SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): October
31, 2005
Charter
Communications, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or Other Jurisdiction of Incorporation or Organization)
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000-27927
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43-1857213
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(Commission
File Number)
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(I.R.S.
Employer Identification
Number)
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12405
Powerscourt Drive
St.
Louis, Missouri 63131
(Address
of principal executive offices including zip code)
(314)
965-0555
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
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ITEM
1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
As
part
of the acquisition of the cable systems owned by Bresnan Communications Company
Limited Partnership in February 2000, CC VIII, LLC ("CC VIII"), Charter
Communications, Inc.'s ("Charter") indirect limited liability company
subsidiary, issued, after adjustments, 24,273,943 Class A preferred membership
units (collectively the "CC VIII interest") with a value and an initial capital
account of approximately $630 million to certain sellers affiliated with
AT&T Broadband, subsequently owned by Comcast Corporation (the "Comcast
sellers"). While held by the Comcast sellers, the CC VIII interest was entitled
to a 2% priority return on its initial capital account and such priority
return
was entitled to preferential distributions from available cash and upon
liquidation of CC VIII. While held by the Comcast sellers, the CC VIII interest
generally did not share in the profits and losses of CC VIII. Mr. Allen granted
the Comcast sellers the right to sell to him the CC VIII interest for
approximately $630 million plus 4.5% interest annually from February 2000
(the
"Comcast put right"). In April 2002, the Comcast sellers exercised the Comcast
put right in full, and this transaction was consummated on June 6, 2003.
Accordingly, Mr. Allen, indirectly through a company controlled by him, Charter
Investment, Inc. ("CII"), became the holder of the CC VIII interest.
Consequently, subject to the matters referenced in the next paragraph, Mr.
Allen
generally thereafter has been allocated his pro rata share (based on number
of
membership interests outstanding) of profits or losses of CC VIII. In the
event
of a liquidation of CC VIII, Mr. Allen would be entitled to a priority
distribution with respect to the 2% priority return (which will continue
to
accrete). Any remaining distributions in liquidation would be distributed
to CC
V Holdings, LLC, an indirect subsidiary of Charter ("CC V"), and Mr. Allen
in
proportion to CC V's capital account and Mr. Allen's capital account (which
will
equal the initial capital account of the Comcast sellers of approximately
$630
million, increased or decreased by Mr. Allen's pro rata share of CC VIII's
profits or losses (as computed for capital account purposes) after June 6,
2003). The limited liability company agreement of CC VIII does not
provide
for a mandatory redemption of the CC VIII interest.
An
issue
arose as to whether the documentation for the Bresnan transaction was correct
and complete with regard to the ultimate ownership of the CC VIII interest
following consummation of the Comcast put right. Specifically, under the
terms
of the Bresnan transaction documents that were entered into in June 1999,
the
Comcast sellers originally would have received, after adjustments, 24,273,943
Charter Communications Holding Company, LLC ("Charter Holdco") membership
units,
but due to an FCC regulatory issue raised by the Comcast sellers shortly
before
closing, the Bresnan transaction was modified to provide that the Comcast
sellers instead would receive the preferred equity interests in CC VIII
represented by the CC VIII interest. As part of the last-minute changes to
the
Bresnan transaction documents, a draft amended version of the Charter Holdco
limited liability company agreement was prepared, and contract provisions
were
drafted for that agreement that would have required an automatic exchange
of the
CC VIII interest for 24,273,943 Charter Holdco membership units if the Comcast
sellers exercised the Comcast put right and sold the CC VIII interest to
Mr.
Allen or his affiliates. However, the provisions that would have required
this
automatic exchange did not appear in the final version of the Charter Holdco
limited liability company agreement that was delivered and executed at the
closing of the Bresnan transaction. The law firm that prepared the documents
for
the Bresnan transaction brought this matter to the attention of Charter and
representatives of Mr. Allen in 2002.
Thereafter,
the board of directors of Charter formed a Special Committee (currently
comprised of Messrs. Merritt, Tory and Wangberg) to investigate the matter
and
take any other appropriate action on behalf of Charter with respect to this
matter. After conducting an investigation of the relevant facts and
circumstances, the Special Committee determined that a "scrivener's error"
had
occurred in February 2000 in connection with the preparation of the last-minute
revisions to the Bresnan transaction documents and that, as a result, Charter
should seek reformation of the Charter Holdco limited liability company
agreement, or alternative relief, in order to restore and ensure the obligation
that the CC VIII interest be automatically exchanged for Charter Holdco units.
The Special Committee further determined that, as part of such contract
reformation or alternative relief, Mr. Allen should be required to contribute
the CC VIII interest to Charter Holdco in exchange for 24,273,943 Charter
Holdco
membership units. The Special Committee also recommended to the board of
directors of Charter that, to the extent contract reformation were achieved,
the
board of directors should consider whether the CC VIII interest should
ultimately be held by Charter Holdco or Charter Communications Holdings,
LLC
("Charter Holdings") or another entity owned directly or indirectly by
them.
Mr.
Allen
disagreed with the Special Committee's determinations described above and
so
notified the Special Committee. Mr. Allen contended that the transaction
was
accurately reflected in the transaction documentation and contemporaneous
and
subsequent company public disclosures.
The
parties engaged in a process of non-binding mediation to seek to resolve
this
matter, without success. The Special Committee evaluated what further actions
or
processes to undertake to resolve this dispute. To accommodate further
deliberation, each party agreed to refrain from initiating legal proceedings
over this matter until it had given at least ten days' prior notice to the
other. In addition, the Special Committee and Mr. Allen determined to utilize
the Delaware Court of Chancery's program for mediation of complex business
disputes in an effort to resolve the CC VIII interest dispute.
