Demand Registration Section 2.1
Demanding Stockholders Section 2.2(c)
Incidental Registration Section 3.1(a)
Initiating Stockholder Section 2.2(a)
Material Event Section 2.6(a)
Minimum Condition Section 2.2(d)
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Term Section
---- -------
Registration Expenses Section 5.1
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.
2. Demand Registration.
2.1 Demand Registration Rights. At any time on or after the 180th
day following the consummation of the IPO, each Stockholder shall have the right
to require that Charter register under the Securities Act the offer or sale of
all or a portion of the Registrable Securities held by such Stockholder on the
terms and subject to the conditions and limitations set forth herein. The
registration of Registrable Securities under the Securities Act in accordance
with this Section 2 is referred to in this Agreement as a "Demand Registration."
The number of Demand Registrations to which the Stockholders shall be entitled
shall be as follows:
(a) the Stockholders who are members of the Xxxxxxxxx
Stockholder Group shall be entitled to two Demand Registrations in the
aggregate, plus, if the Stockholders who are members of the Non-Xxxxxxxxx
Stockholder Group no longer own sufficient Registrable Securities (excluding any
Rule 144-Eligible Securities) to satisfy the Minimum Condition and the number of
Demand Registrations effected at the request of such Stockholders is less than
two, the Stockholders who are members of the Xxxxxxxxx Stockholder Group shall
be entitled to a number of additional Demand Registrations in the aggregate
equal to two minus the number of Demand Registrations effected at the request of
the Stockholders who are members of the Non-Xxxxxxxxx Stockholder Group; and
(b) the Stockholders who are members of the Non-Xxxxxxxxx
Stockholder Group shall be entitled to two Demand Registrations in the
aggregate, plus, if the Stockholders who are members of the Xxxxxxxxx
Stockholder Group no longer own sufficient Registrable Securities (excluding any
Rule 144-Eligible Securities) to satisfy the Minimum Condition and the number of
Demand Registrations effected at the request of such Stockholders is less than
two, the Stockholders who are members of the Non-Xxxxxxxxx Stockholder Group
shall be entitled to a number of additional Demand Registrations in the
aggregate equal to two minus the number of Demand Registrations effected at the
request of the Stockholders who are members of the Xxxxxxxxx Stockholder Group.
2.2 Procedures for Demand Registrations.
(a) A Stockholder holding Registrable Securities may elect to
initiate a Demand Registration pursuant to this Section 21.3 by furnishing
Charter and such Stockholder's Stockholder Group with a written notice
specifying the number of Registrable Securities that
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such Stockholder desires to have registered, whether any of such Registrable
Securities are Rule 144-Eligible Securities, and such Stockholder's intended
method or methods of distribution of all such Registrable Securities. The
Stockholder delivering a notice pursuant to the preceding sentence is referred
to as the "Initiating Stockholder." The Registrable Securities that the
Initiating Stockholder desires to have registered, as specified in its notice
pursuant to this Section 2.2(a), must include some Registrable Securities that
are not Rule 144-Eligible Securities. If the number of Registrable Securities
(excluding any Rule 144-Eligible Securities) that the Initiating Stockholder
desires to have registered, as specified in its notice pursuant to this Section
2.2(a), does not satisfy the Minimum Condition, then, any member of the
Stockholder Group of which the Initiating Stockholder is a member may, within
twenty days after its receipt of the Initiating Stockholder's notice pursuant to
this Section 2.2(a), deliver a written notice to Charter and such Stockholder's
Stockholder Group specifying the number of Registrable Securities that such
Stockholder desires to have registered, whether any of such Registrable
Securities are Rule 144-Eligible Securities, and such Stockholder's intended
method or methods of distribution of such Registrable Securities.
(b) If the number of Registrable Securities (excluding any Rule
144-Eligible Securities) that the Stockholders in a Stockholder Group desire to
have registered, as specified in their notices pursuant to Section 2.2(a), does
not satisfy the Minimum Condition, then Charter will have no obligation to
effect a Demand Registration in response to such notices pursuant to Section
2.2(a), but nothing herein will limit the rights of the Stockholders in such
Stockholder Group to require on a subsequent occasion that Charter effect a
Demand Registration to which the Stockholders in such Stockholder Group are
entitled under Section 2.1.
(c) If the number of Registrable Securities (excluding any Rule
144-Eligible Securities) that the Stockholders in a Stockholder Group desire to
have registered, as specified in their notices pursuant to Section 2.2(a),
satisfies the Minimum Condition, then Charter will notify such Stockholder Group
that the Minimum Condition was satisfied. Any member of that Stockholder Group
may elect, by written notice delivered to Charter within ten days after its
receipt of Charter's notice pursuant to this Section 2.2(c), to include any or
all of its Registrable Securities in the Demand Registration. A Stockholder's
notice pursuant to this Section 2.2(c) will specify (i) the amount of such
Stockholder's Registrable Securities to be included the Demand Registration,
(ii) whether any of such Registrable Securities are Rule 144-Eligible
Securities, (iii) such Stockholder's intended method or methods of distribution
of its Registrable Securities, and (iv) any other information that Charter
reasonably requests. The Stockholders in a Stockholder Group that deliver
notices pursuant to Section 2.2(a) or this Section 2.2(c) are referred to as the
"Demanding Stockholders."
(d) The "Minimum Condition" means that the number of Registrable
Securities (other than any Rule 144-Eligible Securities) that the Stockholders
in a Stockholder Group desire to have registered, as specified in their notices
pursuant to Section 2.2(a),
(i) have an aggregate market value on the date of the
delivery of the Initiating Stockholder's notice pursuant to Section 2.2(a)
(before any underwriting or brokerage discounts and commissions) of not less
than $40,000,000; or
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(ii) have an aggregate value at the price to the public of
shares of Common Stock in the IPO (before any underwriting or brokerage
discounts and commissions, and adjusted as necessary for any events described in
Section 2.9(d) occurring between the consummation of the IPO and the calculation
of the Minimum Condition) of not less than $60,000,000.
(e) Following the effectiveness of a Registration Statement
filed in connection with a Demand Registration, Charter will not be required to
file a Registration Statement for a subsequent Demand Registration within six
months after the date on which it received the Initiating Stockholder's notice
pursuant to Section 2.2(a) for the immediately preceding Demand Registration
(regardless of whether the subsequent Demand Registration is requested by
Stockholders in the same Stockholder Group as the immediately preceding Demand
Registration).
(f) As soon as reasonably practicable after the Stockholders in
a Stockholder Group have notified Charter that they desire to have registered a
number of Registrable Securities (excluding any Rule 144-Eligible Securities)
that satisfies the Minimum Condition, subject to Section 2.6(a) and Section
2.6(e), Charter will file with the SEC and use its reasonable best efforts to
cause to become effective as promptly as practicable a Registration Statement
that covers the Registrable Securities requested to be registered in the manner
set forth above. Subject to the provisions of Section 2.3 below, each
Registration Statement may also include securities to be sold for the account of
Charter, for Stockholders who do not participate as Demanding Stockholders but
who exercise their rights under Section 3 below, or for any stockholder of
Charter not holding Registrable Securities.
2.3 Underwriters. One or more Demanding Stockholders owning more than
50% of the Registrable Securities to be included in a Demand Registration shall
collectively have the right to select the lead book running managing underwriter
for any underwritten public offering in connection with a Demand Registration,
which lead managing underwriter shall be reasonably acceptable to Charter. Each
Demanding Stockholder electing to participate in a Demand Registration involving
an underwritten public offering shall, as a condition to Charter's obligation
under this Section 2 to include such Demanding Stockholder's Registrable
Securities in the Demand Registration, enter into and perform its obligations
under an underwriting agreement or other similar arrangement in customary form
with the lead underwriter of such offering.
2.4 Shelf Registration. If at the time the Minimum Condition is
satisfied, Charter is eligible to file a registration statement on Form S-3 (or
any equivalent successor form), then one or more Demanding Stockholders owning
more than 50% of the Registrable Securities to be included in a Demand
Registration may elect to require that the Demand Registration be effected
pursuant to a shelf registration under Rule 415 of the Securities Act; provided,
however, that (a) Charter will not be required to effect the Demand Registration
pursuant to a shelf registration under Rule 415 of the Securities Act if Charter
has been advised by an independent investment banking firm of nationally
recognized standing that such method of distribution could reasonably be
expected to materially and adversely affect the public market for the Common
Stock or materially and adversely affect any financing then being contemplated
by Charter; (b) the Demanding Stockholders may not elect to require that the
Demand
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Registration be effected pursuant to a shelf registration under Rule 415 of the
Securities Act unless the Registrable Securities to be included in the Demand
Registration have an aggregate market value on the date of the Demanding
Stockholders' election (before any underwriting or brokerage discounts and
commissions) of at least $100,000,000; and (c) during the time any such shelf
registration is effective, Charter may require from time to time that the
Selling Stockholders refrain from selling pursuant to such registration under
the circumstances, in the manner, and for the time period described in Section
2.6. Charter will use its reasonable best efforts to cause any Demand
Registration effected as a shelf registration under Rule 415 of the Securities
Act to remain effective for a period ending on the earlier of (i) the date that
is a number of days after the effective date of the Registration Statement equal
to 365 plus the number of days that the Selling Stockholders must refrain from
selling pursuant to Section 2.6, and (ii) the date on which all Registrable
Securities covered by the Registration Statement have been sold pursuant to the
Demand Registration; and (d) Charter will not be required under this Section 2.4
to effect more than one Demand Registration as a shelf registration under Rule
415 of the Securities Act.
