Membership Purchase Agreement

MEMBERSHIP PURCHASE AGREEMENT


BY AND BETWEEN


ACEC HOLDING COMPANY, LLC,
AS SELLER


AND


CHARTER COMMUNICATIONS, INC.,
AS BUYER


DATED AS OF JANUARY 1, 1999 2
TABLE OF CONTENTS


ARTICLE I
DEFINITIONS


Sections 1.1 - 1.89: Definitions .......................................... 1 - x


ARTICLE II
PURCHASE AND SALE OF ACEC MEMBERSHIP INTEREST


Section 2.1: Purchase and Sale of ACEC Membership Interest ................ x
2.2: Instruments of Transfer ......................................


ARTICLE III
PURCHASE PRICE


Section 3.1: Purchase Price; Payment; Allocation
3.2: Deposit in Escrow ............................................
3.3: Adjustments and Prorations ...................................
3.4: Indemnity Escrow .............................................


ARTICLE IV
CLOSING


Section 4.1: Closing Date .................................................
4.2: Right to Specific Performance ................................


ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER


Section 5.1: Valid Existence of Seller ....................................
5.2: Seller's Interest in ACEC ....................................
5.3: ACEC's Valid Existence and Qualification .....................
5.4: Business of ACEC .............................................
5.5: Authorization; Enforceability ................................
5.6: Required Consents; Effect of Agreement; No Breach ............
5.7: Financial Statements .........................................
5.8: Undisclosed Liabilities ......................................
5.9: Tax Matters ..................................................
5.10: Franchises and Necessary Contracts ........................... 3
5.11: No Other Agreements ..........................................
5.12: Systems' Capacity, Subscribers and Rates .....................
5.13: Pole Attachment Agreements ...................................
5.14: Employees ....................................................
5.15: Absence of Certain Developments ..............................
5.16: Real Property ................................................
5.17: Title to Assets; Personal Property ...........................
5.18: Intangible Property ..........................................
5.19: Necessary Property ...........................................
5.20: Compliance with Laws .........................................
5.21: Litigation and Legal Proceedings .............................
5.22: Brokers' Fees ................................................
5.23: Pensions and Other Deferred Compsensation; Benefits ..........
5.24: Insurance, Surety Bonds, Damages .............................
5.25: Environmental Laws ...........................................
5.26: No Other Commitment to Sell ..................................
5.27: Disclosure ...................................................
5.28: Affiliate Agreements to be Terminated prior to or upon .......
Closing


ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER


Section 6.1: Organization ................................................
6.2: Authorization; Enforceability
6.3: No Default ..................................................
6.4: Litigation ..................................................
6.5: Finders' and Brokers' Fees
6.6: Disclosure ..................................................


ARTICLE VII
CONDUCT OF BUSINESS OF ACEC PRIOR TO CLOSING


Section 7.1: Restrictions on Operations Prior to Closing Date ............
7.2: Payment of Obligations ......................................
7.3: Inventory ...................................................
7.4: Compliance with Franchises ..................................
7.5: Victorville Rebuild .........................................


ARTICLE VIII
INVESTIGATION BY BUYER 4 Section 8.1: Access to Records.............................................
8.2: Publicity.....................................................


ARTICLE XI
FURTHER COVENANTS


Section 9.1: Delivery of Documents to Buyer................................
9.2: Transfer of Franchises and Necessary Contracts Prior to
Closing ......................................................
9.3: Further Assurances............................................
9.4: Environmental Reports.........................................
9.5: HSR Notification..............................................
9.6: Diligent, Good Faith Efforts..................................
9.7: No Solicitation...............................................
9.8: Closing Notice................................................


ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ALL PARTIES


Section 10.1: Orders Prohibiting Consummation of Transactions..............
10.2: HSR Act......................................................
10.3: Subscribers..................................................


