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EXHIBIT
10.5
EXCHANGE
AGREEMENT
This
EXCHANGE AGREEMENT (this "Agreement"), dated as of
November 30, 2009, is made by and among Charter Communications, Inc., a Delaware
corporation (the "Company"), Charter Investment,
Inc., a Delaware corporation ("CII"), Paul G. Allen ("Mr. Allen"), and Charter
Communications Holding Company, LLC, a Delaware limited liability company
("Holdco").
RECITALS
WHEREAS,
on March 27, 2009, the Company, CII, Holdco and certain direct and indirect
subsidiaries of Holdco (collectively, the "Debtors") filed petitions for
relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the
United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court").
WHEREAS,
the Debtors filed a joint plan of reorganization (the "Joint Plan") which, pursuant
to the Bankruptcy Code, was confirmed by an order, entered November 17, 2009
(the "Confirmation
Order"), of the Bankruptcy Court.
WHEREAS,
pursuant to the Joint Plan, among other things, and on the effective date
thereof (the "Effective
Date") (i) all of CII's membership interests in Holdco are being
cancelled, other than a 1% interest to be retained by CII (the "Retained Interest"), (ii) the
Company will hold all of the membership interests in Holdco other than the
Retained Interest, (iii) the Limited Liability Company Agreement of Holdco is
being amended and restated in a manner consistent with the Joint Plan (as so
amended and restated, the "Holdco LLC Agreement"), and
(iv) the Company is granting the Allen Entities (as defined below) the right and
option to exchange all or any portion of the Retained Interest for Class A
Common Stock, par value $.001 per share, of the Company (the "Class A Stock") in accordance
with the terms hereof.
WHEREAS,
the Confirmation Order provides, among other things, that the Company, CII, Mr.
Allen, and Holdco enter into this Agreement to provide the Allen Entities the
rights provided for herein.
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:
AGREEMENT
1. Definitions. For
purposes of this Agreement, the following terms shall have the following
meanings:
"Allen Entity" means from time
to time any of (1) Mr. Allen, (2) any entity controlled by Mr. Allen, (3) any
trust in which Mr. Allen is the grantor, (4) the estate, spouse, immediate
family members and heirs of Mr. Allen, and (5) any trust created as a result of
the
death of
Mr. Allen. For purposes of this definition, "controlled" means the
direct or indirect ownership of at least fifty percent (50%) of the voting power
and economic interest of such entity.
"Available Exchange Shares"
means from time to time the Exchange Shares less any portion thereof previously
issued (or deemed issued pursuant to Section 3(c)) to an Exchanging Holder in
connection with exercise of a portion of its Exchange Option hereunder, subject
to adjustment as provided in Section 5(c).
"Business Day" means any day
other than Saturday, Sunday or other day on which commercial banking
institutions in New York, New York are required or authorized by law or
executive order to remain closed.
"Code" means the U.S. Internal
Revenue Code of 1986, as amended.
"Current Market Price" means
(x) in the case where the Class A Stock has been publicly traded on an
established securities market for a minimum of twenty (20) Trading Days before
an Allen Entity gives notice of the exercise of the Exchange Option pursuant to
Section 3(a), the volume-weighted average sale price per share of the Class A
Stock for the twenty (20) Trading Days immediately preceding such exercise, and
(y) in the case where the Class A Stock has not been publicly traded on an
established securities market for a minimum of twenty (20) Trading Days before
an Allen Entity gives notice of the exercise of the Exchange Option pursuant to
Section 3(a), the fair market value, as reasonably determined by a special
committee of the board of directors of the Company consisting solely of
directors that are not nominated, appointed or elected by any Allen Entity after
consultation with an investment banking firm of nationally recognized
standing.
"Exchange Expiration Date"
means the date that is five (5) years after the date hereof.
"Exchange Option" means the
right and option of any Allen Entity to exchange directly or indirectly such
Person's Holdco Units for Class A Stock pursuant to Section 2, including through
a Taxable Exchange of Units, a Taxable Stock-For-Stock Exchange, a Merger, a C/D
Reorganization and/or a B Reorganization (as such terms are defined in Section 2
hereof).
"Exchange Shares" means
1,120,649 shares of Class A Stock.
"Exchanging Holder" means any
Allen Entity that is a direct or indirect holder of any Holdco Units exercising
its Exchange Option with respect to such Holdco Units.
