EXHIBIT 10.48
EXECUTION COPY
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
IN RE CHARTER COMMUNICATIONS, INC. MDL DOCKET NO. 1506 (CAS)
SECURITIES LITIGATION ALL CASES
STONERIDGE INVESTMENT PARTNERS Consolidated Case
LLC, Individually and On Behalf of All Others No. 4:02-CV-1186 CAS
Similarly Situated,
Plaintiff,
v.
CHARTER COMMUNICATIONS, INC., PAUL ALLEN, JERALD
L. KENT, CARL E. VOGEL, KENT KALKWARF, DAVID G.
BARFORD, PAUL E. MARTIN, DAVID L. McCALL, BILL
SHREFFLER, CHRIS FENGER, JAMES H. SMITH, III,
SCIENTIFIC-ATLANTA, INC., MOTOROLA, INC. and
ARTHUR ANDERSEN, LLP,
Defendants.
STIPULATION OF SETTLEMENT
WITH DEFENDANT CHARTER COMMUNICATIONS, INC. AND RELATED
INDIVIDUAL DEFENDANTS
This Stipulation of Settlement (the "Stipulation"), dated as of January
24, 2005, is made and entered into by and among the following parties to the
above-entitled action, by and through their respective counsel of record: (1)
the Class Action Plaintiff (as defined below), on behalf of itself and each of
the Settlement Class Members (as defined below); and (2) the Settling Class
Action Defendants (as defined below), by and through their respective counsel of
record in the Class Action. The Settlement set forth in this Stipulation (the
"Settlement") is intended by the Settling Class Action Parties (as defined
below) to fully, finally and forever resolve, discharge and settle the Released
Claims (as defined below), upon and subject to the terms and conditions hereof.
I. THE CLASS ACTION AND RELATED LITIGATION
a. BACKGROUND
Charter Communications, Inc. ("Charter" or the "Company," as defined
below) is a broadband communications company. The Company provides analog video,
digital video, cable modem, and telephony services to more than 6 million
customers residing in 37 different states. Charter is headquartered in St.
Louis, Missouri. Arthur Andersen LLP (as defined below, "Andersen") served as
Charter's outside auditor for fiscal years 1999-2001.
On July 18, 2002, a Merrill Lynch analyst issued a report that questioned
several of Charter's accounting practices, including the capitalization of
certain customer service representative costs. The following day, the price of
Charter's common stock declined from $4.06 per share to $3.50 per share.
On August 16, 2002, Charter announced that the U.S. Attorney's Office for
the Eastern District of Missouri had initiated a grand jury investigation into
certain of Charter's operations. The day after this announcement, the price of
Charter's common stock declined from $2.71 per share to $2.53 per share.
On April 1, 2003, Charter announced that it was restating its financial
reports for 2000 and 2001, and the first three quarters of 2002.
On July 24, 2003, a Grand Jury indicted Settling Class Action Defendants
David G. Barford, Kent Kalkwarf, David L. McCall, and James H. Smith, III for a
conspiracy allegedly carried out from May 2001 through March 2002 to inflate
Charter's subscriber numbers and subscriber growth numbers. It further charged
Settling Class Action Defendants Barford and Kalkwarf with causing Charter to
enter into allegedly sham agreements with Scientific-Atlanta, Inc.
("Scientific-Atlanta") and Motorola, Inc. ("Motorola") in the Fall of 2000.
Settling Class Action Defendants McCall, Barford, Smith, and Kalkwarf have pled
guilty to one count of conspiracy to commit wire fraud to inflate Charter's
subscriber numbers.
On July 27, 2004, the Securities and Exchange Commission ("SEC") filed an
Order Instituting Cease-And-Desist Proceedings, Making Findings, And Imposing A
Cease-And-Desist Order Pursuant to Section 21C of the Securities Exchange Act of
1934 (the "SEC Order") on the consent of Charter, which neither admitted nor
denied the allegations therein, regarding certain subscriber count practices and
the accounting for certain agreements with Scientific-Atlanta and Motorola. The
SEC Order did not allege any wrongdoing regarding Charter's accounting, except
with respect to the agreements with Motorola and Scientific-Atlanta.
b. THE CLASS ACTIONS
On and after July 31, 2002, fourteen federal securities class action
complaints, including StoneRidge Investment Partners LLC v. Charter
Communications, Inc., No. 4:02-CV-1186 CAS, were filed against Charter and
various other defendants, including Paul G. Allen, Jerald L. Kent, Carl E.
Vogel, Kent Kalkwarf, David G. Barford, Paul E. Martin, David L. McCall, Bill
Shreffler, Chris Fenger, James H. Smith III, Scientific-Atlanta,
-2-
Motorola, and Andersen. These complaints were consolidated, pursuant to order of
the Multi-District Litigation Panel, in the U.S. District Court for the Eastern
District of Missouri, and captioned In re Charter Communications, Inc.
Securities Litigation, MDL Docket No. 1506 (CAS) (the "Class Action").
By Order dated April 16, 2003, the Court appointed StoneRidge Investment
Partners, LLC as lead plaintiff (hereinafter "Class Action Plaintiff"), and
appointed Pomerantz Haudek Block Grossman & Gross LLP as lead counsel
(hereinafter "Class Action Plaintiff's Counsel").
Class Action Plaintiff's Counsel, aided by private investigators and
forensic accountants, conducted a thorough investigation of the claims prior to
filing an Amended Consolidated Class Action Complaint (the "Amended Complaint")
on August 5, 2003. The Amended Complaint asserted claims against Charter, the
Individual Defendants, Andersen, Scientific Atlanta and Motorola for alleged
violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
and Rule 10b-5 promulgated thereunder, and sections 11, 12 and 15 of the
Securities Act of 1933. The Amended Complaint sought recovery for purchasers of
Charter common stock during the period of November 8, 1999 through July 17,
2002, and damages through August 16, 2002. Class Action Plaintiff subsequently
amended the Amended Complaint to include a class from July 17, 2002 to August
16, 2002, when the grand jury investigation was first announced (the "Second
Amended Complaint").
The Amended Complaint and the Second Amended Complaint alleged that during
the Settlement Class Period (as defined below), Charter issued false and
misleading statements that materially inflated the Company's reported operating
cash flow growth rate, by among other things, improperly accounting for costs
associated with customer service representatives, acquisitions of new customers,
and other matters. Class Action Plaintiff asserted that these manipulations
boosted Charter's operating cash flow by over $400 million during the Settlement
Class Period. In addition, the Amended Complaint and the Second Amended
Complaint alleged that Charter artificially inflated its reported growth rate
for new customers by improperly delaying the termination of a significant number
of subscribers who had either requested such termination or were significantly
delinquent in payments. Finally, Class Action Plaintiff alleged that Charter
engaged in a kick-back scheme with Motorola and Scientific Atlanta, whereby
Charter paid these suppliers $20 more for certain equipment (digital set top
boxes) in return for an equivalent amount of advertising spending by the
suppliers. Accounting manipulation for these transactions allegedly enabled
Charter to boost its income for fourth quarter 2000 by $17 million.
On August 26, 2003, Charter filed a Motion to Dismiss the Class Action,
which Class Action Plaintiff opposed. Other defendants in the Class Action filed
Motions to Dismiss between September 8, 2003 and October 17, 2003, which the
Class Action Plaintiff also opposed. Charter, along with various other
defendants, asserted that some of the statements alleged to be misleading were
in fact not misleading, and that the alleged inflation of customers, operating
cash flow, and revenues was immaterial as a matter of law relative to the total
number of Charter customers and the Company's total cash flow and revenues.
Charter also asserted that the decline in its stock price was due to general
cable industry related matters, including intense competition from satellite TV
providers, and not any revelation of alleged wrongdoing. Charter also asserted
that the SEC had previously
-3-
approved of its accounting for matters challenged in the Amended Complaint, and
had subsequently changed its interpretation of Generally Accepted Accounting
Principles ("GAAP") applicable to cable companies, thereby prompting a
significant portion of the restatement. Many of the Individual Defendants also
asserted that the Amended Complaint failed to adequately allege any direct
participation or knowledge of the alleged wrongdoing.