2.5 Limitation on Inclusion of Registrable Securities.
(a) If the book running managing underwriter of any underwritten
public offering in connection with a Demand Registration determines in good
faith that the aggregate number of Registrable Securities to be offered exceeds
the number of shares that could be sold without having an adverse effect on such
offering (including the price at which the Registrable Securities may be sold),
then the number of Registrable Securities to be offered for the accounts of the
Demanding Stockholders in such offering shall be reduced or limited on a pro
rata basis, based on the respective numbers of Registrable Securities requested
to be included in such offering by all Demanding Stockholders, to the extent
necessary to reduce the total number of shares to be included in such offering
to the amount recommended by the book running managing underwriter; provided,
however, that if such registration includes securities other than Registrable
Securities of the Demanding Stockholders (whether for the account of Charter or
for any stockholder of Charter not exercising rights under this Section 21.3),
such reduction shall be made:
(i) first, from securities held by Persons who are not
Stockholders and from securities being offered for the account of Charter,
allocated between Charter and such other Persons as Charter may determine,
subject to any agreements between Charter and such other Persons;
(ii) second, from the number of Registrable Securities requested
to be included in such offering by Stockholders pursuant to their rights under
Section 3, on a pro rata basis, based on the number of Registrable Securities
requested to be included in the registration by Stockholders pursuant to their
rights under Section 3; and
(iii) last, from the number of Registrable Securities requested
to be included in such offering by the Demanding Stockholders, on a pro rata
basis, based on the number of Registrable Securities requested to be included in
the registration by the Demanding Stockholders.
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(b) One or more Demanding Stockholders owning more than 50% of the
Registrable Securities to be included in a requested Demand Registration may
elect not to proceed with the registration if less than 75% of the Registrable
Securities requested to be registered by each of the Demanding Stockholders are
included in such registration. If Demanding Stockholders owning more than 50% of
the Registrable Securities to be included in a requested Demand Registration
elect not to proceed with the registration pursuant to this Section 2.5(b), the
Registration Statement for such registration shall be promptly withdrawn, a
Demand Registration shall not be deemed to have been effected for purposes of
this Agreement (including the limitations on the number of Demand Registrations
of each Stockholder Group set forth in Section 2.1 above), and the Demanding
Stockholders shall pay all out-of-pocket Registration Expenses incurred by
Charter in connection with such Registration Statement.
2.6 Delay of Filing or Sales.
(a) Charter shall have the right, exercisable by giving notice of
the exercise of such right to the applicable Selling Stockholders, subject to
Section 2.6(b), at any time and from time to time, to delay filing or the
declaration of effectiveness of a Registration Statement or to require the
applicable Selling Stockbrokers not to sell any Registrable Securities pursuant
to an effective Registration Statement for a period not in excess of 120 days
beginning on the date on which such notice is given, or such shorter period of
time as may be specified in such notice or in a subsequent notice delivered by
Charter to such effect prior to or during the effectiveness of the Registration
Statement, if:
(i) Charter is engaged in discussions or negotiations with
respect to, or there otherwise is pending, any merger, acquisition, or other
form of business combination that is "probable" (within the meaning of the
Securities Act), any divestiture, tender offer, financing, or other event that,
in any such case, is material to Charter (any such activity or event, a
"Material Event"),
(ii) such Material Event would, in the judgment of Charter's
board of directors (after consultation with counsel), require disclosure so as
to permit the Registrable Securities to be sold in compliance with law, and
(iii) disclosure of such Material Event would, in the judgment
of Charter's board of directors (after consultation with counsel), be adverse to
its interests.
(b) Charter may not delay the filing of a Registration Statement or
the sale of any Registrable Securities, whether pursuant to one or more notices
pursuant to Section 2.6(a), for more than an aggregate of 120 days within any
12-month period.
(c) If Charter postpones its obligations under this Agreement by
reason of a Material Event as described in Section 2.6(a), any Selling
Stockholder will have the right to withdraw its Registrable Securities from the
applicable Demand Registration or Incidental Registration, by giving notice to
Charter at any time following delivery of Charter's notice pursuant to Section
2.6(a).
(d) No Stockholder may deliver a notice pursuant to the first
sentence of Section 2.2(a) during the period of any postponement pursuant to
Section 2.6(a) until Charter
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notifies all Stockholders of the end of such Material Event or the expiration of
the 120-day period described in Section 2.6(a).
(e) Charter shall have the right, exercisable by giving notice of
the exercise of such right to the applicable Selling Stockholders, to delay
filing or the declaration of effectiveness of a Registration Statement during
any period in which, as a result of Charter's failure to satisfy the conditions
in Rule 3-01(c) of Regulation S-X, Charter is required to include in the
Registration Statement audited financial statements of Charter prior to the date
on which such audited financial statements would normally have been prepared in
accordance with Charter's past practices and the SEC's periodic reporting
requirements.
2.7 Withdrawal.
(a) If (i) a Registration Statement filed pursuant to this Section 2
does not remain effective under the Securities Act for the period specified in
Section 2.8(a) due to a stop order, injunction, or other order of the SEC or
other governmental agency, and (ii) each of the Demanding Stockholders has not
sold at least two-thirds of its Registrable Securities registered under such
Registration Statement, then the Demanding Stockholders may elect to withdraw
such Registration Statement by written notice to Charter; and, in such an event,
such registration shall not be deemed to have been a Demand Registration for
purposes of the limitations on the number of Demand Registrations contained in
Section 2.1, and Charter shall bear the Registration Expenses incurred in
connection with such registration.
(b) Each Selling Stockholder may, no less than five Business Days
before any Registration Statement becomes effective, withdraw some or all of its
Registrable Securities from inclusion in the Registration Statement. If such
withdrawals result in the Minimum Condition not being satisfied, then Charter
may withdraw such Registration Statement unless the remaining Demanding
Stockholders agree to include additional Registrable Securities (excluding any
Rule 144-Eligible Securities) in the registration such that the Minimum
Condition would be satisfied or agree to bear the Registration Expenses incurred
by Charter in connection with such registration.
(c) If Charter withdraws a Registration Statement pursuant to
Section 2.7(b), then the requested registration shall be deemed to have been a
Demand Registration for purposes of the limitations on the number of Demand
Registrations contained in Section 2.1 unless
(i) at the time of a Stockholder's withdrawal of Registrable
Securities pursuant to Section 2.7(b), there has been a material adverse change
in the operating results, financial condition, or business of Charter that was
not publicly known at the time that the Minimum Condition was originally
satisfied; or
(ii) Charter has postponed its obligations under this Agreement
by reason of a Material Event as described in Section 2.6(a).
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2.8 Effectiveness of Registration Statement.
(a) In connection with any Demand Registration pursuant to this
Section 21.3, subject to Section 2.6, Charter will use its best efforts to
prepare and file with the SEC any amendments and supplements to the Registration
Statement and the Prospectus used in connection therewith, and to take any other
actions, that may be necessary to keep the Registration Statement and the
Prospectus effective, current, and in compliance with the provisions of the
Securities Act, until the sooner to occur of (i) the sale of all of the
Registrable Securities covered by such Registration Statement in accordance with
the intended methods of distribution thereof or (ii) the 90th day following the
effective date of such Registration Statement.
(b) A Demand Registration shall not be deemed to have been effected
for purposes of this Agreement (including the limitations on the number of
Demand Registrations of each Stockholder Group set forth in Section 2.1 above)
until the Registration Statement therefor shall have been declared effective
under the Securities Act by the SEC (and is not then subject to any stop order,
injunction, or other order or requirement of the SEC or other governmental
agency or court for any reason) for the period specified in Section 2.8.