"Governmental Authority" means
any federal, state or local governmental authority, including any court or
administrative or regulatory agency.
"Holdco Units" means units of
membership interests issued by Holdco to its members which entitle such members
to the rights set forth in the Holdco LLC Agreement.
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"Legal Requirements" means
applicable common law and any applicable statute, 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 terms of any license or permit and any applicable order, decree,
or judgment that may have been handed down, adopted, or imposed by any
Governmental Authority, in each case as in effect on the date of this
Agreement.
"Lock-Up Agreement" means the
Lock-Up Agreement, dated as of November 30, 2009, by and between Mr. Allen,
Charter Investment, Inc. and the Company.
"Person" means any individual,
corporation, partnership, limited partnership, limited liability partnership,
limited liability company, trust, association, organization, or other
entity.
"Securities Act" means the
Securities Act of 1933, or any successor federal statute, and the rules and
regulations promulgated thereunder, in each case, as amended from time to
time.
"Trading Day" means with respect to
the Class A Stock, a day on which the Class A Stock is publicly listed or
admitted to trading on an established securities market.
2. Exchange
Right.
(a) The
Company hereby grants to each Allen Entity the right and option, exercisable at
any time and from time to time on or before the Exchange Expiration Date, on one
or more occasions, at the election of such Allen Entity, to exchange all or any
portion of the Holdco Units held by such Allen Entity in a taxable transaction
for (i) shares of Class A Stock and (ii) one thousand dollars ($1,000) in cash
(a "Taxable Exchange of
Units"). In the event any Allen Entity elects to exchange
pursuant to this Section 2(a), the number of shares of Class A Stock the
Exchanging Holder shall be entitled to receive under Section 2(d) shall be
reduced by a number of shares of Class A Stock, rounded to the nearest whole
number, that is equal to (x) one thousand dollars ($1,000) divided by (y) the
Current Market Price. Any reduction pursuant to the preceding sentence in the
number of shares of Class A Stock the Exchanging Holder shall be entitled to
receive pursuant to Section 2(d)(i) shall result in a corresponding reduction in
the number of Available Exchange Shares (if any) remaining after the exercise of
the Exchange Option pursuant to this Section 2(a).
(b) Subject
to Section 2(e), the Company hereby grants to each Allen Entity the right and
option, exercisable at any time and from time to time on or before the Exchange
Expiration Date, on one or more occasions, at the election of such Allen Entity,
to exchange all of the Holdco Units held by such Allen Entity by permitting the
equity holders of such Allen Entity to exchange one hundred percent (100%) of
the equity in such Allen Entity in a taxable transaction for (i) shares of Class
A Stock and (ii) one thousand dollars ($1,000) in cash (a "Taxable Stock-For-Stock
Exchange"). In the event any Allen Entity elects to exchange
pursuant to this Section 2(b), the number of shares of Class A Stock the
Exchanging Holder shall be entitled to receive under Section 2(d) shall be
reduced by a number of shares of Class A Stock, rounded to
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the
nearest whole number, that is equal to (x) one thousand dollars ($1,000) divided by (y) the
Current Market Price. Any reduction pursuant to the preceding sentence in the
number of shares of Class A Stock the Exchanging Holder shall be entitled to
receive pursuant to Section 2(d)(i) shall result in a corresponding reduction in
the number of Available Exchange Shares (if any) remaining after the exercise of
the Exchange Option pursuant to this Section 2(b).
(c) Subject
to Section 2(e), the Allen Entities shall have the right and option, exercisable
at any time and from time to time on or before the Exchange Expiration Date, on
one or more occasions, at the election of any Allen Entity, to require the
Company to and the Company shall effect any exchange of Holdco Units held by
such Allen Entity in a tax-free transaction by (at the election of such Allen
Entity):
(i) permitting
such Allen Entity to merge with and into the Company (or, at the election of
such Allen Entity but subject to Section 3(d), causing such Allen Entity to
merge with and into a directly wholly-owned subsidiary of the Company or causing
a directly wholly-owned subsidiary of the Company to merge with and into such
Allen Entity) in a transaction that qualifies as a reorganization under Section
368(a) of the Code (the "Merger");
(ii) permitting
such Allen Entity to exchange all of the Holdco Units held by such Allen Entity
for shares of Class A Stock in a transaction that qualifies as a reorganization
under Section 368(a)(1)(C) or Section 368(a)(1)(D) of the Code (the "C/D Reorganization");
or
(iii) permitting
the equity holders of the Allen Entity to exchange equity in such Allen Entity
constituting "control," as defined in Section 368(c) of the Code, of such Allen
Entity solely for shares of Class A Stock in a transaction that qualifies as a
reorganization under Section 368(a)(l)(B) of the Code (the "B
Reorganization").