The hearing on the Motions to Dismiss of the Settling Class Action
Defendants has been taken off-calendar in light of the Settlement.
c. THE SHAREHOLDER DERIVATIVE ACTIONS
On or after September 12, 2002, three derivative actions were filed in the
Circuit Court for the City of St. Louis (the "State Court"), entitled Kenneth
Stacey, Derivatively on Behalf of Nominal Defendant Charter Communications, Inc.
v. Ronald L. Nelson, et al., and Charter Communications, Inc., No. 022-10625,
Aaron Cane, Derivatively on behalf of Nominal Defendant Charter Communications,
Inc., v. Ronald L. Nelson, et al., and Charter Communications, Inc., No.
022-11450, and Thomas Schimmel, Derivatively on behalf of Nominal Defendant
Charter Communications, Inc. v. Ronald L. Nelson, et al., and Charter
Communications, Inc., No. 044-0858 (the "State Court Shareholder Derivative
Actions"). On December 17, 2002, the Court granted Stacey and Cane's motion to:
(1) consolidate the State Court Derivative Actions; and (2) appoint Schiffrin &
Barroway, LLP, as Lead Counsel in the State Court Derivative Actions.
On February 12, 2003, a derivative action was filed in the United States
District Court for the Eastern District of Missouri, entitled Arthur J. Cohn,
Derivatively on behalf of Nominal Defendant Charter Communications, Inc. v.
Ronald L. Nelson, et al., and Charter Communications, Inc., Case No. 4:03CV00177
ERW (the "Federal Court Shareholder Derivative Action") (together with the State
Court Shareholder Derivative Actions, the "Shareholder Derivative Actions").
The Complaints in the Shareholder Derivative Actions name as defendants
the following officers and members of Charter's Board of Directors: Ronald L.
Nelson, Paul G. Allen, Marc B. Nathanson, Nancy B. Peretsman, William D. Savoy,
John H. Tory, Carl E. Vogel, and Larry W. Wangberg. Andersen was named as a
defendant in the State Court Derivative Actions.
The Shareholder Derivative Complaints alleged that the Charter Board of
Directors breached the fiduciary duties it owed to Charter and its shareholders
by, among other things, causing or allowing the Company to disseminate to the
market materially misleading or inaccurate information through public
statements, placing their own personal interests above the Company's, and
failing to prevent the Company and its officers and directors from committing
acts which would, and did, injure the Company, and failing to establish and
maintain adequate internal accounting controls at the Company.
All proceedings in the Shareholder Derivative Actions were stayed pending
resolution of the Motions to Dismiss in the Class Action.
-4-
d. SETTLEMENT NEGOTIATIONS AND MEDIATION
On March 22 and 23, 2004, April 13 and 14, 2004, May 7, 2004, June 16,
2004, and August 2, 2004, the Settling Class Action Parties, through their
respective counsel, participated in lengthy mediation sessions with Hon. Edward
A. Infante (Ret.). In addition to negotiations prior to and discussions during
the mediation sessions, the settling parties to the Derivative Actions and their
insurers, through their respective counsel, participated in the August 2, 2004
mediation session. During these meetings, which followed extensive briefing of
Judge Infante, the participants discussed with Judge Infante, among other
things, the Settling Class Action Parties' respective claims and defenses,
expert damages analyses, legal analyses, the discovery and motion practice
conducted and expected to be conducted in the Class Action, the evidence
expected to be offered by the parties at trial, and other important factual and
legal issues and matters relating to the merits of the Class Action.
On August 5, 2004, the Settling Class Action Parties agreed to a
Memorandum of Understanding regarding settlement of the Class Action. The terms
of the Memorandum are reflected in and superseded by this Stipulation.
Also on August 5, 2004, the parties to the Shareholder Derivative Actions,
with the exception of Andersen, agreed to a Memorandum of Understanding
regarding the settlement of those actions. Concurrently with the submission of
this Stipulation, the parties to the Shareholder Derivative Actions will submit
a Stipulation Re: Settlement of Derivative Claims to the Court. The Shareholder
Derivative Actions Settlement is conditioned, among other things, upon the
Settlement being approved by the Court, a judgment thereon being entered, that
judgment becoming Final, and the dismissal with prejudice of the State Court
Shareholder Derivative Actions.
By Memorandum Decision dated October 12, 2004, the Honorable Charles A.
Shaw denied the Motion to Dismiss by Andersen, but granted the Motion to Dismiss
by Scientific-Atlantic and Motorola. Class Action Plaintiff filed a Motion for
Reconsideration on October 26, 2004, which was denied on December 20, 2004.
Class Action Plaintiff has appealed this decision.
Subsequent to the October 12, 2004 decision, negotiations took place
between the Class Action Plaintiff and Andersen that resulted in an agreement
whereby all claims in the Class Action and the Derivative Actions against
Andersen will be settled.
e. DISCOVERY, INVESTIGATION, AND RESEARCH CONDUCTED BY PLAINTIFF
Class Action Plaintiff's Counsel has conducted discovery and investigation
during the prosecution of the Class Action. This discovery and investigation has
included: (1) inspection of documents produced by Settling Class Action
Defendants pursuant to agreement during the Mediation and in the Memorandum of
Understanding; (2) interviews with various current and former Charter employees;
(3) consultations with experts; (4) review of Charter's public filings, annual
reports, and other public statements; and (5) research of the applicable law
with respect to the claims asserted in the Class Action and the potential
defenses thereto.
-5-
II. CLAIMS OF THE CLASS ACTION PLAINTIFF AND BENEFITS OF SETTLEMENT
The Class Action Plaintiff believes that the claims asserted in the Class
Action have merit and that the evidence developed to date in the Class Action
supports the claims asserted. The Class Action Plaintiff asserts and believes it
would present supporting evidence at trial, that defendants caused the price of
Charter common stock to be artificially inflated during the Settlement Class
Period by the issuance of materially false statements and by omitting to state
material information concerning Charter and that as a result, Class Action
Plaintiff and Settlement Class Members were injured.
However, Class Action Plaintiff's Counsel recognizes and acknowledges the
expense and length of continued proceedings, trial, and appeals. Class Action
Plaintiff's Counsel also has taken into account the uncertain outcome and the
risk of any litigation, especially in complex actions such as the Class Action.
Class Action Plaintiff's Counsel is also mindful of the inherent problems of
proof under and possible defenses to the federal securities law violations
asserted in the Class Action, including the defenses asserted by defendants
during the litigation, in motions on the pleadings, settlement negotiations and
in the mediation proceedings.
In light of the foregoing, Class Action Plaintiff's Counsel believes that
the Settlement confers substantial benefits upon the Settlement Class (as
defined below) and Settlement Class Members. Based on its evaluation, Class
Action Plaintiff's Counsel has determined that the Settlement is in the best
interests of the Class Action Plaintiff and the Settlement Class.
III. SETTLING CLASS ACTION DEFENDANTS' STATEMENT AND DENIALS OF WRONGDOING AND
LIABILITY
The Settling Class Action Defendants have denied and continue to deny each
and all of the claims and contentions alleged by the Class Action Plaintiff on
behalf of the Settlement Class. The Settling Class Action Defendants also have
denied and continue to deny, inter alia, the allegations that the prices of
Charter stock were artificially inflated by reasons of alleged
misrepresentations, non-disclosures or otherwise, or that the Class Action
Plaintiff or the Settlement Class were harmed by the conduct alleged in the
Class Action. Settling Class Action Defendants believe that throughout the
Settlement Class Period (as defined below) they fully and adequately disclosed
all material facts regarding Charter and made no misrepresentations of material
facts regarding Charter.
Nonetheless, the Settling Class Action Defendants have concluded that
further conduct of the Class Action would be protracted and expensive, and that
it is desirable that the Class Action be fully and finally settled in the manner
and upon the terms and conditions set forth in this Stipulation in order to
limit further expense, inconvenience and distraction, to dispose of the burden
of protracted litigation, and to permit the operation of the Company's business
without further distraction and diversion of the Company's executive personnel
with respect to matters at issue in the Class Action. The Settling Class Action
Defendants also have taken into account the uncertainty and risks inherent in
any litigation, especially in complex cases like this litigation.