As
of
October 31, 2005, Mr. Allen, the Special Committee, Charter, Charter Holdco
and
certain of their affiliates, having investigated the facts and circumstances
relating to the dispute involving the CC VIII interest, after consultation
with counsel and other advisors, and as a result of the Delaware Chancery
Court's non-binding mediation program, agreed to settle the dispute, and
execute
certain permanent and irrevocable releases pursuant to the Settlement Agreement
and Mutual Release agreement dated October 31, 2005 (the
"Settlement").
Pursuant
to the Settlement, CII has retained 30% of its CC VIII interest (the "Remaining
Interests"). The Remaining Interests are subject to certain drag
along,
tag along and transfer restrictions as detailed in the revised CC VIII Limited
Liability Company Agreement. CII transferred the other 70% of the
CC VIII
interest directly and indirectly, through Charter Holdco, to a newly formed
entity, CCHC, LLC (a direct subsidiary of Charter Holdco and the direct parent
of Charter Holdings, "CCHC"). Of that other 70% of the CC VIII preferred
interests, 7.4% has been transferred by CII for a subordinated exchangeable
note of CCHC with an initial accreted value of $48.2 million, accreting at
14%,
compounded quarterly, with a 15-year maturity (the "Note"). The remaining
62.6% has been transferred for no consideration.
As
part
of the Settlement, CC VIII issued approximately 49 million additional
Class
B units to CC V in consideration for prior capital contributions to CC VIII
by
CC V, with respect to transactions that were unrelated to the dispute in
connection with CII's membership units in CC VIII. As a result, Mr. Allen's
pro
rata share of the profits and losses of CC VIII attributable to the Remaining
Interests is approximately 5.6%.
The
Note
is exchangeable, at CII's option, at any time, for Charter Holdco Class A
Common
units at a rate equal to then accreted value, divided by $2.00 (the "Exchange
Rate"). Customary anti-dilution protections have been provided that could
cause
future changes to the Exchange Rate. Additionally, the Charter Holdco Class
A
Common units received will be exchangeable by the holder into Charter common
stock in accordance with existing agreements between CII, Charter and certain
other parties signatory thereto. Beginning three years and four months after
the
closing of the Settlement, if the closing price of Charter common stock is
at or
above the Exchange Rate for a certain period of time as specified in the
Exchange Agreement, Charter Holdco may require the exchange of the Note for
Charter Holdco Class A Common units at the Exchange Rate.
CCHC
has
the right to redeem the Note under certain circumstances, for cash in an
amount
equal to the then accreted value. CCHC must redeem the Note at its maturity
for
cash in an amount equal to the initial stated value plus the accreted return
through maturity.
The
Board
of Directors has determined that the transferred CC VIII interests remain
at
CCHC.
On
November 3, 2005, the parties revised the Note to clarify certain
provisions. The revised Note is filed herewith as Exhibit 10.3.
ITEM
2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OR A REGISTRANT.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS.
The
following exhibit is filed pursuant to Item 1.01:
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Exhibit
Number
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Description
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10.1†
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Settlement
Agreement and Mutual Releases, dated as of October 31, 2005,
by and among
Charter Communications, Inc., Special Committee of the Board
of Directors
of Charter Communications, Inc., Charter Communications Holding
Company,
LLC, CCHC, LLC, CC VIII, LLC, CC V, LLC, Charter Investment,
Inc., Vulcan
Cable III LLC and Paul G. Allen (incorporated by reference
to
Exhibit 10.17 to the quarterly report on Form 10-Q
of Charter
Communications, Inc. filed on November 2, 2005 (File
No. 000-27927)).
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10.2
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Exchange
Agreement, dated as of October 31, 2005, by and among Charter
Communications Holding Company, LLC, Charter Investment, Inc.
and Paul G.
Allen (incorporated by reference to Exhibit 10.18 to
the quarterly
report on Form 10-Q of Charter Communications, Inc.
filed on November
2, 2005 (File No. 000-27927)).
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10.3*
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CCHC,
LLC Subordinated and Accreting Note, dated as of October 31,
2005.
(revised)
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10.4
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Third
Amended and Restated Limited Liability Company Agreement for
CC VIII, LLC,
dated as of October 31, 2005 (incorporated by reference to
Exhibit 10.20 to the quarterly report on Form 10-Q
of Charter
Communications, Inc. filed on November 2, 2005 (File
No. 000-27927)).
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10.5
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Second
Amended and Restated Limited Liability Company Agreement for
Charter
Communications Holdings, LLC, dated as of October 31, 2005
(incorporated
by reference to Exhibit 10.21 to the quarterly report
on
Form 10-Q of Charter Communications, Inc. filed on November
2, 2005
(File No. 000-27927)).
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†
Portions of this document have been omitted pursuant to a request for
confidential treatment. The omitted portions of this document
have been
filed with the Securities and Exchange Commission.
*
Filed
herewith.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, Charter
Communications, Inc. has duly caused this Current Report to be signed on its
behalf by the undersigned hereunto duly authorized.
CHARTER
COMMUNICATIONS, INC.