ARTICLE XI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS


Section 11.1: Compliance with Agreement....................................
11.2: Correctness of Representations and Warranties................
11.3: No Adverse Change in Business or Properties..................
11.4: Termination of Affiliate Agreements..........................
11.5: Certificate of Officer.......................................
11.6: Rancho Cucamonga Franchise...................................
11.7: Pole Attachments.............................................
11.8: Opinion of Counsel...........................................
11.10: Opinion of FCC Counsel......................................
11.10: Noncompete Agreement.........................................
11.11: Consents.....................................................


ARTICLE XII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS


Section 12.1: Correctness of Representations and Warranties................ 5
12.2: Compliance with Agreement....................................
12.3: Certificate of Officer.......................................
12.4: Proceedings and Documents....................................
12.5: Opinion of Counsel...........................................


ARTICLE XIII
EXPENSES OF NEGOTIATION AND TRANSFER


Section 13.1: Expenses.....................................................


ARTICLE XIV
RIGHTS TO TERMINATE; BREACH; LIQUIDATED DAMAGES


Section 14.1: Termination..................................................


ARTICLE XV
INDEMNIFICATION


Section 15.1: Indemnification by Seller....................................
15.2: Indemnification by Buyer.....................................
15.3: Notice and Right to Defend Third Party Claims................


ARTICLE XVI
CASUALTY OR LOSS


Section 16.1: Repairs or Replacement of Assets.............................
16.2: Risk of Loss.................................................


ARTICLE XVII
MISCELLANEOUS


Section 17.1: Assignment...................................................
17.2: Successors...................................................
17.3: Entire Agreement.............................................
17.4: Third Parties................................................
17.5: Amendments in Writing........................................
17.6: Arbitration..................................................
17.7: Governing Law Enforcement....................................
17.8: Interpretation...............................................
17.9: Notices......................................................
17.10:Severability.................................................. 6
17.11:Counterparts.................................................. 7
EXHIBITS


Exhibit Title
------- -----
2.2 Assignment of ACEC Membership Interest
3.2 Deposit Escrow Agreement
3.4 Closing Escrow Agreement
11.7 Legal Opinion of Seller's Counsel
11.10 Legal Opinion of Seller's FCC Counsel
11.11 Members' Indemnity
11.12 Required Consent
12.5 Legal Opinion of Buyer's Counsel


SCHEDULES


Schedule Title
-------- -----
1.1(A) Systems and Service Areas
1.9 Tangible Assets
1.35 Excluded Assets
1.55 Slow Pay Bulk Accounts
1.87 Victorville Upgrade
5.6 Required Consents
5.9 Unpaid Taxes
5.10(A) Franchises
5.10(B) Necessary Contracts
5.10(C) Defaults; Pending Modifications; Commitments
5.12 System Characteristics, Subscribers and Rates
5.13 Pole Attachments
5.14 Labor Discussions; Employees
5.15 Absence of Certain Developments
5.16 Real Estate Owned by ACEC; Permitted Encumbrances
5.18 Intangible Property
5.21 Litigation and Administrative Proceedings
5.23 Employee Benefit Plans
5.24 Insurance Policies and Surety Bonds
5.25 Environmental Laws; Environmental Permits
5.26 Sale Commitments
5.28 Affiliate Agreements 8
THIS MEMBERSHIP PURCHASE AGREEMENT is made and entered into as of January 1, 1999 by and between ACEC HOLDING COMPANY, LLC, a Delaware limited liability company ("Seller"), and CHARTER COMMUNICATIONS, INC., a Delaware corporation ("Buyer").


WHEREAS, Seller is the sole member of, and owns and holds all right, title and interest in and to the sole membership interest in, American Cable Entertainment Company, LLC, a Delaware limited liability company ("ACEC");


WHEREAS, ACEC owns and operates cable television systems serving subscribers in the City of Hesperia, the City of Rancho Cucamonga, the City of San Bernardino, the City of Victorville, the City of Yucaipa, unincorporated areas of the County of San Bernardino (including the unincorporated areas of Angelus Oaks, Forrest Falls and Spring Valley Lake), and the Town of Apple Valley, all in the State of California; and


WHEREAS, in reliance upon the representations and warranties of Buyer set forth herein, Seller desires to sell to Buyer, and in reliance upon the representations and warranties of Seller set forth herein, Buyer desires to purchase from Seller, all right, title and interest in and to the sole membership interest in ACEC;


NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein set forth, the parties hereto agree as follows:


ARTICLE I
DEFINITIONS


As used in this Agreement, the following terms shall have the following meanings:


1.1 "1992 Act" means the Cable Television Consumer Protection and Competition Act of 1992.