-6-
The Settling Class Action Defendants have, therefore, determined that it
is desirable and beneficial to them that the Class Action be settled in the
manner and upon the terms and conditions set forth in this Stipulation. The
Settling Class Action Defendants enter into this Stipulation and Settlement
without in any way acknowledging any fault, liability, or wrongdoing of any
kind. There has been no adverse determination by any court against any of the
Settling Class Action Defendants on the merits of the claims asserted by the
Class Action Plaintiff. Neither this Stipulation, nor any of its terms or
provisions, nor any of the negotiations or proceedings connected with it, shall
be construed as an admission or concession by any of the Settling Class Action
Defendants of the merit or truth of any of the allegations or wrongdoing of any
kind on the part of any of the Settling Class Action Defendants. The Settling
Class Action Defendants enter into this Stipulation and Settlement based upon,
among other things, the Settling Class Action Parties' agreement herein that, to
the fullest extent permitted by law, neither this Stipulation nor any of the
terms or provisions, nor any of the negotiations or proceedings connected
therewith, shall be offered as evidence in the Class Action or in any pending or
future civil, criminal, or administrative action or other proceeding to
establish any liability or admission by any of the Settling Class Action
Defendants or any other matter adverse to any of the Settling Class Action
Defendants or any of their respective related entities, except as expressly set
forth herein.
IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Class
Action Plaintiff (for itself and the Settlement Class Members), and the Settling
Class Action Defendants, by and through their respective counsel of record,
that, subject to the approval of the Court, the Class Action and the Released
Claims shall be finally and fully compromised, settled, and released, and the
Class Action shall be dismissed with prejudice, upon and subject to the terms
and conditions of the Stipulation, as follows:
a. DEFINITIONS
As used in the Stipulation the following terms have the meanings specified
below:
1.1 "Andersen" shall mean Defendant Arthur Andersen LLP, AWSC Societe
Cooperative, en liquidation, and all of their past and present member firms, and
all of their respective current and former partners, members, principals,
participating principals, national directors, managing or other agents,
management personnel, officers, directors, shareholders, administrators,
servants, employees, consultants, advisors, insurers, reinsurers, attorneys,
accountants, representatives, parent companies, subsidiaries, related entities,
divisions, affiliates, predecessors, successors and assigns, along with the
heirs, spouses, executors, administrators, insurers, reinsurers,
representatives, estates, successors and assigns of any such persons or
entities.
1.2 "Authorized Claimant" shall mean any Settlement Class Member whose
claim for recovery has been allowed pursuant to the terms of the Stipulation.
1.3 "Charter" or "Company" shall mean defendant Charter Communications,
Inc., a Delaware corporation, and all of its predecessors, successors, present
and former parents, subsidiaries, divisions, and related or affiliated entities.
-7-
1.4 "Charter's Insurance Carriers" shall mean Liberty International, Inc.
("Liberty") and Certain Underwriters of Lloyds' of London ("Underwriters").
1.5 "Claimant" shall mean any Settlement Class Member who files a Proof of
Claim in such form and manner, and within such time, as the Court shall
prescribe.
1.6 "Claims Administrator" shall mean Berdon Claims Administration LLC,
the firm appointed by the Court to administer this Settlement.
1.7 "Class Action Defendants" shall mean Charter, Paul G. Allen, Jerald L.
Kent, Carl E. Vogel, Kent Kalkwarf, David G. Barford, Paul E. Martin, David L.
McCall, Bill Shreffler, Chris Fenger, James H. Smith III, Scientific-Atlanta,
Inc, Motorola, Inc., and Andersen.
1.8 "Effective Date" shall mean the first date by which all of the events
and conditions specified in Section IV, 10.2(i)-(xi) of the Stipulation have
been met and have occurred.
1.9 "Escrow Agents" shall mean Charter, on the one hand, and Class Action
Plaintiff's Counsel and/or the Claims Administrator, on the other hand, until
such time as the Judgment is entered, at which time Charter shall resign as
Escrow Agent and shall have no further supervisory responsibilities or
obligations with respect to the Escrow Account.
1.10 "Escrow Account" shall mean the interest-bearing escrow account to
which the Settlement Cash will be transferred no later than five (5) business
days after preliminary approval of the Settlement of the Class Action to be
controlled by the Escrow Agents, and to which the Settlement Securities will be
transferred after entry of Judgment.
1.11 "Final" shall mean, with respect to the Judgment or the judgment(s)
entered dismissing the Shareholder Derivative Actions with prejudice in
accordance with the terms of the Stipulation of Settlement in the Derivative
Actions (the "Derivative Judgment"), that one of the following events has
occurred: (1) the time for appealing the Judgment or the Derivative Judgment (as
the case may be) has expired; (2) following a final affirmance on appeal of the
Judgment or the Derivative Judgment (as the case may be), the time to seek
further discretionary review (including, without limitation, from the United
States Supreme Court) has expired, or if discretionary review is allowed, such
discretionary review proceedings are subsequently dismissed with prejudice or
the Judgment or Derivative Judgment (as the case may be) is finally affirmed on
discretionary review; or (3) following a final dismissal of an appeal from the
Judgment or the Derivative Judgment (as the case may be), the time to seek
further discretionary review (including, without limitation, from the United
States Supreme Court) has expired, or if discretionary review is allowed, such
discretionary review proceedings are subsequently dismissed with prejudice or
the dismissal being challenged is itself finally affirmed on discretionary
review. Any proceeding or order, or any appeal or appeal for a writ of
certiorari pertaining solely to any plan of allocation and/or application for
attorneys' fees, costs or expenses, shall not in any way delay or preclude the
Judgment or the Derivative Judgment from becoming Final.
-8-
1.12 "Final Valuation Date" shall mean the date of entry of the Judgment
or the date of entry of an Order approving the award of fees and costs to Class
Action Plaintiff's Counsel, whichever is later.
1.13 "Individual Defendants" shall mean Paul G. Allen, Jerald L. Kent,
Carl E. Vogel, Kent Kalkwarf, David G. Barford, Paul E. Martin, David L. McCall,
Bill Shreffler, Chris Fenger, and James H. Smith III.
1.14 "Judgment" shall mean the judgment to be rendered by the Court
dismissing the Class Action with prejudice, substantially in the form and
content attached hereto as Exhibit A.
1.15 "Judgment Valuation Formula" shall mean the weighted average of the
closing price of Charter's common stock for the thirty (30) calendar days prior
to the Final Valuation Date.
1.16 "Non-Settling Class Action Defendants" shall mean Scientific-Atlanta,
Inc, and Motorola, Inc.
1.17 "Parties" shall mean, collectively, each of the Class Action
Defendants and the Class Action Plaintiff on behalf of itself and the Members of
the Settlement Class.
1.18 "Payment to Underwriters" shall mean Charter's issuance to the Law
Firm of Hanson Peters Nye, for the benefit of Underwriters, shares of Charter
Class A common stock having an aggregate value of $5 million, in accordance with
the Underwriters Agreement. These shares shall be issued pursuant to section
3(a)(10) of the Securities Act of 1933 and shall not constitute "restricted
securities."
1.19 "Person" shall mean an individual, corporation (including all
divisions and subsidiaries), partnership, limited partnership, association,
joint stock company, estate, legal representative, trust, unincorporated
association, government or any political subdivision or agency thereof, and any
business or legal entity and their spouses, heirs, predecessors, successors,
representatives, and assigns.
1.20 "Plan of Allocation" shall mean a plan or formula of allocation of
the Net Settlement Fund which shall be described in the "Notice of Pendency and
Proposed Settlement of Class Action" to be sent to Settlement Class Members in
connection with the Settlement whereby the Settlement Fund shall be distributed
to Authorized Claimants after payment of expenses of notice and administration
of the Settlement, any taxes, penalties or interest or tax preparation fees owed
by the Escrow Account or the Settlement Fund, such attorneys' fees, costs,
expenses and interest as may be awarded by the Court, and any compensatory award
awarded by the Court to Class Action Plaintiff, as described in 5.1 below. Any
Plan of Allocation is not part of the Stipulation.