Registrant
Dated:
November 4, 2005
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By:/s/
Kevin D. Howard
Name:
Kevin D. Howard
Title:
Vice
President of Financial Reporting and
Analysis
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EXHIBIT
INDEX
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Exhibit
Number
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Description
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10.1†
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Settlement
Agreement and Mutual Releases, dated as of October 31, 2005,
by and among
Charter Communications, Inc., Special Committee of the Board
of Directors
of Charter Communications, Inc., Charter Communications Holding
Company,
LLC, CCHC, LLC, CC VIII, LLC, CC V, LLC, Charter Investment,
Inc., Vulcan
Cable III LLC and Paul G. Allen (incorporated by reference
to
Exhibit 10.17 to the quarterly report on Form 10-Q
of Charter
Communications, Inc. filed on November 2, 2005 (File
No. 000-27927)).
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10.2
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Exchange
Agreement, dated as of October 31, 2005, by and among Charter
Communications Holding Company, LLC, Charter Investment, Inc.
and Paul G.
Allen (incorporated by reference to Exhibit 10.18 to
the quarterly
report on Form 10-Q of Charter Communications, Inc.
filed on November
2, 2005 (File No. 000-27927)).
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10.3*
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CCHC,
LLC Subordinated and Accreting Note, dated as of October 31,
2005.
(revised)
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10.4
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Third
Amended and Restated Limited Liability Company Agreement for
CC VIII, LLC,
dated as of October 31, 2005 (incorporated by reference to
Exhibit 10.20 to the quarterly report on Form 10-Q
of Charter
Communications, Inc. filed on November 2, 2005 (File
No. 000-27927)).
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10.5
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Second
Amended and Restated Limited Liability Company Agreement for
Charter
Communications Holdings, LLC, dated as of October 31, 2005
(incorporated
by reference to Exhibit 10.21 to the quarterly report
on
Form 10-Q of Charter Communications, Inc. filed on November
2, 2005
(File No. 000-27927)).
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†
Portions of this document have been omitted pursuant to a request for
confidential treatment. The omitted portions of this document
have been
filed with the Securities and Exchange Commission.
*
Filed
herewith.
Exhibit
10.3
THIS
NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED
FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT THERETO UNDER THE ACT AND APPLICABLE LAWS OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE LAWS OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
THIS
NOTE
IS ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") UNDER SECTION 1272 ET SEQ. OF
THE
U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED. CALL THE DIRECTOR OF INVESTOR
RELATIONS OF CHARTER COMMUNICATIONS, INC. AT 12405 POWERSCOURT DRIVE, ST. LOUIS,
MO 63131, AT (314) 965-0555 FOR THE ISSUE PRICE, THE ISSUE DATE, THE AMOUNT
OF
OID AND THE YIELD TO MATURITY OF THIS NOTE.
CCHC,
LLC
SUBORDINATED
ACCRETING NOTE
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St.
Louis, Missouri
October
31, 2005
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CCHC,
LLC, a Delaware limited liability company (the "Company"), the principal office
of which is located at 12405 Powerscourt Drive, St. Louis, Missouri 63131,
for
value received, hereby promises to pay to Charter Investment, Inc. ("CII"),
or
its successors or registered assigns, the principal sum of the Accreted Value
of
this Note on October 31, 2020. The initial Accreted Value of this Subordinated
Accreting Note (the "Note") is FORTY-EIGHT MILLION TWO HUNDRED THOUSAND DOLLARS
($48,200,000). The initial Accreted Value of this Note shall increase on a
daily
basis at the rate of 14% per annum, compounded quarterly on the basis of a
360-day year of twelve 30-day months; provided, however, that from and after
February 28, 2009, the Company may pay any such increase in the Accreted Value
in cash and the Accreted Value of the Note will not increase to the extent
such
amount has been paid in cash. Interest will be paid upon overdue principal
and
premium, if any, compounded quarterly on the basis of a 360-day year of twelve
30-day months from the due date at 14% per annum to the extent such payment
is
lawful.
Payment
for all amounts due hereunder shall be made by mail to the registered address
of
the Holder. The holder of this Note shall be entitled to the rights and
privileges set forth in, and the obligations of, that certain Exchange
Agreement, by and between CII and Charter Communications Holding Company, LLC,
dated as of October 31, 2005 (the "Exchange Agreement").
Reference
is hereby made to the further provisions of this Note set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect
as
if set forth at this place.
IN
WITNESS WHEREOF, the Company has caused this Note to be issued this
31st
day of
October, 2005.
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CCHC,
LLC
By:
/s/
Paul E. Martin
Name:
Paul E. Martin
Title:
Senior Vice President,
Interim
Chief Financial Officer
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2
[REVERSE
OF NOTE]
The
following is a statement of the rights of the Holder of this Note and the
conditions to which this Note is subject, and to which the Holder hereof, by
the
acceptance of this Note, agrees:
ARTICLE
1. DEFINITIONS.
As
used
in this Note, the following terms, unless the context otherwise requires, have
the following meanings:
1.1 "Accreted
Value" means (i) on the date hereof, FORTY EIGHT MILLION TWO HUNDRED THOUSAND
DOLLARS ($48,200,000) , and (ii) as of any date of determination after the
date
hereof and prior to October 31, 2020, the sum (rounded to the nearest whole
dollar) of (a) FORTY EIGHT MILLION TWO HUNDRED THOUSAND DOLLARS ($48,200,000)
and (b) accretions thereon on a daily basis at the rate of 14% per annum,
compounded (to the extent cash payments are not made in respect of accretions
on
the Note from and after February 28, 2009 as provided in Article II) on each
March 31, June 30, September 30 and December 31, from October 31, 2005 through
such date of determination, and (iii) as of any date on and after October
31, 2020,
the
sum (rounded to the nearest whole dollar) of (a) FORTY EIGHT MILLION TWO
HUNDRED
THOUSAND DOLLARS ($48,200,000) and (b) accretions thereon on a daily basis
at
the rate of 14% per annum, compounded (to the extent cash payments are not
made
in respect of accretions on the Note from and after February 28, 2009 as
provided in Article II) quarterly on each March 31, June 30, September 30,
and
December 31, from October 31, 2005 to October 31, 2020.