Each of a
Merger, a C/D Reorganization and a B Reorganization is referred to herein as a
"Non-Recognition
Transaction." If an exchange is to be effected through a
Merger, the Company shall promptly take all action (and, if applicable, cause
its wholly-owned subsidiary to take all action) necessary to effect the Merger,
including without limitation, execution of reasonable and customary agreements
of merger, the voting of all shares in any subsidiary in favor of the Merger and
the filing of a Certificate of Merger with the Secretary of State of the State
of Delaware (or other applicable jurisdiction). The shareholders of
the Allen Entity that is a party to a Taxable Stock-For-Stock Exchange, Merger
or B Reorganization shall be treated for purposes of this Agreement as an
Exchanging Holder.
(d) (i)
Subject to Sections 2(a), 2(b) and 2(d)(ii), the consideration to be received by
an Exchanging Holder in connection with the exercise of its Exchange Option
hereunder shall be a number of shares of Class A Stock equal to:
(x) in
the case of an exchange of all Holdco Units then held by the Allen Entities, the
Available Exchange Shares (which, in the case of a Taxable Stock-For-Stock
Exchange, Merger or B Reorganization, shall be allocated among Exchanging
Holders (if more than
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one) in
proportion to their respective holdings of the equity securities of the
applicable Allen Entity), and
(y) in
the case of an exchange of less than all Holdco Units then held by the Allen
Entities, a portion of the Available Exchange Shares equal to the product of (a)
the Available Exchange Shares multiplied by (b) a
fraction, the numerator of which is the number of Holdco Units sought to be
exchanged by such Exchanging Holder, and the denominator of which is the total
number of Holdco Units then held by all Allen Entities.
(ii)
Notwithstanding anything to the contrary in Section 2(d)(i), if (x) the
Exchanging Holder and the Company have received distributions from Holdco in
respect of Holdco Units pursuant to and in accordance with Section 8 of the
Holdco LLC Agreement before the Exchanging Holder exercises its Exchange Option
and (y) as of the date an Exchanging Holder delivers its written notice of
exercise under Section 3(a) in respect of the exercise of such Exchange Option
(the "Applicable Exercise
Date"), the Company has not paid dividends or made other distributions to
holders of Class A Stock attributable to the distributions the Company received
from Holdco as described in clause (x) of this Section 2(d)(ii), the number of
shares of Class A Stock the Exchanging Holder shall be entitled to receive
pursuant to Section 2(d)(i) shall be reduced by a number of shares of Class A
Stock, rounded to the nearest whole number, that is equal to (A) the fair market
value (if other than cash, as determined in good faith by the board of directors
of the Company after consultation with an investment banking firm of nationally
recognized standing) of the distribution the Exchanging Holder received as
described in clause (x) of this Section 2(d)(ii) divided by (B) the
Current Market Price as of the Applicable Exercise Date.
(iii) Any
reduction pursuant to Section 2(d)(ii) in the number of shares of Class A Stock
the Exchanging Holder shall be entitled to receive pursuant to Section 2(d)(i)
shall result in a corresponding reduction in the number of Available Exchange
Shares (if any) remaining after the exercise of the applicable Exchange
Option.