1.21 "Released Claims" shall collectively mean all claims (including
"Unknown Claims" as defined in 1.33 below) demands, rights, liabilities and
causes of action of every nature and description whatsoever, known or unknown,
whether in contract, tort, equity or otherwise, whether or not concealed or
hidden, asserted or that might have been asserted in this or any other forum or
proceeding, including, without limitation, claims for negligence,
-9-
gross negligence, indemnification, breach of duty of care and/or breach of duty
of loyalty, fraud, misrepresentation, breach of fiduciary duty, negligent
misrepresentation, unfair competition, insider trading, professional negligence,
mismanagement, corporate waste, breach of contract, or violations of any state
or federal statutes, rules or regulations, by or on behalf of the Class Action
Plaintiff, the Settlement Class, or any Settlement Class Member against the
Released Class Action Parties (as defined in 1.22 below) which are in any way
based upon or related to (a) the purchase of, acquisition of, or investment in
Charter common stock by any Settlement Class Member during the Settlement Class
Period (whether on the open market or otherwise), (b) the facts, transactions,
events, occurrences, acts, disclosures, statements, omissions or failures to act
and/or to supervise Charter officers or employees which were or could have been
alleged in the Class Action or the Shareholder Derivative Actions, (c) the facts
which were alleged in any papers filed in the Class Action or in the Shareholder
Derivative Actions, and/or (d) the administration of the Escrow Account,
Settlement Fund, Net Settlement Fund or Plan of Allocation.
1.22 "Released Class Action Parties" shall mean each and every one of the
following: the Settling Class Action Defendants and all entities owned,
affiliated or controlled by them, all current and former Charter directors and
officers and each of their respective agents, employees, consultants, insurers,
attorneys, advisors, successors, heirs, assigns, executors, personal
representatives, marital communities and immediate families. However, Released
Class Action Parties does not include defendants Motorola, Inc., or Scientific
Atlanta, Inc. Released Class Action Parties shall include Andersen to the extent
the Court approves the Stipulation of Settlement with Andersen dated January 13,
2005 (the "Andersen Settlement"), and the Andersen Settlement becomes Final
pursuant to its terms.
1.23 "Settlement Class" shall mean all persons or entities that purchased
or otherwise acquired Charter common stock during the period of November 8, 1999
through and including August 16, 2002. Excluded from the Class shall be the
Class Action Defendants and their corporate affiliates; any officers or
directors of Charter; or members of their immediate families, and their heirs,
successors and assigns; and any entities controlled directly or indirectly by
Paul G. Allen.
1.24 "Settlement Class Member" or "Member of the Settlement Class" shall
mean a Person who falls within the definition of the Settlement Class as set
forth in 1.23, above.
1.25 "Settlement Class Period" shall mean the period from November 8, 1999
through and including August 16, 2002.
1.26 "Settlement Cash" shall mean the principal amount of $64 million in
cash, for and on behalf of the Settling Class Action Defendants, less the cost
of notice, plus interest earned or accrued thereon.
1.27 "Settlement Fund" shall mean the Settlement Cash and Settlement
Securities.
1.28 "Settlement Securities" shall mean the $40 million in common stock
(subject to the adjustments set forth in 2.8 below) and $40 million in warrants
to purchase common stock, to be issued by Charter pursuant to 2.9, 2.10, and
2.11 below.
-10-
1.29 "Settling Class Action Parties" shall mean Class Action Plaintiff,
each Settlement Class Member, and Settling Class Action Defendants.
1.30 "Settling Class Action Defendants" shall mean Charter, Paul G. Allen,
Jerald L. Kent, Carl E. Vogel, Kent Kalkwarf, David G. Barford, Paul E. Martin,
David L. McCall, Bill Shreffler, Chris Fenger, and James H. Smith III and
Andersen (to the extent the Court approves the Andersen Settlement and the
Andersen Settlement becomes Final pursuant to its terms).
1.31 "Underwriters Agreement" shall mean the Settlement Agreement and
Mutual Release executed by Charter and Underwriters, dated as of January 14,
2005, and attached hereto as Exhibit B.
1.32 "Shareholder Derivative Actions" shall mean the derivative actions
filed in the Circuit Court for the City of St. Louis, entitled Kenneth Stacey,
Derivatively on Behalf of Nominal Defendant Charter Communications, Inc. v.
Ronald L. Nelson, et al., and Charter Communications, Inc., No. 022-10625, Aaron
Cane, Derivatively on behalf of Nominal Defendant Charter Communications, Inc.,
v. Ronald L. Nelson, et al., and Charter Communications, Inc., No. 022-11450,
Thomas Schimmel, Derivatively on behalf of Nominal Defendant Charter
Communications v. Ronald L. Nelson, et al., and Charter Communications, Inc.,
No. 044-0858, and consolidated as In re Charter Communications, Inc. Shareholder
Derivative Litigation, Index No. 022-10625; and the derivative action filed in
the United States District Court for the Eastern District of Missouri, entitled
Arthur J. Cohn, Derivatively on behalf of Nominal Defendant Charter
Communications, Inc. v. Ronald L. Nelson, et al., and Charter Communications,
Inc., Case No. 4:03CV00177 ERW.
1.33 "Unknown Claims" shall mean any Released Claims which the Class
Action Plaintiff or any Settlement Class Member does not know or suspect to
exist in his, her or its favor at the time of the release of the Released Class
Action Parties which, if known by him, her or it, might have affect his, her or
its settlement with and release of the Released Class Action Parties, or might
have affected his, her or its decision not to object to, or opt out of, this
Settlement. With respect to any and all Released Claims, the Settling Class
Action Parties stipulate and agree that, upon the Effective Date, the Class
Action Plaintiff expressly waives and relinquishes, and the Settlement Class
Members shall be deemed to have, and by operation of the Judgment shall have
expressly waived and relinquished, to the fullest extent permitted by law, the
provisions, rights, and benefits of Section 1542 of the California Civil Code,
which provides:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
The Class Action Plaintiff expressly waives and the Settlement Class
Members shall be deemed to have waived, and upon the Effective Date and by
operation of the Judgment shall have waived any and all provisions, rights and
benefits conferred by any law of the United States or of any state or territory
of the United States, or principle of common law, which is similar, comparable
or equivalent to Section 1542 of the California Civil Code. The Class Action
Plaintiff and the Settlement Class Members may hereafter discover facts in
-11-
addition to or different from those which he, she or it now knows or believes to
be true with respect to the subject matter of the Released Claims, but each of
them hereby stipulate and agree that the Class Action Plaintiff does settle and
release, and each Settlement Class Member shall be deemed to have, and upon the
Effective Date and by operation of the Judgment shall have, fully, finally, and
forever settled and released any and all Released Claims, known or unknown,
suspected or unsuspected, contingent or non-contingent, whether or not concealed
or hidden, which now exist, or heretofore have existed upon any theory of law or
equity now existing or coming into existence in the future, including, but not
limited to, all Released Claims that are in any way based on or related to
conduct which is negligent, intentional, with or without malice, or a breach of
any duty, law or rule, without regard to the subsequent discovery or existence
of such different or additional facts. The Settling Class Action Parties
acknowledge that the foregoing waiver was bargained for and a key element of the
Settlement of which this release is a part.
b. THE SETTLEMENT CONSIDERATION
2.1. In full and final settlement of all claims asserted or referred to in
the Class Action, and all claims that have been and could be asserted by Class
Action Plaintiff and the Settlement Class against the Settling Class Action
Defendants in the Class Action, the Settling Class Action Defendants agree to
the following consideration (the "Settlement Consideration").
i. SETTLEMENT CASH
2.2. Within five (5) business days after preliminary approval of the
Settlement of the Class Action as provided in 5.1 below (the "Settlement Cash
Funding Date"), Charter shall cause Charter's Insurance Carriers to wire
transfer $64 million to the Escrow Account.
2.3. The reasonable and necessary costs of administration, notice to Class
Members and taxes shall be paid out of the Settlement Cash, as set forth in 8.2
below, without further order of the Court.
2.4. In the event that the Stipulation of Settlement does not become
effective, or the Settlement does not become Final, as that term is defined in
1.11 above, all monies held in the Escrow Account (less amount necessary to pay
costs, as documented in 2.3 above) shall be returned to Charter's Insurance
Carriers within seven (7) business days. Class Action Plaintiff, the Settlement
Class Members, the Settlement Administrator, and the Class Action Plaintiff's
Counsel shall have no responsibility for any costs as described in 2.3 above.
2.5. On or after the Effective Date, but under no circumstances before the
Effective Date, the Settlement Cash shall be released for the benefit of the
Settlement Class Members.