1.2 "CCI"
means Charter Communications, Inc., a Delaware corporation.
1.3 "Charter
Change of Control" a reorganization, merger, consolidation or other transaction
or transactions, other than with Mr. Allen or one or more of his affiliates
and
other than in connection with any transactions with CCI or one or more of its
subsidiaries, (whether or not CCI is a party thereto and specifically including,
without limitation, open market purchases of securities), as a result of which
any person or entity or "group" of persons or entities (other than Mr. Allen,
any of his affiliates or CCI or any of its affiliates) becomes the "beneficial
owner" (as those terms are defined in and construed by judicial authority under
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended,
as
that Rule may be amended from time to time) of Common Stock or options, warrants
or other rights to acquire Common Stock or and Convertible Securities
representing in the aggregate at least 50% of the ordinary voting power of
CCI
in the election of directors.
1.4 "Common
Stock" means the common stock, par value $0.001, of CCI.
1.5 "Company"
includes any limited liability company, partnership, corporation or other legal
entity which shall succeed to or assume the obligations of CCHC, LLC under
this
Note.
3
1.6 "Holder,"
when the context refers to a holder of this Note, shall mean any person or
entity who shall at the time be the registered holder of this Note.
1.7 "Junior
Security" means (a) any common equity interests of the Company or (b) any
indebtedness issued by the Company that is contractually subordinated in right
of payment to all Senior Indebtedness (and any securities issued in exchange
for
or in replacement of Senior Indebtedness) at least to the same extent as the
Note is subordinated to Senior Indebtedness pursuant to Article 6 and has no
scheduled installment of principal due, by redemption, sinking fund payment
or
otherwise, on or prior to the maturity of the Note.
1.8 "Mr.
Allen" means Paul G. Allen.
1.9 "Related
Party" means
(a) any
individual who is (i) Mr. Allen, or the parent or sibling of Mr. Allen, or
(ii)
any lineal or adopted descendant of Mr. Allen or of his sibling, or (iii) any
lineal or adopted descendant of any individual described in clause (ii) of
this
subparagraph 1.9(a),
and
(iv) any spouse of any individual described in clauses (i), (ii) and (iii)
of
this subparagraph 1.9(a),
and any
lineal or adopted descendant of any such spouse,
(b) the
estate of any individual described in subparagraph 1.9(a),
(c) a
trust
in which (i) one or more individuals described in subparagraph 1.9(a)
have a
majority of the beneficial interests (determined actuarially) and (ii) a
majority of the trustees are one or more individuals described in subparagraph
1.9(a),
(d) a
split
interest trust (i.e.,
a
charitable remainder trust or charitable lead trust) (i) of which the sole
beneficiaries are Mr. Allen and/or individuals described in subparagraph
1.9(a)
and a
charitable institution qualified under Section 501(c)(3) of the U.S. Internal
Revenue Code of 1986, as amended, and (ii) of which the sole trustees are one
or
more individuals described in subparagraph 1.9(a),
(e) any
general partnership, limited partnership, limited liability company, limited
liability partnership, corporation, real estate investment trust, or association
at least 80 percent of the equity interests in which are, at the time of a
transfer to such entity, owned, directly or indirectly (through any entity
described in subparagraphs 1.9(b),
1.9(c),
1.9(d),
or this
subparagraph 1.9(e)),
by any
individual described in subparagraph 1.9(a),
or
(f) any
general partnership, limited partnership, limited liability company, limited
liability partnership, corporation, real estate investment trust, or association
(i) at least 50 percent of the equity interests in which are, at the time of
a
transfer to such entity, owned by Mr. Allen and (ii) the management and policies
of which are directed by Mr. Allen, directly or indirectly, whether through
the
ownership of voting securities or by contract or otherwise.
4
ARTICLE
2. ACCRETION;
INTEREST AND METHOD OF PAYMENT.
The
initial Accreted Value of the Note will increase at the rate of 14% per annum,
compounded on each March 31, June 30, September 30 and December 31, from October
31, 2005 through October 31, 2020; provided, however, that from and after
February 28, 2009, the Company may pay accretions with respect to the Note
in
cash and, to the extent the Company pays such accretions in cash, the Accreted
Value of the Note will not increase by such amount. Payment of the principal
of,
interest or premium, if any, on the Note or such lesser amount payable upon
the
acceleration of the maturity of the Note will include accreted amounts through
but excluding the date of such payment, computed on the basis of a 360-day
year
of twelve 30-day months. Interest will accrue upon overdue principal and
premium, and interest, if any, compounded quarterly from the due date at the
rate borne by the Note to the extent such payment is lawful.
The
Holder must surrender this Note to the Company to collect payment of principal
or Accreted Value. The principal of, Accreted Value, interest and premium,
if
any, on this Note will be payable at the office or agency of the Company
maintained for such purpose or, at the option of the Company, payment may be
made by check mailed to the Holder of the Note at its address that has
previously been provided to the Company. All payments, including redemption
payments, shall be in coin or currency of the United States of America as at
the
time of payment is legal tender for payment of public and private
debts.