2.9 Right to Purchase Shares. In lieu of undertaking to effect a Demand
Registration at any time that Charter would otherwise be required to do so under
this Agreement, Charter may instead elect to purchase, or cause to be purchased,
all Registrable Securities that the Demanding Stockholders desire to have
registered, as specified in their notices pursuant to Section 2.2(a), and in any
notice pursuant to Section 2.2(c), on the following terms:
(a) Charter may elect to purchase all, but not less than all, of
such Registrable Securities by delivering written notice of its election to the
Demanding Stockholders within five Business Days after the deadline for a
Stockholder's delivery of a notice pursuant to Section 2.2(c).
(b) Charter may not make an election pursuant to this Section 2.9
unless all Registrable Securities specified in the Demanding Stockholders'
notices pursuant to Section 2.2(a) and Section 2.2(c) are securities for which
the "average trading price" can be determined in accordance with Section 2.9(d).
Charter may not make an election pursuant to this Section 2.9 if such purchase
would require any waiver, consent, or approval of any Person that could impede
or materially delay the closing of the purchase and sale of the Registrable
Securities required to be purchased.
(c) Upon Charter's delivery of notice of its election pursuant to
Section 2.9(a), Charter shall be obligated to purchase, or to cause to be
purchased, and each Demanding Stockholder shall be obligated to sell, the
Registrable Securities specified in the Demanding Stockholder's notice pursuant
to Section 2.2(a) or Section 2.2(c), as applicable.
(d) The purchase price per share for such Registrable Securities
shall be the "average trading price" (determined as provided below) as of the
date on which the Initiating Stockholder sent its notice pursuant to Section
2.2(a) of a share of the same class as such Registrable Securities and shall be
payable to each selling Stockholder in immediately
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available funds at the closing. The "average trading price" as of any date of
any securities will be the average for the twenty full trading days preceding
such date of (i) the last reported sales prices, regular way, as reported on the
principal national securities exchange 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 sales prices,
regular way, as reported on the Nasdaq National Market 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 to 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 this Section 2.9(d), a "trading day" means a day on which the
principal national securities exchange on which such securities are listed or
admitted to trading, or the Nasdaq National Market or the Nasdaq Stock Market,
as applicable, if such securities are 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
securities are not listed or admitted to trading on any national securities
exchange, the Nasdaq National Market or the Nasdaq Stock Market, any Business
Day. For purposes of determining the "average trading price" of any securities,
(i) the applicable sales 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 the
closing of the purchase of Registrable Securities pursuant to this Section 2.9
for any dividend or distribution (other than a dividend or distribution
contemplated by clause (ii)(B) of this sentence) 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 (ii) the applicable sales 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 outstanding shares of such securities occurring prior to
the closing of the purchase of Registrable Securities pursuant to this Section
2.9 or (B) any "ex-dividend" date or any similar date occurring prior to the
closing of the purchase of Registrable Securities pursuant to this Section 2.9
for any dividend or distribution with respect to such securities to be made in
shares of such securities or securities that are convertible, exchangeable, or
exercisable for shares of Common Stock shall be appropriately adjusted, as
determined by the Board of Directors of Charter, to reflect such subdivision,
combination, dividend, or distribution.
(e) The closing of the purchase and sale of such Registrable
Securities shall take place on a date determined by Charter and set forth in the
notice of its election pursuant to Section 2.9(a) which shall not be fewer than
seven nor more than thirty days after the date of Charter's notice of its
election pursuant to Section 2.9(a)
(f) An election by Charter pursuant to this Section 2.9 shall not
affect the number of Demand Registrations to which the Stockholders are entitled
under Section 2.1.
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3. Incidental Registration.
3.1 Notice of Incidental Registration.
(a) Subject to Section 3.1(b) and Section 3.1(c), if Charter at any
time proposes to register under the Securities Act any shares of the same class
as any of the Registrable Securities (whether in an underwritten public offering
or otherwise and whether or not for the account of Charter or for any
stockholder of Charter, including Selling Stockholders registering Registrable
Shares in a Demand Registration pursuant to Section 21.3), in a manner that
would permit the registration under the Securities Act of Registrable Securities
for sale to the public, Charter will give written notice to each Stockholder of
its intention to do so not later than ten days prior to the anticipated filing
date of the applicable Registration Statement. If the proposed registration is
intended to be a Demand Registration, Charter shall give the notice described in
the preceding sentence but only to the Stockholders that did not previously
elect to become Demanding Stockholders pursuant to Section 21.3 with respect to
such registration. Any Stockholder may elect to participate in such registration
on the same basis as the planned method of distribution contemplated by the
proposed registration by delivering written notice of its election to Charter
within five days after its receipt of Charter's notice pursuant to this Section
3.1(a). A Stockholder's election pursuant to this Section 3.1(a) must (i)
specify the amount of Registrable Securities desired to be included in such
registration by such Stockholder and (ii) include any other information that
Charter reasonably requests be included in such registration statement. Upon its
receipt of a Stockholder's election pursuant to this Section 3.1(a), Charter
will, subject to Section 3.2, use its reasonable best efforts to include in such
registration all Registrable Securities requested to be included. Any
registration of Registrable Securities pursuant to this Section 3 is referred to
as an "Incidental Registration."
(b) Charter shall have no obligation under this Section 3 with respect
to any registration effected pursuant to a registration statement on Form S-4
(or any other registration statement registering shares issued in a merger,
consolidation, acquisition, or similar transaction) or Form S-8 or any successor
or comparable forms, or a registration statement filed in connection with an
exchange offer or any offering of securities solely to Charter's existing
stockholders or otherwise pursuant to a dividend reinvestment plan, stock
purchase plan, or other employee benefit plan.
(c) Charter shall have no obligation under this Section 3 with respect
to any registration initiated by one or more Third-Party Demand Stockholders
pursuant to one or more registration rights agreements under which the rights of
all of such Third-Party Demand Stockholders are pari passu, if:
(i) the applicable registration rights agreement between
Charter and such Third-Party Demand Stockholders prohibits the
inclusion in such registration of securities other than those offered
by such Third-Party Demand Stockholders and Charter; and
(ii) no securities other than those offered by such
Third-Party Demand Stockholders are included in such registration.
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(d) Solely for purposes of this Section 3, Rule 144-Eligible Securities
will not be deemed to be Registrable Securities, and any Stockholder owning any
Rule 144-Eligible Securities will have no rights to require an Incidental
Registration of its Rule 144-Eligible Securities, in the case of any
registration in which no stockholder of Charter has the right to include any
securities that could then be sold by such stockholder without registration
under the Securities Act pursuant to Rule 144 (or any successor provision) under
the Securities Act (regardless of whether any such stockholder elects to include
such securities in such registration).
3.2 Limitation on Inclusion of Registrable Securities; Priorities. If
the proposed method of distribution in connection with an Incidental
Registration is an underwritten public offering and the lead managing
underwriter thereof determines in good faith that the amount of securities to be
included in such offering would adversely affect such offering (including an
adverse effect on the price at which the securities proposed to be registered
may be sold), the amount of securities to be offered may be reduced or limited
to the extent necessary to reduce the total number of securities to be included
in such offering to the amount recommended by the lead managing underwriter as
follows:
(a) in connection with an offering initiated by Charter, if
securities are being offered for the account of other Persons
(including any Stockholders) such reduction shall be made:
(i) first, from the securities intended to be offered
by such other Persons (including any Stockholders), on a pro
rata basis, based on the number of Registrable Securities and
other securities that are requested to be included in such
offering; and
(ii) last, from the number of securities to be
offered for the account of Charter;
(b) in connection with an offering initiated by a Third-Party
Demand Stockholder, such reduction shall be made:
(i) first, from securities held by Persons who are
not Stockholders, Third-Party Demand Stockholders, or other
stockholders entitled under any agreements between them and
Charter to participate pari passu with the Selling
Stockholders in such Incidental Registration, and from
securities being offered for the account of Charter, allocated
between Charter and such other Persons as Charter may
determine, subject to any agreements between Charter and such
other Persons;
(ii) second, from the number of Registrable
Securities requested to be included in such offering by the
Selling Stockholders and any other stockholders entitled under
any agreements between them and Charter to participate pari
passu with the Selling Stockholders in such Incidental
Registration, on a pro rata basis, based on the number of
Registrable Securities and other securities which are
requested to be included in the registration; and
(iii) last, from securities being offered by the
Third-Party Demand Stockholders.
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3.3 Delay or Withdrawal of Registration. Charter may, without
the consent of any Stockholder, delay, suspend, abandon, or withdraw
any proposed registration in which any Stockholder has requested
inclusion of such Stockholder's Registrable Securities pursuant to this
Section 3.
3.4 Withdrawal by Selling Stockholder. Each Selling
Stockholder may, no less than five Business Days before the anticipated
effective date of the applicable Registration Statement for an
Incidental Registration, withdraw some or all of its Registrable
Securities from inclusion in the Registration Statement. No such
withdrawal shall relieve any withdrawing Selling Stockholder of its
obligation to pay expenses under Section 5.