(e) Notwithstanding
anything in this Agreement to the contrary, the exchange rights under Section
2(b) and Section 2(c) shall not be available to any Allen Entity unless and
until Allen Entities have utilized 90% of CII's available ordinary suspended
losses under Section 1366(d) of the Code against ordinary income. For
purposes of this Section 2(e), the amount and character of available suspended
losses under Section 1366(d) of the Code shall be measured as of the date any
Allen Entity delivers written notice under Section 3(a) to effect the first
transaction undertaken under this Agreement pursuant to Section 2(a) and the
amount of applicable ordinary income realized shall be measured as of the date
the applicable Allen Entity delivers written notice under Section 3(a), in each
case determined in good faith by such Allen Entity in its sole discretion,
taking into account any facts and/or circumstances such Allen Entity may deem
appropriate, including, without limitation, any transactions, income or income
allocations to such Allen Entity with respect to Holdco or any direct or
indirect subsidiary of Holdco (the Company, Holdco and such direct or indirect
subsidiaries of Holdco, "Charter") or investment in Charter equities
or debt securities in the applicable taxable year. In no event shall
the Allen Entities in the aggregate be permitted to effect more than two
exchanges pursuant to Section 2(b) and Section 2(c), taken together, in any
six-month period. This Section 2(e) shall
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not apply
to any transaction in which the Allen Entities are required to exchange pursuant
to Section 5(g) hereof.
3. Consummation of
Exchange.
(a) An
Exchanging Holder shall exercise its Exchange Option by delivering written
notice of exercise to the Company, specifying the portion of such holder's
Holdco Units, directly or indirectly, to be exchanged, whether such transaction
is effected as a Taxable Exchange of Units, a Taxable Stock-For-Stock Exchange
or a Non-Recognition Transaction and, with respect to a Non-Recognition
Transaction, the nature of the Non-Recognition Transaction.
(b) Upon its
receipt of notice pursuant to Section 3(a) or, in the case of a Merger, upon
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (or other applicable jurisdiction), and without any further action on
the part of any party hereto, the Company shall be deemed to have acquired the
Holdco Units and/or common stock of the applicable Allen Entity being exchanged
pursuant to Section 2(a), 2(b) or 2(c), as applicable, and the Exchanging Holder
shall be deemed to have acquired the shares of Class A Stock specified in
Section 2(d).
(c) An
Exchanging Holder may, but shall not be required to, surrender the
certificate(s), if any, evidencing the Holdco Units and/or common stock of the
applicable Allen Entity being exchanged pursuant to Section 2(a), 2(b) or 2(c),
as applicable, to the Company for cancellation, and such Exchanging Holder shall
be entitled to receive certificate(s) representing the corresponding number of
Exchange Shares. Until so surrendered or presented for cancellation,
such certificate(s), if any, held by the Exchanging Holders shall be deemed and
treated for all corporate purposes to represent the applicable number of shares
of Class A Stock specified in Section 2(d).
(d) To the
extent not inconsistent with tax-free treatment, a Merger or C/D Reorganization
shall be effected by causing the Holdco Units to be acquired from the applicable
Allen Entity by a direct and wholly-owned subsidiary of the
Company.
4. Representations by the Allen
Entities. Each Exchanging Holder exercising its Exchange
Option hereunder represents and warrants to the Company, as of the date of
delivery of the notice provided in Section 3(a) and, in the case of a Merger, as
of the date of filing of the Certificate of Merger with the Secretary of State
of the State of Delaware (or other applicable jurisdiction), as
follows:
(a) The
Holdco Units subject to such Exchange Option and, in the case of a Taxable
Stock-For-Stock Exchange, Merger or B Reorganization, the common stock of the
applicable Allen Entity are owned, both of record and beneficially, by such
Exchanging Holder or Allen Entity, as applicable, 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 Holdco
Units, and in the case of a Taxable Stock-For-Stock Exchange, Merger or B
Reorganization, the common stock of such applicable Allen Entity), other than
those arising under applicable law and those arising under the organizational
documents of Holdco or the
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Company,
and, upon the transfer of such Holdco Units pursuant to this Agreement (or, in
the case of a Taxable Stock-For-Stock Exchange, Merger or B Reorganization, the
common stock of such applicable Allen Entity), the Company will receive good
title to the Holdco Units, or, in the case of a Taxable Stock-For-Stock
Exchange, Merger or B Reorganization, the common stock of such applicable Allen
Entity, free and clear of all liens, encumbrances, and adverse interests created
by the Exchanging Holder, other than those arising under applicable law or those
arising under the organizational documents of Holdco or the
Company.
(b) Such
Exchanging Holder is acquiring such shares of Class A Stock with the intent of
holding such shares for investment for its own account and without the intent or
a view to participating directly or indirectly in, or for resale in connection
with, any distribution of such shares within the meaning of the Securities Act
of any applicable state securities laws.