ARTICLE
3. OPTIONAL
REDEMPTION; MAKE WHOLE PREMIUM.
3.1 Except
as
set forth below, the Company shall not be entitled to redeem this Note at its
option prior to February 28, 2009 (the "Hard Call Date") From and after the
Hard
Call Date, the Note may be redeemed at the option of the Company, in whole
but
not in part, at any time, upon not less than 30 nor more than 60 days’ prior
notice to the Holder of the Note, at the Accreted Value thereof to, but
excluding, the Redemption Date.
3.2 Prior
to
the Hard Call Date, the Note may be redeemed at the option of the Company,
in
whole but not in part, upon not less than 30 nor more than 60 days’ prior notice
to each Holder of the Note, upon the occurrence of any of the following:
(a) a
Charter
Change of Control;
(b) a
sale by
Charter Communications Holding Company, LLC, a Delaware limited liability
company ("HoldCo"), of all of HoldCo’s equity interests in the Company other
than to CCI or its affiliates or Mr. Allen or his affiliates; or
(c) a
sale of
all of the Company’s assets other than to CCI or its affiliates or Mr. Allen or
his affiliates.
5
If
the
Company elects to exercise its redemption right as set forth in this Section
3.2, the Company shall redeem the Note at the Accreted Value thereof to, but
excluding, the Redemption Date, plus the Make-Whole Amount.
For
purposes of this Article 3, the following defined terms shall have the following
meanings:
(d) "Make-Whole
Amount" means the aggregate present value as of the Redemption Date of the
amount of interest that would have accreted on the Note from the Redemption
Date
to, but excluding, the Hard Call Date if such redemption had not been made,
determined by discounting, on a quarterly basis (assuming a 360-day year of
twelve 30-day months), such interest at the Reinvestment Rate, determined on
the
third business day preceding the date notice of such redemption is given, from
what the Accreted Value would have been on the Hard Call Date if such redemption
had not been made, to the Redemption Date; provided, however that the Make-Whole
Amount shall not be less than $1.00.
(e) "Reinvestment
Rate" means the yield under the headings "Week Ending" published in the most
recent Statistical Release under the capital "Treasury Constant Maturities"
for
the maturity, rounded to the nearest month, corresponding to the remaining
period of time through the Hard Call date, as of the Redemption Date;
provided,
however,
if
there is more than one such yield published for such maturity, "Reinvestment
Rate" means the arithmetic mean of such yields. If no maturity exactly
corresponds to such period of time, the yields for the two published maturities
most closely corresponding to such period of time will be calculated pursuant
to
the immediately preceding sentence, and the "Reinvestment Rate" will be
interpolated or extrapolated from such yields on a straight-line basis, rounding
in each of the relevant periods to the nearest month. For purposes of
calculating the "Reinvestment Rate," the most recent Statistical Release
published prior to the date of determination of the Make-Whole Amount will
be
used.
(f) "Statistical
Release" means the statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve System and which
establishes yields on actively traded United States government securities
adjusted to constant maturities or, if such statistical release is not published
at the time of any determination, then such other reasonably comparable index
which shall be designated by the Company.
ARTICLE
4. NOTICE
OF
REDEMPTION.
Notice
of
redemption will be mailed by first class mail at least 30 days but not more
than
60 days before the Redemption Date to the Holder at the Holder’s registered
address. Any notice of redemption shall be unconditional and the Accreted Value
of the Note, together with any applicable Make-Whole Amount, shall be due on
the
date for redemption of the Note specified in such notice of redemption (the
"Redemption Date").
6
ARTICLE
5. EVENTS
OF
DEFAULT.
5.1 If
any of
the events specified in this Article 5 shall occur (herein individually referred
to as an "Event of Default"), the Holder may, so long as such condition exists,
declare the entire Accreted Value immediately due and payable, by notice in
writing to the Company:
(a) Default
in the payment of the principal of, or premium, if any, or any other amounts
with respect to this Note, in each case, when due and payable; or
(b) The
institution by the Company of proceedings to be adjudicat-ed as bankrupt or
insolvent, or the consent by it to institution of bankrupt-cy or insolvency
proceedings against it or the filing by it of a petition or answer or consent
seeking reorganization or release under Title 11 of the U.S. Code or any federal
or state law of any jurisdiction relating to bankruptcy, insolvency, winding
up,
liquidation, reorganization or relief of debtors, or any other applicable
federal or state law, or the consent by it to the filing of any such petition
or
the appointment of a receiver, liq-uidator, assignee, trustee or other similar
official of the Company, or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the taking of
corporate action by the Company in furtherance of any such action;
or
(c) If,
within sixty (60) days after the commencement of an action against the Company
(and service of process in connection therewith on the Company) seeking any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
relief under any present or future statute, law or regu-lation, such action
shall not have been resolved in favor of the Company or all orders or
proceedings thereunder affecting the operations or the business of the Company
stayed, or if the stay of any such order or proceeding shall thereafter be
set
aside, or if, within sixty (60) days after the appointment without the consent
or acquiescence of the Company of any trustee, receiv-er or liquidator of the
Company or of all or any substantial part of the properties of the Company,
such
appointment shall not have been vacated.