2.6. Settling Class Action Parties agree that, in consideration for the
Settlement of the Shareholder Derivative Actions and their contribution to the
corporate governance reforms identified in Exhibit C hereto, an amount up to but
no greater than $2.25 million shall be paid from the Settlement Cash to the
counsel for plaintiffs in the Shareholder Derivative Actions, subject to Court
approval and the settlement of the Shareholder
-12-
Derivative Actions becoming final and effective pursuant to its terms. The Class
Action Plaintiff and Class Action Plaintiff's Counsel agree that any sums to be
paid in settlement of the Shareholder Derivative Actions, shall be paid out of
the proceeds described in 2.2 to 2.11, without further contribution by any of
the Settling Class Action Defendants, the Released Class Action Parties,
Charter's Insurance Carriers or any of the defendants in the Shareholder
Derivative Actions.
2.7. Under no circumstances shall any portion of the Settlement Cash
revert to Charter or Charter's Insurance Carriers unless the Settlement is
terminated pursuant to 10.1-10.9 below.
ii. SETTLEMENT SECURITIES
2.8. Five (5) business days after the Final Valuation Date, Charter shall
cause the following securities to be issued and transferred to the Escrow
Account for the benefit of the Class Members and their counsel: (a) Charter
common stock having an aggregate value of $40 million to be determined pursuant
to 2.10 below; and (b) warrants to purchase Charter common stock having an
aggregate value of $40 million to be determined pursuant to 2.11 below. The
Settlement Securities shall be issued pursuant to section 3(a)(10) of the
Securities Act and shall not constitute "restricted securities." All costs
associated with the issuance of the Settlement Securities shall be borne by
Charter.
2.9 On or after the Effective Date, but under no circumstances before the
Effective Date, the Settlement Securities shall be released for the benefit of
the Settlement Class Members.
2.10 Charter common stock having an aggregate value of $40 million shall
be determined as follows: The number of shares to be issued shall be determined
by dividing $40 million by the weighted average of the closing price of
Charter's common stock for thirty (30) calendar days prior to August 5, 2004.
This number (the "Original Number of Shares") will be subject to the following
adjustments:
(a) Downside protection. In the event that as of the date the
Judgment is entered by the Court the aggregate value of the Original Number of
Shares, based on the Judgment Valuation Formula, is less than $40 million,
Charter shall contribute sufficient shares to create $40 million of value based
on the Judgment Valuation Formula. Provided, however, in the event that the
shares of Charter common stock as reflected in the Judgment Valuation Formula is
less than $2.25 per share, then Charter may in its sole discretion terminate the
Settlement.
(b) Upside allocation. In the event that the aggregate value of the
Original Number of Shares exceeds $44 million on the Final Valuation Date based
on the Judgment Valuation Formula, the number of shares of common stock that
Charter shall issue to satisfy its obligations pursuant to the Settlement shall
be reduced so that the aggregate value is $44 million, plus 50% of the excess of
$44 million, up to and including an aggregate value of $54 million based on the
Judgment Valuation Formula. By way of example, if on the Final Valuation Date,
the aggregate value of the Original Number of Shares based on the Judgment
Valuation Formula is $48 million, then Charter shall issue shares with an
-13-
aggregate value of $46 million. In no event, however, shall the aggregate value
of the shares of common stock that Charter shall issue to satisfy its
obligations pursuant to the Settlement exceed $54 million, based on the Judgment
Valuation Formula.
(i) In the event that the counsel for plaintiffs in the
Shareholder Derivative Actions are awarded attorneys' fees and costs in excess
of $2 million (but in no event greater than $2.25 million), then the Settlement
Class Members shall be entitled to the benefit of the appreciation of the
Original Number of Shares in excess of $4 million above $40 million, based on
the Judgment Valuation Formula, on a ratio of two dollars for every dollar of
fees and costs awarded by the Court, up to $500,000. By way of example, in the
event that the Court awards counsel for plaintiffs in the Shareholder Derivative
Actions $2.25 million in fees and costs, and the aggregate value of the Original
Number of Shares based on the Judgment Valuation Formula on the Final Valuation
Date is: (A) $44.5 million, then all Original Number of Shares shall be
transferred to the Escrow Account; or (B) $46 million, then shares with an
aggregate value of $45.5 million as computed by the formula for determining the
Judgment Valuation Formula shall be transferred to the Escrow Account.
2.11. Warrants to purchase Class A common stock having an aggregate value
of $40 million, the terms of which are described in Exhibit D, shall be
determined as follows: (i) the exercise price per share of Class A common stock
under each warrant shall equal 150% of the volume weighted average price of the
Charter Class A common stock during the thirty day period ending on the Final
Valuation Date, as determined by the Bloomberg VAP function, and (ii) the number
of warrants to be issued, shall be determined by dividing $40 million by the
Black-Scholes Warrant Value of each warrant as of the Final Valuation Date. The
"Black-Scholes Warrant Value" shall be calculated by using the following inputs
on the Bloomberg page titled CHTR EQUITY OV (Exotic Option Type 4): 10 year
maturity; volatility of 50%; strike price equal to the price indicated in (i)
above. Charter shall use its best efforts to cause the warrants to be listed on
a national exchange of its choice, such as NASDAQ, consistent with the rules of
such exchange, and will use reasonable efforts to obtain market makers for the
warrants.
iii. NON-MONETARY CONSIDERATION
2.12 In joint consideration for the Settlement of the Class Action and the
Shareholder Derivative Actions, Charter will take steps reasonably required to
implement the corporate governance provisions set forth in Exhibit C.
c. ADMINISTRATION OF THE SETTLEMENT CONSIDERATION
i. THE ESCROW AGENTS
3.1 The Escrow Agents shall invest the Settlement Fund in instruments
backed by the full faith and credit of the United States Government or fully
insured by the United States Government or an agency thereof and shall reinvest
the proceeds of these instruments as they mature in similar instruments at the
current market rates.
3.2 The Escrow Agents shall not disburse the Settlement Fund except as
provided in the Stipulation, or by an order of the Court, (provided said order
is consistent with the
-14-
terms of the Stipulation) or with the written agreement of counsel for the
Settling Class Action Defendants and Class Action Plaintiff's Counsel.
3.3 Subject to such further order and direction by the Court as may be
necessary, the Escrow Agents are authorized to execute such transactions on
behalf of the Settlement Class Members as are consistent with the terms of the
Stipulation.
3.4 All funds held by the Escrow Agents shall be deemed and considered to
be in custodia legis of the Court, and shall remain subject to the jurisdiction
of the Court, until such time as such funds shall be distributed pursuant to the
Stipulation and/or further order(s) of the Court consistent with the terms of
the Stipulation.
3.5 All costs and expenses associated with the Settlement, the Settlement
Fund, including but not limited to any taxes, administrative costs, and costs of
providing notice of the proposed Settlement to the Settlement Class, shall be
paid from the Settlement Cash, and in no event shall any of the Settling Class
Action Defendants, Class Action Plaintiff, Settlement Class Members, or their
counsel bear any responsibility for any such costs or expenses, except that
Charter shall bear all costs associated with the issuance of the securities
portion of the Settlement Fund.
3.6 On or after the Effective Date, but under no circumstances before the
Effective Date, upon the advice and consent of Class Action Plaintiff and Class
Action Plaintiff's Counsel, and to the extent practicable, the Escrow Agents may
sell portions of, or the entirety of, the Settlement Securities prior to
distribution to the Authorized Claimants. With respect to the Charter stock, the
shares may be sold at a price equal to or greater than the closing price of
Charter Common Stock as quoted on the NASDAQ on the Final Valuation Date. The
warrants may be sold only at a price that is equal to or greater than a price
per warrant determined by the total number of warrants issued divided by
$40,000,000. No Person, including any Settlement Class Member, shall have any
claim against anyone (including but not limited to the Escrow Agents, Charter,
Class Action Plaintiff, or Class Action Plaintiff's Counsel) arising out of or
relating to the sale of or failure to sell any of the Settlement Securities. All
cash generated from such sales will be contributed to the Escrow Account.
ii. TAXES
3.7 (a) The Settling Class Action Parties and the Escrow Agents agree to
treat the Settlement Fund as being at all times a "qualified settlement fund"
within the meaning of Treas. Reg. Section 1.468B-1. In addition, the Escrow
Agents and, as required, Charter and Charter's Insurance Carriers contributing
any settlement consideration shall jointly and timely make the "relation-back
election" (as defined in Treas. Reg. Section 1.468B-1) back to the earliest
permitted date. Such election shall be made in compliance with the procedures
and requirements contained in such regulations. It shall be the responsibility
of the Escrow Agents to timely and properly prepare, and deliver the necessary
documentation for signature by all necessary parties, and thereafter to cause
the appropriate filing to occur.