(c) Such
Exchanging Holder acknowledges and agrees that shares of Class A Stock are being
issued to it in reliance on the exemption from registration contained in Section
4(2) of the Securities Act and exemptions contained in applicable state
securities laws, and that such shares cannot be sold or transferred except in a
transaction that is exempt under the Securities Act and those state acts or
pursuant to an effective registration statement under those acts or in a
transaction that is otherwise in compliance with the Securities Act and those
state acts.
(d) Such
Exchanging Holder is an "accredited investor" within the meaning assigned to
such term under Regulation D promulgated pursuant to the Securities
Act.
(e) In the
case of a Taxable Stock-For-Stock Exchange, Merger or B Reorganization only, (i)
the applicable Allen Entity does not own any material assets other than the
Holdco Units, common stock of the Company, goodwill and deferred tax assets, and
(ii) any material liabilities of such applicable Allen Entity required by United
States generally accepted accounting principles in effect from time to time to
be reflected on a consolidated balance sheet of such Allen Entity as of the date
of delivery of notice under Section 3(a) (other than deferred taxes) have been
defeased or the satisfaction of such liabilities has been adequately provided
for by another Allen Entity.
5. Other
Covenants.
(a) Closing of the
Books. For any taxable year in which the Exchange Option is
exercised or the Allen Entities are required to effect an exchange pursuant to
Section 5(g) hereof, the Company agrees to utilize, and to cause Holdco to
utilize, at any Allen Entity's election, a "closing of the books" or "pro rata"
method with respect to Holdco's income allocations, and to the extent applicable
in connection with a Taxable Stock-For-Stock Exchange, Merger or B
Reorganization, income allocations for the applicable Allen Entity, in each
case, for the taxable year in which any exchange occurs under this
Agreement. Notwithstanding the foregoing, all allocations of
cancellation of indebtedness income related to confirmation of the Joint Plan
shall be made utilizing the closing of the books method.
(b) Reporting. The
Company agrees to report, and to cause Holdco and, to the extent applicable in
connection with a Taxable Stock-For-Stock Exchange, Merger or B
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Reorganization,
the applicable Allen Entity to report, any transaction hereunder for tax
purposes consistent with the manner the transaction is effected as specified in
the notice delivered pursuant to Section 3(a), except to the extent prohibited
by any applicable law. In addition, the Company and the applicable Allen
Entities agree to report any transaction hereunder pursuant to Section 5(g) for
tax purposes in a manner consistent with the type of transaction such Allen
Entities have elected (or deemed elected) pursuant to Section 5(g), except to
the extent prohibited by any applicable law.
(c) Adjustment of Available
Exchange Shares.
(i) The
number of Available Exchange Shares shall be adjusted proportionately in
connection with any subdivision (by any stock split, stock dividend,
reclassification, recapitalization or otherwise) or combination (by reverse
stock split, reclassification, recapitalization or otherwise) of the outstanding
shares of Class A Stock.
(ii) In
the event any transaction or event (including, but not limited to, any merger,
consolidation, sale of assets, tender or exchange offer, reclassification,
compulsory share exchange or liquidation) occurs in which the shares of Class A
Stock are converted into or exchanged for stock, other securities, cash and/or
assets (each, a "Fundamental
Change"), subject to Section 5(g), an Exchanging Holder shall be entitled
to receive upon any subsequent exercise of its Exchange Option the kind and
amount of stock, other securities, cash and/or assets that such Exchanging
Holder would have received if such exercise had occurred immediately prior to
such Fundamental Change.
(iii) If
the Company distributes to holders of its Class A Stock any assets (including
but not limited to cash), securities, any rights or warrants to purchase
securities (including but not limited to Class A Stock) or any other property in
respect of Class A Stock (other than (x) as described in clauses (i) and (ii) of
this Section 5(c) and (y) from distributions received from Holdco that were
distributed to each member of Holdco (including the applicable Allen Entities)
pursuant to and in accordance with Section 8 of the Holdco LLC Agreement) (any
such non-excluded event being referred to herein as an "Extraordinary Distribution"),
then the number of Available Exchange Shares shall be increased, effective
immediately after the earlier of the record date and the distribution date of
such Extraordinary Distribution, by an amount (rounded to the nearest whole
number) equal to the product of (x) the number of Available Exchange Shares
immediately prior to such record date or distribution date, as applicable, multiplied by (y) the quotient
obtained by dividing (A) the aggregate fair market value (if other than cash, as
determined in good faith by the board of directors of the Company after
consultation with an investment banking firm of nationally recognized standing)
of the assets, securities, rights, warrants, and/or other property distributed
in such Extraordinary Distribution in respect of each share of Class A Stock by
(B) the Current Market Price as of such record date or distribution date, as
applicable.