ARTICLE
6. SUBORDINATION.
6.1 Subordination.
This
Note shall be issued subject to the provisions of this Article 6; and the Holder
accepts and agrees that all payments of the principal of, premium, if any,
and
interest on (and other obligations, if any, with respect to) this Note by the
Company shall, to the extent and in the manner set forth in this Article 6,
be
subordinated and junior in right of payment to the prior payment in full in
cash
of all obligations arising under Senior Indebtedness. As used in this Note,
the
term "Senior Indebtedness" shall mean all liabilities of the Company which
would
appear on a balance sheet of the Company prepared in accordance with generally
accepted accounting principles.
7
6.2 No
Payment On This Note In Certain Circumstances.
(a) No
direct
or indirect payment (other than in Junior Securities (as defined herein)) by
or
on behalf of the Company of principal of, premium, if any, or interest on (and
other obligations, if any, with respect to) this Note, whether pursuant to
the
terms of this Note, upon acceleration, redemption or otherwise, will be made,
if, at the time of such payment, there exists a default in the payment of all
or
any portion of the obligations on any Senior Indebtedness, whether at maturity,
on account of mandatory redemption or prepayment, acceleration or otherwise,
and
such default shall not have been cured or waived in writing or the benefits
of
this sentence waived in writing by or on behalf of the holders of such Senior
Indebtedness. In addition, during the continuance of any non-payment event
of
default with respect to any Senior Indebtedness pursuant to which the maturity
thereof may be immediately accelerated by the holder or holders of such Senior
Indebtedness or may be accelerated by the holder or holders of such Senior
Indebtedness with the giving of notice or the passage of time or both, and
upon
receipt by the Company or any trustee of the Company’s Senior Indebtedness (each
a "Trustee") of written notice (a "Payment Blockage Notice") from the holder
or
holders of such Senior Indebtedness or the Trustee or agent acting on behalf
of
the holders of such Senior Indebtedness, then, unless and until such event
of
default has been cured or waived in writing or has ceased to exist or such
Senior Indebtedness has been discharged or repaid in full in cash (or such
payment shall be duly provided for in a manner satisfactory to holders of Senior
Indebtedness) or otherwise to the extent holders of Senior Indebtedness in
their
sole discretion accept satisfaction of amounts due by settlement in other than
cash or the benefits of these provisions have been waived in writing by the
holders of such Senior Indebtedness, no direct or indirect payment (other than
in Junior Securities) will be made by or on behalf of the Company of principal
of, premium, if any, or interest on (and other obligations, if any, with respect
to) this Note, whether pursuant to the terms of this Note, upon acceleration,
redemption or otherwise to such holders during a period (a "Payment Blockage
Period") commencing on the date of receipt of the Payment Blockage Notice by
the
Company and ending 179 days thereafter. The Company shall deliver a copy of
the
Payment Blockage Notice to the Holder promptly upon receipt
thereof.
(b) Notwithstanding
anything in the subordination provisions of this Note to the contrary, (1)
in no
event will a Payment Blockage Period extend beyond 179 days from the date the
Payment Blockage Notice in respect thereof was given and (2) not more than
one
Payment Blockage Period may exist with respect to this Note during any period
of
360 consecutive calendar days. No default that existed or was continuing on
the
date of delivery of any Payment Blockage Notice (whether or not such event
is
with respect to the same issue of Senior Indebtedness) may be, or be made,
the
basis for a subsequent Payment Blockage Notice, unless such default has been
cured or waived for a period of not less than 90 consecutive calendar
days.
(c) In
the
event that, notwithstanding the foregoing, any payment shall be received by
the
Holder at a time when such payment is prohibited by Section 6.2(a), such payment
shall be received and held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Indebtedness or their respective
representatives, or
8
to
the
Trustee or Trustees or agent or agents under any indenture or agreement pursuant
to which any of such Senior Indebtedness may have been issued or incurred,
as
their respective interests may appear, but only to the extent that, upon
notice
from the Company to the holders of Senior Indebtedness that such prohibited
payment has been made, the holders of the Senior Indebtedness (or their
representative or representatives or a Trustee or Trustees) notify the Company
in writing of the amounts then due and owing on the Senior Indebtedness,
if any,
and only the amounts specified in such notice to the Company shall be paid
to
the holders of Senior Indebtedness.
6.3 Payment
Over Of Proceeds Upon Dissolution, Etc.
(a) Upon
any
payment or distribution of assets or securities of the Company of any kind
or
character, whether in cash, property or securities, to the creditors of the
Company upon any dissolution or winding-up or total liquidation or
reorganization of the Company, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other similar proceedings relating
to
the Company, any assignment for the benefit of creditors or any marshalling
of
the Company’s assets and liabilities, the holders of Senior Indebtedness shall
be entitled to receive payment in full in cash of all obligations due in respect
of such Senior Indebtedness (including interest accruing after, or which would
accrue but for, the commencement of any proceeding at the rate specified in
the
applicable Senior Indebtedness, whether or not a claim for such interest would
be allowed), or have provision made for such payment in a manner acceptable
to
holders of such Senior Indebtedness, before the Holder shall be entitled to
receive any payment by the Company of the principal of, premium, if any, or
interest on (and other obligations, if any, with respect to) this Note, or
any
payment by the Company to acquire any of this Note for cash, property or
securities, or any distribution by the Company with respect to this Note of
any
cash, property or securities (in each case, other than payments in Junior
Securities).