1.2 "1998 Credit Agreement" means that certain Amended and Restated Credit Agreement dated as of September 30, 1998 between ACEC and the respective lenders named therein.


1.3 "ACEC" means American Cable Entertainment Company, LLC, a Delaware limited liability company doing business as American Cable Entertainment in the City of Rancho Cucamonga and the other areas served by the Angelus Oaks System, the Rancho System and the Yucaipa System and as Hi-Desert Cablevision in the City of Victorville, California and the other areas served by the Victorville System.


1.4 "ACEC Membership Interest" or "Membership Interest" means ACEC's sole 9 issued and outstanding membership interest.


1.5 "Additional Financial Statements" means (i) as to monthly statements, ACEC's unaudited Statement of Operations for each monthly period after the period ended September 30, 1998, and (ii) as to quarterly statements, ACEC's unaudited Balance Sheet and related Statements of Operations and Statements of Changes in Financial Position for each quarterly period after the period ended September 30, 1998.


1.6 "Affiliate" has the meaning prescribed by Rule 12-b-2 of the regulations promulgated pursuant to the Securities Exchange Act of 1934, as amended, and in the case of Buyer, Affiliate shall include any Person in which Paul G. Allen has an equity interest valued in excess of $100,000,000.


1.7 "Affiliate Agreements" has the meaning set forth in Section 5.28.


1.8 "Angelus Oaks System" has the meaning set forth in Schedule 1.1(A).


1.9 "Assets" means all of ACEC's assets (including, without limitation, those listed in Schedules 1.9, 5.10(A), 5.10(B), 5.16 and 5.18), whether tangible or intangible, other than the Excluded Assets.


1.10 "Assignment" has the meaning set forth in Section 2.2.


1.11 "Basic Subscriber Equivalents" or "BSE's" means equivalent bona fide Non-Delinquent CATV subscribers served by commercial establishments and multi-dwelling units (e.g., bars, taverns, apartment buildings, dormitories, hospitals, etc.) that are billed on a bulk or otherwise discounted basis for basic (or expanded basic) service which have paid in full the charges for at least one month of service, none of which is pending disconnection for any reason, the number of which BSE's shall be deemed to be equal to the quotient that is derived from dividing: (a) the gross basic (or, if applicable, expanded basic) billings to all such commercial establishments and multi-dwelling units that are billed on a bulk or otherwise discounted basis for basic (or expanded basic) service (but excluding billings from a la carte tiers or premium services, installation or other non-recurring charges, converter rental, any fees or charges for any outlet or connection other than the first outlet or connection, and pass-through charges for sales taxes, line-itemized franchise fees, fees charged by the FCC and the like) attributable to such commercial establishment or multi-dwelling unit during the most recent Monthly Billing Period ended prior to the date of calculation (but excluding billings in excess of a single Monthly Billing Period's charge) by (b) the rate charged by the respective System to individual homes at the date of determination for basic service (or, if the respective commercial establishment or multi-dwelling unit also takes expanded basic service, then by the rate charged by that System to individual homes at the date of determination for basic and expanded basic service), exclusive of any charges for the additional services, franchise fees, taxes, etc. which are excluded from the calculation of gross basic (or, if applicable, expanded basic) billings set forth in clause (a) above, such rate to be not less than the respective System's standard rate for such service.