If at any
time an adjustment is required by this Section 5(c), such adjustment will be
applicable immediately after the record date, the distribution or the effective
date of the event causing such adjustment, whichever occurs first, to allow the
exchange of the aggregate amount of Class A
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Stock
and/or, as applicable, the aggregate kind and amount of other stock or
securities, cash and/or assets to which the Allen Entities shall be
entitled.
(d) Reservation of
Shares. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Class A Stock, solely for
purpose of issuance upon exercise of the Exchange Option, a number of shares of
Class A Stock equal to the Available Exchange Shares.
(e) Prior Notice by the
Company. The Company will deliver written notice to each party
hereto (other than Holdco) at least thirty days prior to:
(i) the
fixing of the record date to determine the holders of shares of common stock of
the Company entitled to receive any dividend or other distribution or any right,
including the right to acquire any additional shares of stock of any
class;
(ii) the
fixing of the record date to determine the holders of shares of common stock of
the Company entitled to participate in or, if no such record date is fixed, the
consummation date of, any capital reorganization or any reclassification of or
change in the outstanding capital stock of the Company, or any consolidation or
merger, sale, transfer, or disposition of substantially all of the Company's
assets as an entirety, or the liquidation, dissolution, or winding up of the
Company, or any other transaction or event that would cause an adjustment of the
number of Exchange Shares pursuant to Section 5(c) hereof; or
(iii) the
consummation of any disposition by the Company of all or substantially all its
Holdco Units.
Any
notice by the Company pursuant to this Section 5(e) shall specify the applicable
record date or consummation date, as applicable, and set forth the general
nature of the action to be taken.
(f) Assumption of Company
Obligations by Successor. Subject to Section 5(g), the Company
will not consolidate with any Person, merge into any Person, or otherwise sell,
convey, transfer, or otherwise dispose of all or substantially all of its
capital stock (in one transaction or a series of related transactions) to any
Person, or liquidate or dissolve unless the Person that consolidates or merges
with the Company or acquires all or substantially all of its capital stock (or,
in the case of a triangular merger or consolidation or other transaction in
which a direct or indirect parent of such consolidating Person has a publicly
traded class of equity securities, such direct or indirect parent) expressly
assumes, by an agreement executed and delivered to the Allen Entities parties
hereto, in form reasonably satisfactory to such Allen Entities, all of the
obligations of the Company under this Agreement.
(g) Required
Exchange.
(i) If,
at any time after the later of (x) 120 (one-hundred and twenty) days after the
Effective Date and (y) January 1, 2010, the Company solicits or receives a bona
fide proposal from any Person (a “Company Sale Proposal”) in
connection with a transaction that would result in a Change of Control (as
defined in the Lock-Up Agreement), and such Company Sale
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Proposal
is approved by a majority of the members of the board of directors of the
Company not affiliated with the Person(s) making such Company Sale Proposal (any
such transaction, a "Company
Sale Transaction"), then the Company may elect to require the applicable
Allen Entities to effect an exchange in the form elected by the Allen Entities
as determined below by delivering a written notice (a “Required Exchange Notice”) of
such Company Sale Transaction to Mr. Allen and each Allen Entity that is a
record holder of Holdco Units within ten (10) days following board approval
of such Company Sale Proposal specifying (A) the material terms of the Company
Sale Proposal, (B) the identity of the Person(s) involved in the Company Sale
Proposal, (C) the anticipated closing date thereof, and (D) if the Company
determines, in its reasonable discretion, that a Non-Recognition Transaction in
connection with the Company Sale Transaction would not be available, the reasons
for such unavailability, in which case the Allen Entities shall be limited to
electing to exchange pursuant to this Section 5(g) using a Taxable Exchange of
Units or a Taxable Stock-for-Stock Exchange. Within ten (10) Business Days of
receipt of the Required Exchange Notice, the applicable Allen Entities shall
deliver a written notice to the Company specifying the type of exchange to be
effected in the transaction pursuant to this Section 5(g), and, if the
applicable Allen Entities specify a Non-Recognition Transaction, if available,
the nature thereof. If the applicable Allen Entities fail to specify
the type of transaction within the required time period, the applicable Allen
Entities shall be deemed to have elected a Taxable Stock-for-Stock Exchange. For
the avoidance of doubt, the Allen Entities shall be permitted to specify the
type of election pursuant to the immediately preceding sentence without regard
to Section 2(e) hereof.