3.5 Underwriters; Underwriting Agreement. In connection with
any Incidental Registration involving an underwritten public offering
of securities for the account of Charter or a Third-Party Demand
Stockholder, (a) the managing and lead underwriters shall be selected
by Charter, unless otherwise provided in any agreement between Charter
and any Third-Party Demand Stockholder, and (b) each Selling
Stockholder electing to participate in the Incidental Registration
shall, as a condition to Charter's obligation under this Section 3 to
include such Selling Stockholder's Registrable Securities in such
Incidental Registration, enter into and perform its obligations under
an underwriting agreement or other similar arrangement in customary
form with the managing underwriter of such offering.
4. Obligations with Respect to Registration.
4.1 Obligations of Charter. Whenever Charter is obligated by
the provisions of this Agreement to effect the registration of any
Registrable Securities under the Securities Act, Charter shall:
(a) Subject to the provisions of Section 4.2, use its reasonable best
efforts to cause the applicable Registration Statement to become
effective as promptly as practicable, and to prepare and file with the
SEC any amendments and supplements to the Registration Statement and
to the Prospectus used in connection therewith as may be necessary to
keep the Registration Statement and the Prospectus effective, current,
and in compliance with the provisions of the Securities Act, during
the periods when Charter is required by this Agreement to keep the
Registration Statement effective and current.
(b) Within a reasonable time not to exceed ten Business Days
prior to filing a Registration Statement or Prospectus or any amendment
or supplement thereto (other than any amendment or supplement in the
form of a filing that Charter makes pursuant to the Exchange Act),
furnish to each Selling Stockholder and each underwriter, if any, of
the Registrable Securities covered by such Registration Statement
copies of such Registration Statement or Prospectus as proposed to be
filed, which documents will be subject to the reasonable review and
comments of the Selling Stockholders (and their respective counsel)
during such period, and Charter will not file any Registration
Statement or any Prospectus or any amendment or supplement thereto
containing any statements with respect to any Selling Stockholder or
the distribution of the Registrable Securities to be included in such
Registration Statement for sale by such Selling Stockholder if such
Selling Stockholder reasonably objects in writing. Thereafter, Charter
will furnish to each Selling Stockholder and each underwriter, if
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any, such number of copies of such Registration Statement, each
amendment and supplement thereto (in each case including all exhibits
thereto), the Prospectus included in such Registration Statement
(including each preliminary Prospectus), and such other documents as
such Selling Stockholder or underwriter may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by
such Selling Stockholder.
(c) After the filing of the Registration Statement, promptly
notify each Selling Stockholder of the effectiveness thereof and of any
stop order issued or threatened by the SEC and take all reasonable
actions required to prevent the entry of such stop order or to remove
it if entered and promptly notify each Selling Stockholder of the
lifting or withdrawal of any such order.
(d) Immediately notify each Selling Stockholder holding
Registrable Securities covered by the applicable Registration Statement
at any time when a Prospectus relating thereto is required to be
delivered under the Securities Act, of (i) the determination that a
Material Event exists or (ii) the occurrence of an event requiring the
preparation of a supplement or amendment to such Prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such Prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading and promptly make available to
such Selling Stockholder any such supplement or amendment, and subject
to the provisions of this Agreement regarding the existence of a
Material Event, Charter will promptly prepare and furnish to each such
Selling Stockholder a supplement to or an amendment of such Prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such Prospectus will not contain any untrue statement of
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(e) Enter into customary agreements (including an underwriting
agreement in customary form including customary indemnification
provisions) and perform its obligations under any such agreements and
shall take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities.
(f) Make available for inspection by any Selling Stockholder
covered by such Registration Statement, any underwriter selected by a
Selling Stockholder pursuant to Section 2.3 participating in any
disposition pursuant to such Registration Statement, and any attorney,
accountant, or other professional retained by any such Selling
Stockholder or underwriter, all financial and other records, pertinent
corporate documents, and properties of Charter as shall be reasonably
necessary to enable them to exercise their due diligence responsibility
in connection therewith, and cause Charter's officers, directors, and
employees to supply all information reasonably requested by any of such
Persons in connection with such Registration Statement. Information
that Charter determines, in good faith, to be confidential and notifies
such Persons is confidential shall not be disclosed by such Persons
unless (i) the release of such information is ordered pursuant to a
subpoena or other order from a court, or other governmental agency or
tribunal, of competent jurisdiction or (ii) such information becomes
public other than through a breach by such Persons of the
confidentiality obligations of such Persons. Each Selling Stockholder
agrees that information obtained by it as a result of such
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inspections shall be deemed confidential and shall not be used by it as
the basis for any transactions in the securities of Charter or for any
other purpose unless and until such information is made generally
available to the public.
(g) Furnish, in the case of an underwritten public offering,
to each Selling Stockholder and to each underwriter a signed
counterpart of (i) an opinion or opinions of in-house counsel or
outside counsel to Charter addressed to such Selling Stockholder and
underwriters (on which opinion both such Selling Stockholder and each
such underwriter shall be entitled to rely) and (ii) a comfort letter
or comfort letters from Charter's independent public accountants, each
in customary form and covering such matters of the type customarily
covered by opinions or comfort letters, as the case may be, as the
holders of a majority of the Registrable Securities included in such
Registration Statement or the managing underwriter therefor reasonably
requests.
(h) Register or qualify the Registrable Securities covered by
a Registration Statement under the securities or blue sky laws of such
United States jurisdictions as the Selling Stockholders shall
reasonably request, and do any and all other acts and things which may
be necessary to enable each Selling Stockholder to consummate the
disposition in such jurisdictions of such Registrable Securities in
accordance with the method of distribution described in such
Registration Statement; provided, however, that Charter shall not be
required (i) to qualify to do business as a foreign corporation in any
jurisdiction where it is not otherwise required to be so qualified,
(ii) to conform its capitalization or the composition of its assets at
the time to the securities or blue sky laws of such jurisdiction, (iii)
to execute or file any general consent to service of process under the
laws of any jurisdiction, or (iv) to subject itself to taxation in any
jurisdiction where it has not theretofore done so.
(i) Use its reasonable best efforts to cause such Registrable
Securities covered by a Registration Statement to be listed on the
principal exchange or exchanges or qualified for trading on the
principal over-the-counter market or listed on the automated quotation
market on which securities of the same class and series as the
Registrable Securities (or into which such Registrable Securities will
be or have been converted) are then listed, traded, or quoted upon the
sale of such Registrable Securities pursuant to such Registration
Statement.
(j) Make and keep information publicly available relating to
Charter so as to satisfy the requirements of Rule 144 under the
Securities Act (or any successor or corresponding rule) and file with
the SEC all reports and other documents required of Charter under the
Securities Act and the Exchange Act in a timely manner.
(k) Make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act (provided that Charter shall not be deemed in violation
of this paragraph so long as it files customary quarterly reports with
the SEC for such period), and not file any amendment or supplement to
such Registration Statement or Prospectus to which any of the Selling
Stockholders shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with
the requirements of the Securities Act.
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4.2 Selling Stockholders' Obligations. Charter's obligations under this
Agreement to a Selling Stockholder shall be conditioned upon such Selling
Stockholder's compliance with the following:
(a) Such Selling Stockholder shall cooperate with Charter in
connection with the preparation of the Registration Statement, and for
so long as Charter is obligated to keep the Registration Statement
effective, such Selling Stockholder will provide to Charter, in
writing, for use in the Registration Statement, all information
regarding such Selling Stockholder, its intended method of disposition
of the applicable Registrable Securities, and such other information as
Charter may reasonably request to prepare the Registration Statement
and Prospectus covering the Registrable Securities and to maintain the
currency and effectiveness thereof.
(b) Such Selling Stockholder agrees that, upon receipt of any
notice from Charter of the happening of any event of the kind described
in Section 4.1(d), such Selling Stockholder will discontinue its
offering and sale of Registrable Securities pursuant to the applicable
Registration Statement until such Selling Stockholder's receipt of
either (i) notice from Charter that a Material Event no longer exists
(but for no longer than the end of the 120-day period described in
Section 2.6) or (ii) the copies of the supplemented or amended
Prospectus contemplated by Section 4.1(d), and, in either case, if so
directed by Charter, such Stockholder will deliver to Charter all
copies in its possession of the most recent Prospectus covering such
Registrable Securities at the time of receipt of such notice.
4.3 Underwriting Agreement. Neither Charter nor any other Person may
participate in any underwritten public offering in connection with a Demand
Registration or an Incidental Registration unless such Person (i) agrees to sell
its securities on the basis provided in any underwriting arrangements approved
by the Person or Persons selecting the lead managing underwriters for such
offering and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements, and other documents reasonably required
under the terms of such underwriting arrangements and this Agreement.