(b) In
the
event that, notwithstanding the foregoing provision prohibiting such payment
or
distribution, any payment or distribution of assets or securities of the Company
of any kind or character, whether in cash, property or securities (in each
case,
other than Junior Securities), shall be received by the Holder at a time when
such payment or distribution is prohibited by Section 6.2 and before all
obligations in respect of Senior Indebtedness are paid in full in cash (or
such
payment shall be duly provided for in a manner satisfactory to the holders
of
Senior Indebtedness) or otherwise to the extent holders of Senior Indebtedness
in their sole discretion accept satisfaction of amounts due by settlement in
other than cash, such payment or distribution shall be received and held in
trust for the benefit of, and shall be paid over or delivered to, the holders
of
Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their respective
representatives, or to the Trustee or Trustees or agent or agents under any
indenture or agreement pursuant to which any of such Senior Indebtedness may
have been issued or incurred, as their respective interests may appear, for
application to the payment of Senior Indebtedness remaining unpaid until all
such Senior Indebtedness has been paid in full in cash (or such payment shall
be
duly provided for in a manner satisfactory to the holders of Senior
Indebtedness) or otherwise to the extent holders of Senior
Indebtedness
9
in
their
sole discretion accept satisfaction of amounts due by settlement in other
than
cash after giving effect to any prior or concurrent payment, distribution
or
provision therefor to or for the holders of such Senior
Indebtedness.
(c) Upon
the
payment in full in cash (or such payment shall be duly provided for in a manner
satisfactory to the holders of Senior Indebtedness) or otherwise to the extent
holders of Senior Indebtedness in their sole discretion accept satisfaction
of
amounts due by settlement in other than cash of all Senior Indebtedness, the
Holder shall be subrogated to the rights of the holders of Senior Indebtedness
to receive payments or distributions of cash, cash equivalents, property or
securities of the Company made on such Senior Indebtedness until the principal
of, premium, if any, and interest on this Note shall be paid in full in cash
or
this Note is no longer outstanding; and, for the purposes of such subrogation,
no payments or distributions to the holders of the Senior Indebtedness of any
cash, cash equivalents, property or securities to which the Holder would be
entitled except for the provisions of this Article 6, and no payment pursuant
to
the provisions of this Article 6 to the holders of Senior Indebtedness by the
Holder shall, as between the Company, its creditors other than holders of Senior
Indebtedness, and the Holder, be deemed to be a payment by the Company to or
on
account of the Senior Indebtedness. It is understood that the provisions of
this
Article 6 are and are intended solely for the purpose of defining the relative
rights of the Holder, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
(d) If
any
payment or distribution to which the Holder would otherwise have been entitled
but for the provisions of this Article 6 shall have been applied, pursuant
to
the provisions of this Article 6, to the payment of all amounts payable under
Senior Indebtedness, then and in such case, the Holder shall be entitled to
receive from the holders of such Senior Indebtedness any payments or
distributions received by such holders of Senior Indebtedness in excess of
the
amount required to make payment in full in cash of such Senior Indebtedness
(or
to duly provide for such payment in a manner satisfactory to the holders of
Senior Indebtedness) or otherwise to the extent holders of Senior Indebtedness
in their sole discretion accept satisfaction of amounts due by settlement in
other than cash.
6.4 Obligations
Of Company Unconditional.
Nothing
contained in this Article 6 is intended to or shall impair, as among the Company
and the Holder, the obligation of the Company, which is absolute and
unconditional, to pay to the Holder the principal of, premium on and interest
on
this Note as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the Holder
and creditors of the Company other than the holders of the Senior Indebtedness,
nor shall anything herein or therein prevent the Holder from exercising all
remedies otherwise permitted by applicable law upon default under this Note,
subject to the rights, if any, under this Article 6 of the holders of the Senior
Indebtedness in respect of cash, cash equivalents, property or securities of
the
Company received upon the exercise of any such remedy.
Without
limiting the generality of the foregoing, nothing contained in this Article
6
shall restrict the right of the Holder to take any action to declare this Note
to be
10
due
and
payable prior to their stated maturity pursuant to Section 3.1 or to pursue
any
rights or remedies hereunder; provided, however, that all Senior Indebtedness
then due and payable shall first be paid in full in cash, or have provision
made
for such payment in a manner satisfactory to the holders of such Senior
Indebtedness, before the Holder is entitled to receive any direct or indirect
payment from the Company of principal of, premium and interest on (and other
obligations, if any, with respect to) this Note.
6.5 Subordination
Rights Not Impaired By Acts Or Omissions Of The Company Or Holders Of Senior
Indebtedness.
No
right of any present or future holders of any Senior Indebtedness to enforce
subordination as provided herein shall at any time in any way be prejudiced
or
impaired by any act or failure to act on the part of the Company or by any
act
or failure to act, in good faith, by any such holder, or by any noncompliance
by
the Company with the terms of this Note, regardless of any knowledge thereof
which any such holder may have or otherwise be charged with. The provisions
of
this Article 6 are intended to be for the benefit of, and shall be enforceable
directly by, the holders of Senior Indebtedness.
6.6 This
Article Not To Prevent Events Of Default.
The
failure to make a payment on account of principal of, or premium, if any, on
this Note by reason of any provision of this Article 6 shall not be construed
as
preventing the occurrence of an Event of Default specified in clause (a) of
Section 5.1.
6.7 No
Waiver Of Subordination Provisions.