(ii) If
the Company delivers a Required Exchange Notice and does not rescind such notice
pursuant to clause (iii) of this Section 5(g), the exchange elected (or deemed
elected) by the applicable Allen Entities pursuant to Section 5(g)(i) shall be
deemed to occur, and the applicable Allen Entities shall be deemed to hold the
number of shares of Class A Stock determined under Section 2(d), automatically
and without any further action on the part of any party hereto, in each case
effective immediately prior to consummation of the Company Sale Transaction, and
the applicable Allen Entities shall be entitled to receive in the Company Sale
Transaction the same kind and amount of consideration per share, and on the same
terms and conditions, as the other holders of Class A Stock or Holdco Units, as
applicable. If the exchange elected (or deemed elected) by the
applicable Allen Entity pursuant to Section 5(g)(i) is deemed to occur pursuant
to this Section 5(g)(ii), then the Company shall deliver prompt written notice
of the occurrence of such exchange to the applicable Allen Entity as soon as
reasonably practicable after such exchange.
(iii) Any
such Company Sale Proposal, and the terms of any Company Sale Transaction, may
be amended or modified from time to time, and any such Required Exchange Notice
may be rescinded, by the Company; provided that the Company shall give prompt
written notice of any such amendment, modification or rescission to each of the
parties required to receive the Required Exchange Notice under clause (i) of
this Section 5(g) specifying in reasonable detail the terms of any amendment or
modification, as applicable.
6. Representations of the
Company. The Company represents and warrants to each party
hereto (other than Holdco) as follows:
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(a) The
Company is a corporation duly organized, validly existing, and in good standing
under the laws of Delaware. The Company has all requisite power and
authority to execute and deliver this Agreement and the documents contemplated
hereby, and to perform and comply with all of the terms, covenants, and
conditions to be performed and complied with by the Company hereunder and
thereunder. The Company is duly qualified to transact business in
each jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so qualified would not impair or
hinder the ability of the Company to perform its obligations under this
Agreement.
(b) The
execution, delivery, and performance of this Agreement by the Company have been
duly authorized by all necessary actions on the part of the
Company. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid, and binding obligation of the Company,
enforceable against it in accordance with its terms except as the enforceability
of this Agreement may be affected by bankruptcy, insolvency, or similar laws
affecting creditors' rights generally, and by judicial discretion in the
enforcement of equitable remedies.
(c) The
execution and delivery by the Company of this Agreement and the documents
contemplated hereby and the performance by the Company of its obligations under
this Agreement and the documents contemplated hereby, including its issuance of
shares of common stock of the Company (with or without the giving of notice, the
lapse of time, or both): (A) do not require the consent of any third party
(including any Governmental Authority); (B) will not conflict with any provision
of the Company's Amended and Restated Certificate of Incorporation, the
Company's Amended and Restated Bylaws, or any other organizational documents of
the Company; (C) will not violate, result in a breach of, or contravene any
Legal Requirement applicable to the Company; and (D) will not violate, conflict
with, result in a material breach of any terms of, constitute grounds for
termination of, constitute a default under, or result in the acceleration of any
performance required by the terms of, any mortgage, indenture, lease, contract,
agreement, or similar instrument to which the Company is a party or by which the
Company or its properties may be bound legally.
(d) The
shares of Class A Stock to be issued under this Agreement, when issued, sold,
and delivered in accordance with the terms of this Agreement, will be duly and
validly issued, fully paid, and nonassessable and will be free of restrictions
on transfer other than restrictions on transfer under applicable state and
federal securities laws.
7. Miscellaneous.
(a) Complete Agreement;
Modifications. This Agreement (together with the Holdco LLC
Agreement, the Joint Plan and all related documents, instruments and agreements
expressly contemplated by the Joint Plan) 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 each of the parties hereto.