2 10
1.12 "Basic Subscribers" means (i) all bona fide Non-Delinquent CATV subscribers (i.e., the first connections) that have paid in full, on a nondiscounted basis, for at least one Monthly Billing Period of the respective basic (or expanded basic, as the case may be) services ordered by the respective subscriber, and to whom the respective System is rendering its basic (or expanded basic, as the case may be) CATV service (whether or not in conjunction with any tiered or premium services, and whether or not any such tiered or premium services have been discounted, provided that any such discount shall be in accordance with the respective System's past practices in the ordinary course of business) at that System's then applicable monthly rate therefor, none of which subscribers is pending disconnection for any reason, plus (ii) all BSE's; provided, that solely for purposes of calculating the number of Basic Subscribers, those residential subscribers in the City of Victorville who are paying the discounted monthly expanded basic service rate then being billed to, and who qualify as, those "grandfathered" subscribers who funded the initial construction of the Victorville System shall be deemed to be Basic Subscribers.


1.13 "Basket" has the meaning set forth in Section 15.1(b)(iii).


1.14 "BSE's" means Basic Subscriber Equivalents.


1.15 "Business" means the CATV business conducted by ACEC on the date of this Agreement through the Systems in and around the Service Areas.


1.16 "Buyer" means Charter Communications, Inc., a Delaware corporation.


1.17 "Cable Act" means the Cable Communications Policy Act of 1984, as amended and supplemented by the 1992 Act and the Telecommunications Act of 1996.


1.18 "CARS" means CATV relay service.


1.19 "CATV" means cable television.


1.20 "Closing" has the meaning set forth in Section 4.1.


1.21 "Closing Date" has the meaning set forth in Section 4.1.


1.22 "Closing Escrow Agreement" means an indemnification escrow agreement substantially in the form of Exhibit 3.4.


1.23 "Closing Date Subscriber Total" means the total number of Basic Subscribers on the Closing Date.


1.24 "Completed Plant" has the meaning set forth in Schedule 1.87, which Schedule defines the Victorville Upgrade and the Victorville Upgrade Completion Cost.


1.25 "Debt Certificate" means the certificate to be delivered by Buyer to Seller not less than 10 days prior to the Closing Date pursuant to Section 3.3(c).


1.26 "DeMinimus Agreements" means ACEC's written or oral subscriber agreements


3 11 with subscribers entered into in the ordinary course of business for the provision of CATV service at the standard rates (or, solely with respect to the Victorville System's "grandfathered" subscribers referred to in Section 1.12, at the discounted rates) charged by the respective System for such service and those contracts, leases, assignments, licenses, commitments and other agreements that involve payments of less than $25,000 individually over the life thereof and less than $100,000 in the aggregate for all such agreements, etc. over the life thereof and do not impose (individually or collectively) any material non-monetary obligations.


1.27 "Deposit" means the sum of Seven Million Two Hundred Thousand Dollars ($7,200,000) deposited into escrow by Buyer with the Escrow Agent pursuant to Section 3.2(a).


1.28 "Deposit Escrow Agreement" means a deposit escrow agreement substantially in the form of Exhibit 3.2.


1.29 "Effective Time" means 11:59 p.m. of the day prior to the Closing Date.


1.30 "Encumbrances" means, collectively, all liens, mortgages, security interests and other encumbrances of any kind, character or description, whether accrued, absolute, contingent or otherwise (and whether or not reflected or reserved against in the balance sheets, books of account and records of ACEC).


1.31 "Environmental Law" means any applicable federal, state, or local law, statute, standard, ordinance, rule, regulation, code, license, permit, authorization, approval, and any consent order, administrative or judicial order, judgment, decree, injunction, or settlement agreement between ACEC and a governmental entity relating to the protection, preservation or restoration of the environment (including, without limitation, air, water, land, plant and animal life or any other natural resource).


1.32 "Environmental Permit" means any permit, license, approval, consent or other authorization required by any applicable Environmental Law.


1.33 "Escrow Agent" means Societe Generale, New York Branch.


1.34 "Event of Loss" has the meaning set forth in Section 16.1.


1.35 "Excluded Assets" has the meaning set forth in Schedule 1.35.


1.36 "FAA" means the Federal Aviation Authority.


1.37 "FCC" means the Federal Communications Commission.


1.38 "Final Closing Certificate" means the certificate to be delivered by Buyer to Seller within ninety (90) days after the Closing Date pursuant to Section 3.3(f).