4.4 Holdback by Charter. Charter agrees not to engage in any public
sale or distribution by it of any securities of the same class or series as the
Registrable Securities or securities convertible into, or exchangeable or
exercisable for, or the value of which relates to or is based upon, such
securities during the ten days prior to, and during the 45-day period beginning
on, the effective date of any Registration Statement filed with respect to any
public offering of Registrable Securities to the extent the lead book running
managing underwriter for such offering advises Charter in writing that a public
sale or distribution during such 45-day period (including a sale pursuant to
Rule 144 under the Securities Act) of Registrable Securities by Charter other
than pursuant to the underwritten public offering contemplated by such
registration statement would materially adversely impact such underwritten
public offering), except as part of such registration; provided, however, that
the limitation set forth in this Section 4.4 shall not apply: (a) to
registrations by Charter on Form S-4 or any other registration of shares issued
in a merger, consolidation, acquisition, or similar transaction or on Form S-8,
or any successor or comparable forms, or a registration statement filed in
connection with an exchange offer of securities of Charter made solely to
Charter's existing stockholders or otherwise pursuant to a dividend reinvestment
plan, stock purchase plan, or other employee benefit plan; (b) to sales
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by Charter upon exercise or exchange, by the holder thereof, of options,
warrants or convertible securities; (c) to any employee benefit plan (if
necessary to allow such plan to fulfill its funding obligations in the ordinary
course); or (d) to any Demand Registration effected as a shelf registration
under Rule 415 of the Securities Act. This Section 4.4 shall not limit any
public sale or distribution of any securities of Charter by any Third-Party
Demand Stockholder or any Person having the right to require that Charter
include its securities in any registration initiated by any Third-Party Demand
Stockholder.
5. Expenses of Registration.
5.1 Registration Expenses. Except as provided in Section 5.2
and Section 5.3, all Registration Expenses incurred in connection with any
Demand Registration or Incidental Registration and the distribution of any
Registrable Securities in connection therewith shall be borne by Charter. For
purposes of this Agreement, the term "Registration Expenses" means all:
(a) registration, application, filing, listing,
transfer, and registrar fees,
(b) NASD fees and fees and expenses of registration
or qualification of Registrable Securities under state securities or
blue sky laws
(c) printing expenses (or comparable duplication
expenses), delivery charges, and escrow fees,
(d) fees and disbursements of counsel for Charter,
(e) fees and expenses for independent certified
public accountants retained by Charter (including the expenses of any
comfort letters or costs associated with the delivery by independent
certified public accountants of a comfort letter or comfort letters),
(f) fees and expenses of any special experts retained
by Charter in connection with such registration;
(g) reasonable fees and disbursements of underwriters
and broker-dealers customarily paid by issuers or sellers of
securities, and
(h) fees and expenses of listing the Registrable
Securities on a securities exchange or over-the-counter market.
5.2 Selling Stockholder Expenses. Each Selling Stockholder
shall pay all stock transfer fees or expenses (including the cost of all
transfer tax stamps), if any, all underwriting or brokerage discounts and
commissions and all fees and disbursements of counsel for such Selling
Stockholder attributable to the distribution of the Registrable Securities of
such Selling Stockholder included in such registration.
5.3 Internal Expenses of Charter. Notwithstanding any other
provision of this Agreement, Charter shall be obligated to bear all internal
expenses of Charter in connection with any Demand Registration or Incidental
Registration (including all salaries and expenses of its officers and employees
performing accounting and legal functions and related expenses).
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6. Indemnification.
6.1 By Charter. Charter agrees to indemnify and hold harmless
each Stockholder Indemnified Party from and against any Losses, joint or
several, to which such Stockholder Indemnified Party may become subject under
the Securities Act, the Exchange Act, state securities or blue sky laws, common
law or otherwise, insofar as such Losses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the applicable Registration Statement or Prospectus,
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and Charter will
reimburse each such Stockholder Indemnified Party for any reasonable fees and
expenses of outside legal counsel for such Stockholder Indemnified Parties, or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such claims; provided, however, that Charter will
not indemnify or hold harmless any Stockholder Indemnified Party from or against
any such Losses (including any related expenses) to the extent such Losses
(including any related expenses) result from an untrue statement, omission or
allegation thereof which were (a) made in reliance upon and in conformity with
written information provided by or on behalf of the applicable Selling
Stockholder specifically and expressly for use or inclusion in the applicable
Registration Statement or Prospectus or (b) made in any Prospectus used after
such time as Charter advised such Selling Stockholder that the filing of a
post-effective amendment or supplement thereto was required, except that this
proviso shall not apply if the untrue statement, omission, or allegation thereof
is contained in the Prospectus as so amended or supplemented. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Stockholder Indemnified Parties and shall survive the transfer
of such securities by the Selling Stockholders.
6.2 By Selling Stockholders. Each Selling Stockholder,
individually and not jointly, agrees to indemnify and hold harmless each Charter
Indemnified Party and each other Stockholder Indemnified Party from and against
any Losses, joint or several, to which such Charter Indemnified Party or any
other Stockholder Indemnified Party may become subject, insofar as such Losses
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
applicable Registration Statement or the Prospectus, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, if the statement or omission was made in
reliance upon and in conformity with written information provided by or on
behalf of such Selling Stockholder or any Person who controls such Selling
Stockholder specifically and expressly for use or inclusion in the applicable
Registration Statement or Prospectus; provided, however, that such Selling
Stockholder will not indemnify or hold harmless any Charter Indemnified Party or
other Stockholder Indemnified Party from or against any such Losses (including
any related expenses) (a) to the extent the untrue statement, omission, or
allegation thereof upon which such Losses (including any related expenses) are
based was made in any Prospectus used after such time as such Selling
Stockholder advised Charter that the filing of a post-effective amendment or
supplement thereto was required, except the Prospectus as so amended or
supplemented, or (b) in an amount that exceeds the net proceeds received by such
Selling Stockholder from the sale of Registrable Securities pursuant to such
Registration
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Statement. Such indemnity shall remain in full force and effect regardless of
any investigation by or on behalf of Charter Indemnified Parties or the
Stockholder Indemnified Parties, and shall survive the transfer of such
securities by the Selling Stockholder.
6.3 Procedures. Each Indemnified Party shall give notice to
each Indemnifying Party promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and the Indemnifying
Party may participate at its own expense in the defense, or if it so elects,
assume the defense of any such claim and any action or proceeding resulting
therefrom, including the employment of counsel and the payment of all expenses.
The failure of any Indemnified Party to give notice as provided in this Section
6.3 shall not relieve the Indemnifying Party from its obligations to indemnify
such Indemnified Party, except to the extent the Indemnified Party's failure to
so notify actually prejudices the Indemnifying Party's ability to defend against
such claim, action, or proceeding. If the Indemnifying Party elects to assume
the defense in any action or proceeding, an Indemnified Party shall have the
right to employ separate counsel in such action or proceeding and to participate
in the defense thereof, but such Indemnified Party shall pay the fees and
expenses of such separate counsel unless (a) the Indemnifying Party has agreed
to pay such fees and expenses or (b) the named parties to any such action or
proceeding (including any impleaded parties) include such Indemnified Party and
the Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that there is or would be a conflict of interest between such
Indemnified Party and the Indemnifying Party in the conduct of the defense of
such action (in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not assume the defense of such
action or proceeding on such Indemnified Party's behalf). No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent
of the Indemnified Party (which consent will not be unreasonably withheld),
consent to entry of any judgment, or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
6.4 Contribution. If the indemnification provided for under
this Section 6 is unavailable to or insufficient to hold the Indemnified Party
harmless under Section 6.1 or Section 6.2 above in respect of any Losses
referred to therein for any reason other than as specified therein, then the
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on the one
hand, and such Indemnified Party, on the other, in connection with the
statements or omissions that resulted in such Losses. The relative fault of each
Indemnifying Party or Indemnified Party, as the case may be, shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by (or that was failed to be
supplied by) such Indemnifying Party or Indemnified Party, such party's relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission. If contribution based upon the relative fault of the
Indemnifying Party, on the one hand, and the Indemnified Party, on the other
hand, is not available, then the Indemnifying Party shall contribute to the
amount paid or payable by Indemnified Party as a result of Losses in such
proportion as is appropriate to reflect the relative benefits received by the
Indemnifying Party, on the one hand, and such Indemnified Party, on the other,
from the subject
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offering or distribution. The relative benefits received by the Indemnifying
Party, on the one hand, and the Indemnified Party, on the other, shall be deemed
to be in the same proportion as the net proceeds of the offering or other
distribution received by the Indemnifying Party bears to the net proceeds of the
offering or other distribution received by the Indemnified Party. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
7. Limitation on Other Registration Rights. Charter shall not grant to
any Person any demand registration right, incidental registration right, or
other right that would conflict with any of the rights granted to Stockholders
herein.