11
(b) 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,
including any Non-Recognition Transaction.
(c) 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 facsimile, 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 Mr. Allen, CII or any other Allen Entity:
|
Vulcan
Inc.
505
Fifth Avenue South, Suite 900
Seattle,
Washington 98104
Attention: William
L. McGrath
Fax: (206)
342-2347
|
|
with
a copy to (which shall not constitute notice):
|
Skadden,
Arps, Slate, Meagher & Flom LLP
300
S. Grand Avenue, Suite 3400
Los
Angeles, California 90071
Attention: Nicholas
P. Saggese
Fax: (213)
687-5600
|
|
If
to the Company:
|
Charter
Communications, Inc.
12405
Powerscourt Drive
St.
Louis, Missouri 63131
Attention: General
Counsel
Fax: (314)
965-8793
|
|
with
a copy to (which shall not constitute notice):
|
Kirkland
& Ellis LLP
601
Lexington Avenue
New
York, New York 10022
Attention: Richard
M. Cieri and Paul M. Basta
Fax: (212)
446-4900
|
Any such
notice or other communication shall be deemed to have been given and received on
the day on which it is delivered or faxed (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 facsimile number.
(d) No Third Party
Beneficiaries. None of the provisions of this Agreement shall
be for the benefit of, or enforceable by, any Person that is not a party to this
Agreement, other than Mr. Allen, CII and any other Allen Entity.
12
(e) Waivers Strictly
Construed. With regard to any power, remedy or right provided
herein or otherwise available to any party hereunder (a) no waiver or extension
of time shall be effective unless expressly contained in a writing signed by the
waiving party; and (b) no alteration, modification or impairment shall be
implied by reason of any previous waiver, extension of time, delay, or omission
in exercise or other indulgence.
(f) 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.
(g) Successors and
Assigns. Except as provided herein to the contrary, this
Agreement shall be binding upon and shall inure to the benefit of the parties,
their respective successors (including any successor by merger, consolidation,
or otherwise to all or substantially all of a party's business or assets) and
permitted assigns.
(h) Assignments. Neither
this Agreement nor any of the rights or obligations hereunder shall be assigned
by any of the parties hereto without the prior written consent of the other
parties. Notwithstanding the foregoing, Mr. Allen and/or CII or any
other Allen Entity may, without the consent of the Company or Holdco, assign its
rights and obligations hereunder to any other Allen Entity that holds, directly
or indirectly, Holdco Units from time to time as permitted by the Holdco LLC
Agreement; provided, that as a
condition to such assignment, the assignee executes an acknowledgment in which
such assignee agrees to be bound by the terms and conditions of this Agreement
as if an original party hereto (including obligations with respect to the
delivery of representations and warranties required by this Agreement to be
delivered with any notice delivered pursuant to Section 3(a)).
(i) Governing
Law. This Agreement shall be governed by the laws of the State
of New York, without regard to any choice of law provisions of that state or the
laws of any other jurisdiction.
(j) 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.
(k) Counterparts. This
Agreement may be executed simultaneously in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
(l) Costs. All
filing fees, transfer taxes, sales taxes, document stamps or other similar
charges levied by any Governmental Authority in connection with the exchange of
the Holdco Units for shares of Class A Stock pursuant to this Agreement shall be
paid by the Company. Except as otherwise provided in this Agreement,
each party will bear its own costs in connection with the performance of its
obligations under this Agreement.
(m) 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
13
addition
to any other legal remedies, all of its costs and expenses, including reasonable
attorney's fees, from the non-prevailing party, regardless of whether such legal
action is prosecuted to completion.
[Remainder of Page Intentionally Left
Blank]
14
IN
WITNESS WHEREOF, the undersigned have executed and delivered this Agreement as
of the date first written above.
CHARTER
COMMUNICATIONS, INC.
By:________________________________
Name:
Title:
CHARTER
INVESTMENT, INC.
By:________________________________
Name: William
L. McGrath
Title: Vice
President
CHARTER
COMMUNICATIONS HOLDING COMPANY, LLC
By:________________________________
Name:
Title:
___________________________________
PAUL
G. ALLEN
[Signature
Page to Exchange Agreement]