Without
in any way limiting the generality of Section 6.5, the holders of Senior
Indebtedness may, at any time and from time to time, without the consent of
or
notice to the Holder, without incurring responsibility to the Holder and without
impairing or releasing the subordination provided in this Article 6 or the
obligations hereunder of the Holder to the holders of Senior Indebtedness,
do
any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew, alter or amend, any Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding or secured; (b) sell, exchange, release
or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (c) release any person or entity liable in any manner for the
collection of Senior Indebtedness; and (d) exercise or refrain from exercising
any rights against the Company and any other person or entity.
6.8 Acceleration
of Note.
If
payment of this Note is accelerated because of an Event of Default, the Company
shall promptly notify holders of the Senior Indebtedness of the
acceleration.
ARTICLE
7. PREPAYMENT.
Except
as
provided in Article 3, this Note may not be prepaid prior to its stated final
maturity date, except with the express written consent of the Holder.
11
ARTICLE
8. WAIVER AND AMENDMENT.
No
provision of this Note may be amended, waived or modified, except upon the
written consent of the Company and the Holder.
ARTICLE
9. TRANSFER
OF THIS NOTE.
9.1 The
Holder shall not transfer or assign this Note without the prior written consent
of the Company, which consent may be granted or withheld, conditioned or
delayed, as the Company may determine in its sole discretion; provided,
however,
that
CII may transfer or assign this Note, in whole but not in part, without the
prior written consent of the Company to any Related Party; provided, however,
that the foregoing is not intended to, nor shall it, limit any rights of any
person pursuant to the Exchange Agreement dated as of November 12, 1999 by
and
among CCI, CII, Vulcan Cable III, Inc., and Mr. Allen.
9.2 So
long
as CII/Successor holds the Note, neither Mr. Allen nor any person in Control
of
CII/Successor shall transfer Control of CII/Successor without the prior written
consent of the Company, which consent may be granted or withheld, conditioned
or
delayed, as the Company may determine in its sole discretion; provided,
however,
that
Mr. Allen and any person in Control of CII/Successor may transfer Control of
CII/Successor without the prior written consent of the Company to any Related
Party.
For
purposes of this Article 9, the following defined terms shall have the following
meanings:
(a) "CII/Successor"
means CII and any entity that succeeds to all or any portion of CII’s interest
in the Note.
(b) "Control,"
as used with respect to any entity, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and
policies of such entity, whether through the ownership of voting securities
or
by contract or otherwise.
9.3 With
respect to any direct or indirect transfer or assignment of this Note that
is
permitted under Section 9.1 or Section 9.2, the Holder will give written notice
to the Company prior thereto, describing briefly the manner thereof, together,
if required by the Company, with a written opinion of such Holder’s counsel, to
the effect that such offer, sale or other distribution may be effected without
registration or qualification (under any federal or state law then in effect).
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so requested, the Company, as promptly as practicable, shall notify such
Holder that such Holder may sell or otherwise dispose of this Note, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Article 9 that the opinion of
counsel for the Holder is not reasonably satisfactory to the Company, the
Company shall so notify the Holder promptly after such determination has been
made. The Note thus transferred shall
12
bear
a
legend as to the applicable restrictions on transferability in order to ensure
compliance with the Act, unless in the opinion of counsel for the Company
such
legend is not required. The Company may issue stop transfer instructions
to its
transfer agent in connection with such restrictions.
ARTICLE
10. TREATMENT
OF NOTE.
The
Company and the Holder will treat, account and report this Note as debt and
not
equity (i) to the extent permitted by generally accepted accounting principles,
for financial accounting purposes and (ii) with respect to any returns filed
with federal, state or local tax authorities.
ARTICLE
11. NOTICES.
Any
notice, request or other communication required or permitted hereunder shall
be
in writing and shall be deemed to have been duly given if personally delivered
or if telegraphed or mailed by registered or certified mail, postage prepaid,
at
the respective addresses of the parties as set forth herein. Any party hereto
may by notice so given change its address for future notice hereunder. Notice
shall conclusively be deemed to have been given when personally delivered or
when deposited in the mail or telegraphed in the manner set forth above and
shall be deemed to have been received when delivered. Notices should be provided
in accordance with this Section at the following addresses:
If
to
CII, to:
Charter
Investment, Inc.
505
Fifth
Avenue S, Suite 900
Seattle,
WA 98104
Attention:
General Counsel
with
a
copy (which shall not constitute notice) to:
Mr.
Allen
D. Israel
Foster
Pepper & Shefelman PLLC
1111
Third Avenue, 34th Floor
Seattle,
WA 98101
and
with
a copy (which shall not constitute notice) to:
Mr.
Nicholas P. Saggese
Skadden,
Arps, Slate, Meagher & Flom LLP
300
South
Grand Avenue, 34th
Floor
Los
Angeles, California 90071
If
to
CCHC, LLC, to:
13
CCHC,
LLC
c/o
Charter Communications, Inc.
12405
Powerscourt Drive
St.
Louis, Missouri 63131-3674
Attention:
General Counsel
Facsimile:
(314) 965-8793
with
a
copy (which shall not constitute notice) to:
Mr.
Dennis Friedman
Gibson,
Dunn & Crutcher LLP
200
Park
Avenue
New
York,
New York 10166
Facsimile:
(212) 351-6201
ARTICLE
12. GOVERNING
LAW.
This
Note
shall be governed by and construed in accordance with the laws of the State
of
Delaware, excluding that body of law relating to conflict of laws.
ARTICLE
13. HEADING;
REFERENCES.
All
headings used herein are used for convenience only and shall not be used to
construe or interpret this Note. Except where otherwise indicated, all
references herein to Articles refer to Articles hereof.
14