8. Miscellaneous.
8.1 Notices.
(a) All notices, requests, demands, waivers, and other
communications under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally, mailed,
certified or registered mail with postage prepaid, or sent by reliable
overnight courier, or facsimile transmission, to the address or
facsimile number specified for the applicable party on Schedule A
attached to this Agreement, or to such other Person, address, or
facsimile number as any party shall specify by notice in writing to the
other parties.
(b) Any notice or other communication to a party in accordance
with the provisions of this Agreement shall be deemed to have been
given (i) three Business Days after it is sent by certified or
registered mail, postage prepaid, return receipt requested, (ii) upon
receipt when delivered by hand or transmitted by facsimile
(confirmation received), or (iii) one Business Day after it is sent by
a reliable overnight courier service, with acknowledgment of receipt
requested. Notwithstanding the preceding sentence, notice of change of
address shall be effective only upon actual receipt thereof.
(c) Any requirement in this Agreement that notice be given to
a Stockholder Group means that notice must be given separately to each
member of the Stockholder Group.
8.2 Amendment. Any provision of this Agreement may be amended or
modified in whole or in part at any time by an agreement in writing among
Charter and each Stockholder, executed in the same manner as this Agreement. No
consent, waiver, or similar act shall be effective unless in writing.
8.3 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements and understandings,
oral and written, among the parties hereto with respect to the subject matter
hereof.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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8.5 Governing Law. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of [New York], without giving
effect to principles of conflicts of laws.
8.6 Assignment.
(a) Except as expressly provided in this Section 8.6, the
rights of the parties hereto cannot be transferred or assigned and any
purported assignment or transfer to the contrary shall be void ab
initio. So long as the terms of this Section 8.6 are followed, any
Stockholder may transfer any of its rights under this Agreement,
without the consent of Charter, to any Person to whom such holder
transfers any Registrable Securities or any rights to acquire
Registrable Securities, whether such transfer is by sale, gift,
assignment, pledge, or otherwise, so long as:
(i) such transfer is not made pursuant to an effective
Registration Statement or pursuant to Rule 144 or Rule 145 (or any
successor provisions) under the Securities Act or in any other manner
the effect of which is to cause the transferred securities to be freely
transferable without regard to the volume and manner of sale
limitations set forth in Rule 144 (or any successor provision) in the
hands of the transferee as of the date of such transfer; and
(ii) in the case of a transfer by any member of the
Non-Xxxxxxxxx Stockholder Group [(other than Falcon Holding Group,
L.P.)], such transfer is made (A) to another Stockholder; (B) to any
Person that, directly or indirectly, through the ownership of voting
securities, controls, is controlled by, or is commonly controlled with
such Stockholder; (C) to any investment fund formed by an Affiliate of
such Stockholder that is commonly controlled with such Stockholder; (D)
to a trust for the benefit of the equity owners of such Stockholder and
of which the trustee or trustees are one or more Persons that either
control, or are commonly controlled with, such Stockholder or are
banks, trust companies, or similar entities; (E) any Person for which
such Stockholder is acting as nominee or any trust controlled by or
under common control with such Person; (F) where the transferring
Stockholder is an individual, (i) to the estate, heirs, or legatees of
such Stockholder upon such Stockholder's death; (ii) to or for the
benefit of any member of such Stockholder's family or to any Person
controlled by such Stockholder or one or more members of such
Stockholder's family; or (iii) to any charitable foundation, charitable
trust, or similar entity; and
(iii) [in the case of a transfer by Falcon Holding Group,
L.P., such transfer is made to any Person that is a partner of Falcon
Holding Group, L.P. at the time of the transfer; and]
(iv) in the case of a transfer by any member of the Xxxxxxxxx
Stockholder Group, such transfer is made (A) to another Stockholder;
(B) to any Person that owns a controlling equity interest in the
transferor at the time of the transfer (or, if the transferor is
specifically named in clause (i) of the definition of "Xxxxxxxxx
Stockholder Group," to any Person that owns an equity interest in the
transferor at the time of the transfer), (C) to or for the benefit of
Xxxx X. Xxxxxxxxx or any member of his family or to any Person
controlled, directly or indirectly, by Xxxx X. Xxxxxxxxx, (D) where the
transferring Stockholder is an individual, (i)
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to the estate, heirs, or legatees of such Stockholder upon such
Stockholder's death; (ii) to or for the benefit of any member of such
Stockholder's family or to any Person controlled by such Stockholder
or one or more members of such Stockholder's family; or (E) to any
charitable foundation, charitable trust, or similar entity.
(b) Notwithstanding Section 8.6(a), no Stockholder may assign
any of its rights under this Agreement to any Person to whom such
Stockholder transfers any Registrable Securities unless the transfer of
such Registrable Securities did not require registration under the
Securities Act.
(c) The nature and extent of any rights assigned shall be as
agreed to between the assigning party and the assignee. No Person may
be assigned any rights under this Agreement unless Charter is given
written notice by the assigning party at the time of such assignment
stating the name and address of the assignee, identifying the
securities of Charter as to which the rights in question are being
assigned, and providing a detailed description of the nature and extent
of the rights that are being assigned. Any assignee hereunder shall
receive such assigned rights subject to all the terms and conditions of
this Agreement, including the provisions of this Section 8.6. Subject
to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns.
8.7 Binding Agreement; No Third Party Beneficiaries. This Agreement
will be binding upon and inure to the benefit of the parties hereto and their
successors and permitted assigns. Except as set forth herein and by operation of
law, no party to this Agreement may assign or delegate all or any portion of its
rights, obligations, or liabilities under this Agreement without the prior
written consent of each other party to this Agreement.
[Signature page follows.]
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IN WITNESS WHEREOF, Charter and each of the other parties hereto has
executed this Agreement as of the date first above written.
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EXHIBIT D
TERMS OF CHARTER LLC OPERATING AGREEMENT
Formation of Charter LLC Charter Communications, Inc. ("CCI") will
form, prior to the filing of franchise
transfer applications under the Purchase and
Contribution Agreement, a new limited
liability company ("Charter LLC"). Prior to
or at the Closing, CCI will contribute to
Charter LLC all its membership interests in
Charter Communications Holdings, LLC
("Charter Holdings").
At the Closing, Falcon Holding Group, L.P.
("FHGLP") will contribute to Charter LLC a
portion of the partnership interest owned by
it in Falcon Communications, L.P. ("Falcon")
(referred to as the "Contributed Interest"
in Section 2.1(b) of the Purchase and
Contribution Agreement) in exchange for a
membership interest in Charter LLC
represented by units (the "Units"). The
contribution by FHGLP is intended to be a
tax-free contribution to Charter LLC by
FHGLP.
Calculation of Units Issued to
FHGLP at Closing All Units of Charter LLC will have the same
rights, except that there may be differences
among the Units as to voting rights. The
number of Units issued to FHGLP will be a
fraction of all Units in Charter LLC
outstanding on the Closing, the numerator of
which will equal the Equity Value as
determined under Section 2.3(b) of the
Purchase and Contribution Agreement, and the
denominator of which will equal the sum of
the Charter Holdings Value and the Equity
Value. An example of such calculation is
attached hereto as Attachment A. The Units
issued to members of Charter LLC will be
certificated.
"Charter Holdings Value" will equal
$11,272,700,000,
(1) less liabilities (other than deferred
taxes) of Charter LLC and its Subsidiaries
(determined on a consolidated basis in
accordance with Generally Accepted
Accounting Principles) at the Closing,
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(2) plus, with respect to assets that are
acquired by Charter LLC or its Subsidiaries
on or before the Closing, (other than assets
described in clauses (3) and (4)) the
product of 17 and the projected operating
cash flow of such assets for fiscal year
ended December 31, 2000, determined in a
manner consistent with information provided
to Falcon on May 24, 1999 (the "Cash Flow
Projections"),
(3) plus, the purchase price (including
liabilities assumed) of assets that are
acquired by Charter LLC from parties related
to CCI (other than assets acquired by CCI or
any of its affiliates from unrelated third
parties and contributed to Charter LLC on or
before the Closing) for a purchase price
less than $10,000,000 in the aggregate,
(4) plus the value of assets that are
acquired by Charter LLC from parties related
to CCI (other than assets acquired by CCI or
any of its affiliates from unrelated third
parties and contributed to Charter LLC on or
before the Closing and other than assets
described in clause (3)), which value shall
be determined by the Board of Charter LLC
and Xxxxxx Xxxx in good faith, and
(5) plus, with respect to assets that are
subject to definitive agreements prior to
the Closing, but which have not been
acquired by Charter LLC or its Subsidiaries
on or before Closing, the product of 17 and
the projected operating cash flow of such
assets for fiscal year ended December 31,
2000, determined in a manner consistent with
the Cash Flow Projections.