-15-
(b) For the purposes of Section 468B of the Internal Revenue Code of
1986, and Treas. Reg. Section 1.468B, the "administrator" shall be the Escrow
Agents. The Escrow Agents shall timely and properly file all informational and
other tax returns necessary or advisable with respect to the Settlement Fund
(including, without limitation, the returns described in Treas. Reg. Section
1.468B-2(l)). Such returns (as well as the election described in 3.7(a)) shall
be consistent with this 3.7 and in all events shall reflect that all taxes
(including any estimated taxes, interest or penalties) on the income earned by
the Settlement Fund shall be paid out of the Settlement Fund as provided in
3.7(c) hereof.
(c) All (i) taxes (including any estimated taxes, interest or
penalties) arising with respect to the income earned by the Settlement Fund
("Taxes"), and (ii) expenses and costs incurred in connection with the operation
and implementation of this 3.7 (including, without limitation, expenses of tax
attorneys and/or accountants and mailing and distribution costs and expenses
relating to filing (or failing to file) the returns described in this 3.7) ("Tax
Expenses"), shall be paid out of the Settlement Cash; in all events the Released
Class Action Parties shall not have any liability or responsibility for the
Taxes, the Tax Expenses, or the filing of any tax returns or other documents
with the Internal Revenue Service or any other state or local taxing authority.
The Escrow Agents shall indemnify and hold the Released Class Action Parties
harmless for Taxes and Tax Expenses (including, without limitation, Taxes
payable by reason of any such indemnification). Further, Taxes and Tax Expenses
shall be treated as, and considered to be, a cost of administration of the
Settlement and shall be timely paid by the Escrow Agents out of the Settlement
Fund without prior order from the Court, and the Escrow Agents shall be
obligated (notwithstanding anything herein to the contrary) to withhold from
distribution to Authorized Claimants any funds necessary to pay such amounts (as
well as any amounts that may be required to be withheld under Treas. Reg.
Section 1.468B-2(1)(2)); the Released Class Action Parties are not responsible
and shall have no liability therefor, or for any reporting requirements that may
relate thereto. The Settling Class Action Parties hereto agree to cooperate with
the Escrow Agents, each other, and their tax attorneys and accountants to the
extent reasonably necessary to carry out the provisions of this 3.7.
d. CERTIFICATION OF THE SETTLEMENT CLASS.
4.1 For the sole purpose of implementation, approval and consummation of
the Settlement, the Settling Class Action Parties stipulate and agree that the
Court may enter an order certifying the Settlement Class, and appointing the
Class Action Plaintiff as the representative of the Settlement Class.
4.2 Certification of the Settlement Class and appointment of Settlement
Counsel by the Court, as set forth herein, shall be binding only with respect to
the Settlement set forth in the Stipulation. In the event that this Stipulation
is terminated or cancelled or that the Effective Date does not occur for any
reason, the stipulated certification of the Settlement Class shall be vacated
and the Class Action shall proceed as though the Settlement Class had never been
certified. Except to effectuate the Settlement, neither the Settling Class
Action Parties, their respective counsel, nor any member of the Settlement Class
shall cite, present as evidence or legal precedent, rely upon, make reference to
or otherwise make any use whatsoever of this stipulated certification of the
Settlement Class, in this Class Action or in any other proceeding.
-16-
e. NOTICE ORDER AND SETTLEMENT HEARING
5.1. Promptly after execution of the Stipulation, but in no event later
than ten (10) days after the Stipulation is signed (unless such time is extended
by the written agreement of Class Action Plaintiff's Counsel and counsel for
Charter), the Settling Class Action Parties shall submit the Stipulation
together with its Exhibits to the Court, along with the Stipulation of
Settlement between Class Action Plaintiff and Andersen, and shall jointly apply
for entry of an order (the "Notice Order"), substantially in the form and
content of Exhibit E hereto, requesting certification of the Settlement Class,
preliminary approval of the Settlement, and approval for the mailing and
publication of a Notice of Pendency and Proposed Settlement of Class Action
(substantially in the form and content of Exhibit E-1 hereto), which shall
include the general terms of the Settlement set forth in the Stipulation, the
proposed Plan of Allocation, the general terms of the Fee and Expense
Application (as defined in 9.1), the request for Class Action Plaintiff's
Compensatory Award for time and expenses relating to the representation of the
Class pursuant to Section 27(2)(B)(4) of the Private Securities Litigation
Reform Act of 1995, and the date of the Settlement Hearing (as defined below in
5.2).
5.2. The Settling Class Action Parties shall request that, after notice is
given, the Court hold a Hearing (the "Settlement Hearing") and finally approve
this Settlement as set forth herein. At or after the Settlement Hearing, Class
Action Plaintiff's Counsel also will request that the Court approve the proposed
Plan of Allocation, the Fee and Expense Application, and the Class Action
Plaintiff's Compensatory Award.
f. ENTRY OF JUDGMENT AND DISCHARGE OF ALL CONTRIBUTION CLAIMS
6.1. The Settling Class Action Parties agree to the entry of Judgment
substantially in the form and content of Exhibit A (which to the extent
practicable shall be consistent with the Judgment entered for the Stipulation of
Settlement with Andersen).
6.2. The Judgment proposed to the Court shall include a bar order stating
the following:
(a) In accordance with 15 U.S.C. Section 78u-4(f)(7)(A), any and all
claims for contribution arising out of any Released Claim, including, but not
limited to, any claims that are based upon, arise out of or relate to the Class
Action, and/or any claims that were alleged or could have been alleged in the
Amended Complaint or Second Amended Complaint (i) by any Person against a
Settling Class Action Defendant, and (ii) by any Settling Class Action Defendant
against any Person other than as set out in 15 U.S.C. Section 78u-4(f)(7)(A)(ii)
are hereby permanently barred, extinguished, discharged, satisfied, and
unenforceable. Accordingly, without limitation to any of the above, any Person,
including, without limitation Andersen and each and every Non-Settling Class
Action Defendant (and all Persons purporting to act on his, its, or their
behalf, and all Persons purporting to claim by or through him, it, or them,
whether under a subrogation theory or otherwise), are hereby permanently
enjoined from commencing, prosecuting, or asserting against any of the Settling
Class Action Defendants any such claim for contribution, and each and every
Settling Class Action Defendant is hereby permanently enjoined from commencing,
prosecuting, or asserting against any Person, including without limitation,
Andersen or any Non-Settling Class Action Defendant, any such claim for
contribution. In accordance with
-17-
15 U.S.C. Section 78u-4(f)(7)(B), any final verdict or judgment that may be
obtained by or on behalf of the Settlement Class or a Settlement Class Member
against a Non-Settling Class Action Defendant shall be reduced by the greater of
(x) an amount that corresponds to the percentage of responsibility of the
Settling Class Action Defendants for the loss to the Settlement Class or a
Settlement Class Member, or (y) the amount paid by or on behalf of the Settling
Class Action Defendants to the Settlement Class in connection with the
Settlement.