1.39 "Financial Statements" has the meaning set forth in Section 5.7.


1.40 "Franchise" means, with respect to any System, the respective franchise (or, in lieu thereof, the respective license, consent, permit, approval or authorization) entered into, issued or otherwise granted by any state or local (e.g., city, county, parish, town or village)


4 12 franchising authority, for the construction, installation and operation of the respective System within the respective Service Area (or portion thereof) designated therein.


1.41 "GAAP" means generally accepted accounting principles consistently applied.


1.42 "Hazardous Substance" means any substance or material listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, under any Environmental Law, whether by type or by quantity; Hazardous Substance includes, without limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance or petroleum or any derivative or by-product thereof, radon, radioactive material, asbestos, asbestos-containing material, urea formaldehyde foam installation, lead and polychlorinated biphenyl classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated under any Environmental Law.


1.43 "Homes Passed" means all single family homes and all residential units in multi-dwelling units (e.g., apartment buildings, dormitories), provided that as of the date of determination any such home or unit is capable of being serviced by any System without further trunk or feeder line construction, and all commercial or institutional real property improvements (e.g., bars, taverns, hospitals, hotels, motels), provided that as of the date of determination any such improvement subscribes (directly or indirectly) to any System's CATV services.


1.44 "HSR Act" has the meaning set forth in Section 9.5.


1.45 "Improvements" means all buildings, structures, CATV towers and fixtures, and other improvements now or hereafter attached to the Real Estate, and all modifications, additions, restorations or replacements of the whole or any part thereof.


1.46 "Indemnifiable Damages" means any and all liabilities in respect of suits, proceedings, demands, judgments, damages, expenses and costs (including, without limitation, reasonable counsel fees and costs and expenses) incurred in the investigation, defense or settlement of any claims covered by the indemnification set forth in this Agreement.


1.47 "Indemnitee" has the meaning set forth in Section 15.3.


1.48 "Indemnitor" has the meaning set forth in Section 15.3.


1.49 "Indemnity Fund" means the sum of Ten Million dollars ($10,000,000) of the Purchase Price deposited at Closing with the Escrow Agent pursuant to the Closing Escrow Agreement.


1.50 "Knowledge" or "knowledge" means, as to Seller, the actual knowledge of any of Seller's executive officers, and as to ACEC, the actual knowledge of any of ACEC's executive officers or general manager.


1.51 "Legal Proceedings" has the meaning set forth in Section 5.21.


1.52 "Membership Interest" means the ACEC Membership Interest.


5 13
1.53 "Monthly Billing Period" means the respective monthly period (whether such period is a calendar month or, as in the case of any System that engages in cycle billing, any other monthly period) to which any System-generated subscriber bill for CATV services relates.


1.54 "Necessary Contract" means any agreement to which ACEC is a party, or by which any of the Assets is bound, and which is reasonably necessary for ACEC's (i) use of any tower, office or headend site, (ii) pole attachments, (iii) rights-of-way, (iv) service to any residential development or any commercial or residential dwelling unit, (v) material licenses and easements, or (vi) operation of the Business and the Systems; provided, that the term "Necessary Contract" shall be deemed to exclude all Franchises and DeMinimus Agreements.


1.55 "Non-Delinquent" means a subscriber who does not have a past due balance of more than two Monthly Billing Periods (except as otherwise set forth on Schedule 1.55 with respect to those certain bulk accounts, if any, itemized thereon) from the first day of the initial Monthly Billing Period to which a bill relates, except for past due amounts representing late charges and other minimal ancillary charges totaling $5.00 or less.


1.56 "NTSC" means National Television System Committee.


1.57 "Operating Agreement" means that certain Limited Liability Company Agreement of ACEC dated as of April, 1998.


1.58 "Outside Date" has the meaning set forth in Section 4.1.


1.59 "Permitted Encumbrances" means (a) any Encumbrances set forth in Schedule 5.16; (b) any liens for current taxes, assessments or governmental charges not yet due and payable; (c) any non-monetary Encumbrances that do not, in any material respect, individually or in the aggre ...