To the extent that the assets described in
clause (5), above, have not been acquired by
Charter LLC or its Subsidiaries and the
"Definitive Agreements" to which such assets
are subject are terminated, then the Falcon
Holders shall be issued additional Units in
Charter LLC in an amount sufficient to
provide the Falcon Holders with the same
economic interests in Charter LLC that they
would have had if the Charter Holdings Value
determined at the Closing had been reduced
by the value of such assets determined in
clause (5) above (taking into account
distributions from Charter LLC to its
members and other events occurring after the
Closing but prior to the issuance of
additional Units to the Falcon Holders).
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If prior to Closing CCI, Charter LLC or
Charter Holdings takes an action (other than
dispositions of obsolete equipment or other
equipment deemed to be unnecessary in the
ordinary operations of Charter Holdings'
business) that results in a reduction in the
assets of Charter LLC or Charter Holdings,
then, at FHGLP's option, either an
appropriate adjustment (as mutually agreed
between FHGLP and CCI) will be made to the
number of Units in Charter LLC received by
FHGLP to reflect such reduction, or FHGLP
will sell the Contributed Interest to CCI
and receive Cash Consideration therefor in
lieu of Equity Consideration, in accordance
with the terms of the Purchase and
Contribution Agreement.
Transfer of FHGLP Units The Units received by FHGLP will be
transferable in accordance with the
following: FHGLP will have the right to
transfer its Units in Charter LLC to its
partners, provided, however, that (i) each
such transferee must agree to be bound by
the terms of the Charter LLC Operating
Agreement, and (ii) each such transferee
must represent that it is an accredited
investor and give such other investment
representations and other undertakings as
are customarily given by persons acquiring
securities in a private placement. If any
proposed transferee fails to make such
agreements and representations or if the
Company reasonably determines that the
transfer to such individual would require
registration under the Securities Act, then
such transferee shall receive cash in lieu
of such Units, and the Company shall adjust
the cash and equity components of the
consideration accordingly; provided,
however, that if and to the extent such
adjustment causes the equity component of
the consideration to be less than the
Minimum Contributed Interest, FHGLP shall
not be required to contribute the Minimum
Contributed Interest. All Units of Charter
LLC will be freely transferable without
restriction to Xxxx X. Xxxxx in accordance
with any of the various Put Agreements
contemplated by the Purchase and
Contribution Agreement. In addition, each
holder of Units may transfer all or any
portion of its Units to any person or entity
to which such holder is permitted to assign
its rights under the Registration Rights
Agreement (in the form of Exhibit C to the
Contribution and Purchase Agreement) in
accordance with Section 8.6(a) thereof,
provided, however, that (i) each such
transferee must agree to be bound by the
terms of the Charter LLC Operating
Agreement, (ii) each such transferee must
(x) represent that
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it is an accredited investor and give such
other investment representations and other
undertakings as are customarily given by
persons acquiring securities in a private
placement, or (y) must provide Charter LLC
with an opinion of counsel reasonably
satisfactory to it that such transfer would
not result in a violation of the
registration requirements of the 1933 Act,
and (iii) any such transfer will not result
in a violation of the registration
requirements of the 1933 Act.
Holders of the Units received by FHGLP are
referred to as the "Falcon Holders."
Contribution of Purchased Interests As soon as reasonably practicable following
the Closing, CCI will contribute to Charter
LLC the Purchased Interests (for these
purposes, the "Purchased Interests" include
the assets acquired by CCI pursuant to the
Purchase and Contribution Agreement, plus
the proceeds of any dispositions of
Purchased Interests (including assets
exchanged for Purchased Interests), plus the
cash flow generated by the Purchased
Interests subsequent to Closing and on or
prior to the contribution to Charter LLC).
Prior to the contribution of the Purchased
Interests to Charter LLC, CCI will not
dispose of the Purchased Interests for less
than fair market value (based upon the terms
of any arm's length agreement for such
disposition negotiated by CCI).
IPO It is the current intent of CCI to effect an
initial public offering of stock in a
corporation ("PublicCo") that will acquire
an interest in Charter LLC (an "IPO"). Each
of the Falcon Holders may, and under certain
circumstances shall, exchange its Units in
Charter LLC for stock in PublicCo. on the
terms set forth in the Exchange Agreement,
as outlined in Exhibit E to the Purchase and
Contribution Agreement.
If an initial public offering is effected
other than through PublicCo (i.e., through
CCI or Charter LLC), the Falcon Holders will
have rights and protections that will put
them in the same economic position as if the
IPO had been effected through PublicCo.
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Dilution for Events Prior to IPO If CCI contributes the Purchased Interests
to Charter LLC prior to an IPO, the relative
interests of CCI and the Falcon Holders will
be adjusted, and additional Units will be
issued to CCI, so that CCI and the Falcon
Holders will have the same relative
interests they would have had if the
Purchased Interests had been contributed at
Closing at a value equal to the Cash
Consideration, taking into account
liabilities assumed by Charter LLC in
connection with such contribution. To the
extent that pursuant to the foregoing,
either the assets of Charter LLC or the
Purchased Interests are "booked-up" (to
reflect a value in excess of their book
value immediately prior to the
contribution), taxable income and loss of
Charter LLC allocated under section 704(c)
of the Internal Revenue Code with respect to
such adjusted assets will be made in
accordance with the "remedial" method. An
example of the foregoing is attached hereto
as Attachment B.
After Closing and prior to an IPO, upon the
contribution by CCI (or any affiliate of
CCI) of assets to Charter LLC (other than
the Purchased Interests), the members'
interests in Charter LLC will be adjusted,
and additional Units will be issued to CCI
(or affiliate) based on the valuation of
Charter LLC and the contributed assets
determined in good faith by the Board of
Charter LLC and Xxxxxx Xxxx.
Prior to an IPO (whether before or after
Closing), upon the issuance of Units in
Charter LLC to an entity unrelated to CCI
(or any affiliate of CCI), and upon the
issuance of Units in Charter LLC to
employees of Charter LLC in their capacity
as employees, the Falcon Holders' interest
in Charter LLC will be diluted on a
proportional basis with CCI.
Dilution Upon and After IPO In connection with an IPO, the Falcon
Holders' interest in Charter LLC will be
diluted on a proportional basis with CCI and
any affiliate of CCI.
If, after an IPO, CCI contributes the
Purchased Interests to Charter LLC, then the
Falcon Holders' interest in Charter LLC will
be adjusted so as to equal the interest they
would have had in Charter LLC if the
contribution of Purchased Interests had
occurred prior to the IPO.
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If, after an IPO, CCI or any affiliate of
CCI contributes assets to Charter LLC (other
than the Purchased Interests), the Falcon
Holders' interest in Charter LLC will be
diluted on a proportional basis with
PublicCo.
Upon the issuance of Units in Charter LLC to
an entity unrelated to CCI (or any affiliate
of CCI), and upon the issuance of Units in
Charter LLC to employees of Charter LLC in
their capacity as employees, the Falcon
Holders' interest in Charter LLC will be
diluted on a proportional basis with CCI.
Nondiscrimination In any transactions between Charter LLC and
any holders of Charter LLC Units in their
capacities as such,, the Falcon Holders must
be treated in a nondiscriminatory manner to
the Units held by CCI, Xxxx Xxxxx or their
affiliates. For instance, any proposed
redemption of Units held by CCI, Xxxx Xxxxx
and their affiliates must be offered to the
Falcon Holders on the same proportionate
terms and conditions offered to such other
holders of Units.
Tag-along Rights Prior to an IPO, if Xxxx Xxxxx disposes of
more than 25% (cumulatively) of his current
interests in CCI (or control, irrespective
of the amount of interests sold), or if CCI
disposes of more than 25% (cumulatively) of
its current interests in Charter LLC, (or
control, irrespective of the amount of
interests sold), each of the Falcon Holders
will have the right to sell a proportionate
share of its Units on the same economic
terms and conditions and for proportionate
consideration.
Distributions Distributions from Charter LLC shall be made
in proportion to the number of Units held by
each member. Subject to any limitations in
contractual covenants of Charter LLC or its
subsidiaries and subject to applicable law,
within 90 days after the end of each fiscal
year, Charter LLC will distribute to all
holders, in proportion to the number of
Units held by them, cash in an amount which,
in the reasonable judgment of Charter LLC,
is sufficient to pay the federal, state, and
local income taxes on each holder's share of
Charter LLC's taxable income for such fiscal
year at the highest combined marginal rate
applicable to the ordinary income of an
individual residing in New York City.