(b) The Court finds that the Stipulation represents a good faith
settlement of all Released Claims of all Settlement Class Members sufficient to
discharge Settling Defendants and the Released Class Action Parties of all
Released Claims of all Settlement Class Members. In order to effectuate such
settlement, the Court hereby enters the following bar:
(i) Any and all Non-Settling Class Action Defendants and Andersen
are permanently barred, enjoined and restrained from commencing, prosecuting or
asserting any claim against any Released Class Action Party (other than
Andersen), however styled, whether legal or equitable, known or unknown,
foreseen or unforeseen, matured or unmatured, accrued or unaccrued, whether
arising under state, federal, or common law, whether for indemnification or
contribution or otherwise denominated, including, without limitation, any claim
for breach of contract or misrepresentation, where the claim is based upon,
arises out of, or relates to the Class Action or the Shareholder Derivative
Actions (including any matters that were alleged or could have been alleged in
the Class Action or Shareholder Derivative Actions) including, without
limitation, any claim in which a Non-Settling Class Action Defendant or Andersen
seeks to recover from any of the Released Class Action Parties (1) any amounts
that a Non-Settling Class Action Defendant or Andersen has paid, become liable
to pay, or may become liable to pay (whether in cash or any other form of
consideration) in the Class Action, the Shareholder Derivative Actions or any
action in which one or more Settlement Class Members who validly and timely
excluded themselves from the Settlement Class seek a recovery on account of any
matters that were alleged or that could have been alleged in the Class Action
(the "Opt-out Actions"), and/or (2) any costs, expenses, or attorneys' fees that
a Non-Settling Class Action Defendant or Andersen has incurred or may incur in
defending against any claim in the Class Action, the Shareholder Derivative
Actions or the Opt-out Actions. All such claims are hereby extinguished,
discharged, satisfied and unenforceable (hereinafter "Barred Claims");
(ii) Any and all Released Class Action Parties (other than Andersen)
are permanently barred, enjoined and restrained from commencing, prosecuting or
asserting any claim against any Non-Settling Class Action Defendants or
Andersen, however styled, whether legal or equitable, known or unknown, foreseen
or unforeseen, matured or unmatured, accrued or unaccrued, whether arising under
state, federal, or common law, whether for indemnification or contribution or
otherwise denominated, including, without limitation, any claim for breach of
contract or misrepresentation, where such claim is based upon, arises out of, or
relates to the Class Action or the Shareholder Derivative Actions (including any
matters that were alleged or could have been alleged in the Class Action or the
Shareholder Derivative Actions), including, without limitation, any claim in
which a Released Class Action Party seeks to recover from any of the
Non-Settling Class Action
-18-
Defendants or Andersen (1) any amounts such Released Class Action Party has
paid, become liable to pay, or may become liable to pay (whether in cash or any
other form of consideration) in the Class Action, the Shareholder Derivative
Actions or the Opt-out actions, and/or (2) any costs, expenses, or attorneys'
fees that the Released Class Action Parties have incurred or may incur in
defending against any claim in the Class Action, the Shareholder Derivative
Actions, or the Opt-out Actions. All such claims are hereby extinguished,
discharged, satisfied and unenforceable hereinafter;
(iii) Because the Non-Settling Class Action Defendants are barred
from asserting any Barred Claims against the Settling Class Action Defendants,
any judgments entered against the Non-Settling Class Action Defendants by the
Settlement Class or any Settlement Class Members shall be reduced by an amount
equal to the value as determined by the Court of such Barred Claims (provided,
however, that to the extent such Barred Claims constitute claims for
contribution within the meaning of 15 U.S.C. Section 78u-4(f)(7)(A), the
reduction provisions set forth in 15 U.S.C. Section 78u-4(f)(7)(B) shall apply);
(iv) If the Settlement Class or any Settlement Class Member brings a
claim against any Person that is based upon, arises out of, or relates to the
Class Action or any matters that were alleged or could have been alleged in the
Class Action (the "Underlying Action"), and notwithstanding 6.2(a) and
6.2(b)(i), that Person obtains a recovery against a Released Class Action Party
that is based, in whole or in part, on (1) any amounts that such Person has
become liable to pay or may become liable to pay in the Underlying Action,
and/or (2) any costs, expenses or attorneys' fees that such Person has incurred
or may incur in the Underlying Action (amounts (1) and (2) being collectively
the "Reduction Amount"), the Settlement Class and the Settlement Class Members
agree that they will reduce or credit any judgment or settlement with such
Person (up to the amount of such judgment or settlement) by the Reduction
Amount, which amount shall then also be credited to the Released Class Action
Party.
(c) Provided, however, that nothing in this Judgment shall release, bar,
enjoin, or otherwise restrain any claim between Charter and any current or
former Charter employee regarding indemnification, advancement, and/or
recoupment of fees, costs, and expenses.
g. RELEASES
7.1. Upon the Effective Date, the Class Action Plaintiff shall release,
relinquish and discharge, and each of the Settlement Class Members (other than
those Settlement Class Members who validly and timely request exclusion from
this Settlement Class in accordance with the provisions of the Notice Order and
the Notice given pursuant thereto) shall be deemed to have, and by operation of
the Judgment shall have, fully, finally, and forever released, relinquished and
discharged each and all of the Released Class Action Parties (which does not
include defendants Motorola, Inc., or Scientific Atlanta, Inc.) from all
Released Claims (including "Unknown Claims"), and from all claims (including
"Unknown Claims"), arising out of, relating to, or in connection with the
defense, or resolution of the Class Action or the Released Claims, whether or
not such Settlement Class Member executes and delivers the Proof of Claim and
Release. Claims for violation of this Stipulation (including any exhibits) are
preserved.
-19-
7.2. Upon the Effective Date, each of the Settling Class Action Defendants
shall be deemed to have, and by operation of the Judgment shall have, fully,
finally, and forever released, relinquished and discharged the Class Action
Plaintiff, the Settlement Class Members (other than those Settlement Class
Members who validly and timely request exclusion from this Settlement Class in
accordance with the provisions of the Notice Order and the Notice given pursuant
thereto), Class Action Plaintiff's Counsel, and counsel for all other plaintiffs
in the Class Action from any claims (including "Unknown Claims") arising out of,
relating to, or in connection with the commencement, prosecution, assertion or
resolution of the Class Action or the Released Claims. Claims for violation of
this Stipulation (including any exhibits) are preserved.
7.3. Except as otherwise expressly provided for in this Stipulation, the
Settling Class Action Parties shall each bear their own respective attorneys'
fees, expenses and costs incurred in connection with the conduct and settlement
of the Class Action, and the preparation, implementation and performance of the
terms of this Stipulation.
7.4. Only those Settlement Class Members filing valid and timely Proofs of
Claim and Release shall be entitled to participate in the Settlement and receive
any distributions from the Settlement Fund. The Proofs of Claim and Release to
be executed by the Settlement Class Members shall release all Released Claims
against the Released Class Action Parties, and shall be substantially in the
form and content of Exhibit E-3 hereto. All Settlement Class Members shall be
bound by the releases set forth herein and therein whether or not they submit a
valid and timely Proof of Claim and Release.
h. ADMINISTRATION AND CALCULATION OF CLAIMS, FINAL AWARDS AND
SUPERVISION AND DISTRIBUTION OF SETTLEMENT FUND
8.1. Class Action Plaintiff's Counsel, or its authorized agents, acting on
behalf of the Settlement Class shall formulate a Plan of Allocation of the
Settlement Fund to the Settlement Class Members, subject to the approval of the
Court. The Claims Administrator, subject to the supervision, direction and
approval of the Court, shall administer and calculate the claims submitted by
Settlement Class Members, and shall oversee distribution of that portion of the
Settlement Fund that is finally awarded by the Court to Authorized Claimants.
The Settling Class Action Parties expressly agree that any change, modification,
or alteration to the Plan of Allocation by the Court shall not be grounds for
termination of the Settlement.
8.2. The Settlement Fund shall be applied as follows:
i. To pay 96.6% of all unpaid costs and expenses reasonably and
actually incurred in connection with providing notice to the Settlement Class
Members and to current shareholders of Charter including, locating Settlement
Class Members and current shareholders of Charter, soliciting Settlement Class
claims, assisting with the filing of claims, administering and distributing the
Settlement Fund to the Settlement Class, processing Proofs of Claim and Release
and paying escrow fees and costs, if any;
ii. To pay, following the Effective Date, unpaid costs and expenses
incurred in soliciting Settlement Class claims, assisting with the filing of
such claims,
-20-
administering and distributing the Net Settlement Fund (as defined below) to the
Settlement Class, processing Proofs of Claim and Release, and paying escrow fees
and costs, if any;
iii. To pay, pursuant to 9.2 below, 96.6% of Class Action
Plaintiff's Counsel's attorneys' fees, expenses and costs, with interest
thereon, and any fees and expenses awarded to counsel in the Shareholder
Derivative Actions (which in no event shall exceed $2.25 million), if and to the
extent allowed by the Court;
iv. To pay, following the Effective Date, any Compensatory Award
granted Class Action Plaintiff by the Court, as described in 5.1; and
v. To distribute, following the Effective Date, the balance of the
Settlement Fund (the "Net Settlement Fund") to Authorized Claimants as allowed
by the Stipulation, the Plan of Allocation or the Court.