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Tax Allocations Taxable income and loss of Charter LLC will
be allocated in accordance with Units,
except as provided in section 704(c) of the
Internal Revenue Code. Taxable income and
loss of Charter LLC that is allocated under
section 704(c) of the Code will be made in
accordance with the "remedial" method.
Charter LLC will file a Section 754 election
with respect to its first taxable year.
Charter LLC will not revoke the Section 754
election in effect for itself or for any of
the Falcon Companies and will administer the
elections so as to reflect (i) gain
recognized by the Sellers with respect to
the sale of the Purchased Interests and the
contribution of the Contributed Interest to
Charter LLC, and (ii) gain recognized by
holders of Units in Charter LLC with respect
to dispositions of their Units.
The sum of (i) the Cash Consideration
allocable (pursuant to Section 2.3(d) of the
Purchase and Contribution Agreement) to the
partnership interests in Falcon other than
the Contributed Interest, (ii) the Equity
Value, and (iii) liabilities of the Falcon
Companies allocable pursuant to Section 752
of the Code to the partnership interests in
Falcon, shall be allocated among the assets
of the Falcon Companies that are Tax
Partnerships in accordance with the Falcon
Allocation Agreement (as described in
Section 6.10(h) of the Purchase and
Contribution Agreement), and the aggregate
gross value of all the membership interests
in Charter Holdings (including liabilities
of Charter Holdings and its Subsidiaries)
shall be allocated among the assets of
Charter Holdings and its Subsidiaries in
accordance with the Charter Allocation
Agreement (as described in Section 6.10(h)
of the Purchase and Contribution Agreement).
Unless otherwise required by applicable law,
CCI and the Falcon Holders agree to act, and
cause their respective affiliates to act, in
accordance with the allocations provided
herein in any relevant Tax Returns or
similar filings.
The Falcon Holders shall have typical rights
with respect to access to Charter LLC's book
and records. As soon as reasonably
practicable following the end of each fiscal
year, but in no event later than July 15,
Charter LLC shall furnish to each Falcon
Holder Schedule K-1 for such Falcon Holder,
and Charter LLC shall furnish to Xxxx
Xxxxxxxxx (and to any other Falcon Holding
requesting such information) a complete copy
of Charter LLC's
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federal information return (Form 1065) for
such fiscal year (as filed) and a schedule
setting forth each member's capital account
balance as of the end of such fiscal year;
provided, however, that for the taxable year
of Charter LLC in which the Closing occurs,
such information must be furnished no later
than August 15 following the end of such
fiscal year. In addition, Charter LLC shall,
upon the request of Xxxx Xxxxxxxxx (or other
Falcon Holder), promptly provide Xxxx
Xxxxxxxxx (or such Falcon Holder) with
copies of tax-related schedules, workpapers,
appraisals, and other documents
Governance The Falcon Holders will have no voting
rights, except that the operating agreement
of Charter LLC cannot be amended in a manner
that is adverse to the Falcon Holders and
that treats the Units of the Falcon Holders
in a discriminatory manner vis a vis the
Units held by CCI, Xxxx Xxxxx or their
affiliates, without the consent of Holders
owning a majority of the Units adversely
affected.
Charter LLC will be a manager-managed (and
not a member-managed) limited liability
company, and the manager(s) will be CCI,
PublicCo, and/or their affiliates.
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EXHIBIT E
EXCHANGE AGREEMENT TERM SHEET
Certain definitions Charter LLC: the limited liability company
formed to acquire the Sellers' partnership
interests in Falcon Communications, L.P. and
to hold all of Charter's other cable
television systems.
PublicCo: the entity through which Charter
effects an initial public offering of
indirect equity interests in Charter LLC,
and its successors.
Right to exchange interests Any holder of a membership interest in
Charter LLC will have the right at any time
(subject to the conditions specified in
"Conditions to exchange" below) to exchange
all or part of its membership interest in
Charter LLC for shares of PublicCo common
stock.
The shares of PublicCo common stock received
in the exchange would be:
- of the same class as the shares of
PublicCo common stock that are
publicly traded
- duly authorized, validly issued,
fully paid, and nonassessable
- freely tradable and transferable,
subject only to restrictions
imposed by applicable securities
laws
- "Registrable Securities" at the
time of their issuance for purposes
of the Registration Rights
Agreement to be entered into
pursuant to the Purchase Agreement
Conditions to exchange A holder's right to exchange its membership
interest in Charter LLC for PublicCo's
common stock would be conditioned on the
holder's execution and delivery to PublicCo
of such investment representations and other
undertakings as are customarily given by
persons acquiring securities in a private
placement.
In addition, if PublicCo reasonably
determines that, notwithstanding such
investment representations and other
undertakings, its issuance of common stock
in exchange for any holder's membership
interest in Charter LLC must be registered
under the Securities Act, then, in lieu of
issuing common stock in exchange for such
membership interest, PublicCo will purchase
or cause to be purchased such membership
interest for a purchase price in cash equal
to the value thereof, as determined under
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"Exchange ratio" below.
Mandatory exchange upon IPO Each holder will agree to exchange its
membership interest in Charter LLC for
PublicCo's common stock immediately prior to
PublicCo's initial public offering if:
- PublicCo's initial public offering
will occur concurrently with or
after the closing under the
Purchase and Contribution
Agreement; and
- the holder has received an opinion
of counsel to PublicCo, in
customary form, subject to
customary exceptions and
qualifications and based upon
reasonable assumptions and
representations of PublicCo, each
holder, and third parties, that the
exchange qualifies under Section
351 of the Internal Revenue Code
Exchange ratio The exchange ratio will be determined in a
manner that preserves the exchanging
member's relative ownership interest in
Charter LLC.
To implement the general principle described
above, but subject to any modifications that
may be appropriate to implement this
principle, the value of the shares of
PublicCo common stock received in the
exchange will be the same as the value of
the membership interest in Charter LLC
exchanged for such shares, where the value
of the exchanged membership interest would
be determined by reference to the value of
shares of PublicCo common stock.
Shares of PublicCo common stock would be
valued as follows:
- shares of PublicCo common stock
would be valued at the price to the
public of such shares in PublicCo's
initial public offering (before any
underwriting or brokerage discounts
and commissions) if the exchange
occurs concurrently with PublicCo's
initial public offering
- shares of PublicCo common stock
would be valued at the average
trading price of such shares for
the twenty trading days prior to
the exchange if the exchange occurs
after PublicCo's initial public
offering
Regardless of which method is used to value
shares of PublicCo common stock, a
membership interest in Charter LLC would be
valued by reference to the value used for
shares of PublicCo
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common stock. The parties contemplate that:
- the value of a membership interest
in Charter LLC would be the product
of the percentage interest
represented by such membership
interest times the aggregate value
of Charter LLC
- the aggregate value of Charter LLC
would equal the value of PublicCo's
membership interest in Charter LLC
divided by the percentage interest
represented by PublicCo's
membership interest in Charter LLC
- the value of PublicCo's membership
interest in Charter LLC would equal
the sum of (i) the aggregate value
of all outstanding shares of
PublicCo common stock, with each
share valued as described above,
plus (ii) the amount by which the
aggregate exercise price of all
in-the-money options, warrants, and
other similar instruments
exercisable or convertible for
shares of PublicCo common stock is
less than the aggregate value of
all PublicCo common stock issuable
upon the exercise or conversion
thereof
Modification of formulas
for calculating the exchange ratio This term sheet does not prescribe the
capital structure of either Charter LLC
calculating the exchange ratio or PublicCo
and, therefore, equity interests (such as
preferred or convertible interests) or
liabilities of Charter LLC or PublicCo, or
assets of PublicCo other than its interest
in Charter LLC may exist that prevent the
formulas described under "Exchange ratio"
above from preserving an exchanging member's
relative ownership interest in Charter LLC.
The Exchange Agreement will include
appropriate provisions to deal with such
equity interests, liabilities, or assets.
Registration Rights In addition to the Registration Rights
provided in the Registration Rights
Agreement in the form of Exhibit C to the
Purchase and Contribution Agreement, if the
exchange of membership interests in Charter
LLC for PublicCo common stock is to occur
concurrently with PublicCo's initial public
offering and shares of PublicCo stock owned
by any stockholder of PublicCo will be
included in the initial public offering,
then each holder of membership interests in
Charter LLC will have the right to sell a
proportionate number of shares of PublicCo
common stock in the initial public offering
on substantially the same terms as are
described in Section 3 of the Registration
Rights Agreement.
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