8.3 After the Effective Date and subject to such further approval and
further order(s) of the Court as may be required, the Net Settlement Fund shall
be distributed to Authorized Claimants, subject to and in accordance with the
following:
(a) Within ninety (90) days after the mailing of the Notice or such
other time as may be set by the Court, each Person claiming to be an Authorized
Claimant shall be required to submit to the Claims Administrator a separate
completed Proof of Claim and Release as attached to the Notice and substantially
in the form and content of Exhibit E-3 hereto, signed under penalty of perjury
and supported by such documents as specified in the Proof of Claim and Release
and as are reasonably available to the Authorized Claimant.
(b) Except as otherwise ordered by the Court, all Settlement Class
Members who fail to timely submit a valid Proof of Claim and Release within such
period, or such other period as may be ordered by the Court, or who have not
already done so, shall be forever barred from receiving any payments of money or
stock pursuant to the Stipulation and the Settlement set forth herein, but will
in all other respects be subject to and bound by the provisions of the
Stipulation, the Settlement and releases contained herein, and the Judgment.
(c) The Net Settlement Fund shall be distributed to the Authorized
Claimants in accordance with and subject to the Plan of Allocation to be
described in the Notice mailed to Settlement Class Members. The proposed Plan of
Allocation shall not be a part of the Stipulation.
8.4 The Released Class Action Parties shall have no responsibility for,
interest in, or liability whatsoever with respect to: (a) the investment or
distribution of the Settlement Fund; (b) the Plan of Allocation or any other act
described in this 8 or any of its subparagraphs; (c) the determination or
administration of taxes; or (d) any losses incurred in connection with (a), (b)
or (c). No Person shall have any claim of any kind against the Released Class
Action Parties with respect to the matters set forth in this 8 or any of its
subparagraphs.
8.5 No Person shall have any claim against the Class Action Plaintiff or
Class Action Plaintiff's Counsel, or any Claims Administrator, or other agent
designated by Class
-21-
Action Plaintiff's Counsel based on the distributions made substantially in
accordance with the Stipulation and the Settlement contained herein, the Plan of
Allocation or further orders of the Court.
8.6 It is understood and agreed by the Settling Class Action Parties that
any proposed Plan of Allocation of the Net Settlement Fund, including, without
limitation, any adjustments to an Authorized Claimant's claim set forth therein,
is not a material part of the Stipulation and is to be considered by the Court
separately from the Court's consideration of the fairness, reasonableness and
adequacy of the Settlement set forth in the Stipulation, and any order or
proceedings relating to the Plan of Allocation shall not operate to terminate or
cancel the Stipulation or affect the finality of the Court's Judgment approving
the Stipulation and the Settlement set forth herein, including, but not limited
to, the release, discharge, and relinquishment of the Released Claims against
the Released Class Action Parties, or any other orders entered pursuant to the
Stipulation.
i. CLASS ACTION PLAINTIFF'S COUNSEL'S ATTORNEYS' FEES AND REIMBURSEMENT
OF EXPENSES
9.1. The Class Action Plaintiff or its counsel may submit an application
or applications for an order (the "Fee and Expense Application") for
distributions to them from the Settlement Cash and Securities for: (i) an award
of attorneys' fees plus (ii) reimbursement of all expenses and costs, including
the fees of any experts or consultants, incurred in connection with prosecuting
the Class Action, (iii) interest on such attorneys' fees, costs and expenses at
the same rate and for the same periods as earned by the Settlement Fund (until
paid), as may be awarded by the Court, and (iv) grant of a Compensatory Award to
Class Action Plaintiff by the Court (as described in 5.1).
9.2. Within five (5) business days after the Court executes an order
awarding attorneys' fees, expenses and costs, including the fees of experts and
consultants, (the "Fee and Expense Award"), 96.6% of that Award allocable to the
Settlement Cash (i.e., $64 million plus interest divided by $144 million plus
interest) shall be transferred to Class Action Plaintiff's Counsel from the
Settlement Cash. In the event that the Stipulation and the Settlement set forth
herein does not become Final for any reason, or the Judgment or the Order making
the Fee and Expense Award is reversed or modified on appeal, and in the event
that the Fee and Expense Award has been paid to any extent, then Class Action
Plaintiff's Counsel shall within five (5) business days from the event which
precludes the Effective Date from occurring or such reversal or modification,
refund to the Settlement Cash the fees, expenses, costs and interest previously
paid to it from the Settlement Cash, including accrued interest on any such
amount at the average rate earned on the Settlement Cash from the time of
withdrawal until the date of refund. The Class Action Plaintiff's Counsel, as a
condition of receiving such fees and expenses, on behalf of itself and each
partner and/or shareholder of it, agrees that the law firm and its partners
and/or shareholders are subject to the jurisdiction of the Court for the purpose
of enforcing this 9.2 of the Stipulation. Without limitation, Class Action
Plaintiff's Counsel's law firm and its partners and/or shareholders agree that
the Court may, upon application of Settling Class Action Defendants, on notice
to Class Action Plaintiff's Counsel, summarily issue orders, including, but not
limited to, judgments and attachment orders, and may make appropriate
-22-
findings of or sanctions for contempt, against it should Class Action
Plaintiff's Counsel fail timely to repay fees and expenses pursuant to this 9.2
of the Stipulation.
9.3. The Released Class Action Parties shall have no responsibility for,
and no liability whatsoever with respect to, any fee and expense award to Class
Action Plaintiff's Counsel, or to any other Person who may assert some claim
thereto, except as provided herein.
9.4. The procedure for and the allowance or disallowance by the Court of
the Fee and Expense Application are not part of the Settlement set forth in the
Stipulation, and are to be considered by the Court separately from the Court's
consideration of the fairness, reasonableness and adequacy of the Settlement set
forth in the Stipulation. Any order or proceedings relating to the Fee and
Expense Application, or any appeal from any order relating thereto, shall not
operate to terminate or cancel the Stipulation, or affect or delay the finality
of the Judgment approving the Stipulation and the Settlement of the Class Action
set forth herein.
9.5. Class Action Plaintiff's Counsel shall be authorized by the Court to
allocate the attorney's fees among all counsel representing Class Action
Plaintiff and the Class for any work performed by such counsel that was
authorized by Class Action Plaintiff's Counsel and contributed to the effective
litigation of the Class Action.
9.6. Any fees and expenses awarded to counsel in the Shareholder
Derivative Actions shall be paid from the Settlement Cash, but in no event shall
exceed $2.25 million, and shall be transferred to counsel in the Shareholder
Derivative Actions within five (5) business days after the Court executes an
order awarding such fees and expenses.
j. CONDITIONS OF SETTLEMENT, EFFECT OF DISAPPROVAL, CANCELLATION OR
TERMINATION
10.1 This Settlement shall be terminated in the event that any of the
following occurs: (1) any of the conditions set forth in 10.2 below are not
satisfied; (2) Charter exercises its right to terminate the Settlement pursuant
to 2.10(a) or 10.4; (4) the Settlement does not become Final for any reason; (5)
failure on the part of any of the Settling Class Action Parties to abide, in any
material respect, with the terms of the Stipulation.
10.2 Unless otherwise agreed by Class Action Plaintiff's Counsel and
counsel for Settling Class Action Defendants in writing, this Stipulation shall
be terminated in the event that any of the following conditions is not met:
i. The transfer into the Escrow Account of the Settlement Cash
following entry of an order giving preliminary settlement approval, no later
than five (5) business days following entry of such order;
ii. The issuance of the Settlement Securities no later than five (5)
business days after the Final Valuation Date, as required by 2.8-2.11,
above;
-23-
iii. The Court has entered the Notice Order and certified the
Settlement Class, as required by 4.1 and 5.1, above;
iv. Preliminary and final approval of this Stipulation,
independent of the Court's determination of any award of attorneys' fees and
expenses to the Class Action Plaintiff's Counsel;
v. Entry of Judgment, substantially in the form and content of
Exhibit A, by the U.S. District Court for the Eastern District of Missouri
dismissing all Released Claims with prejudice and without costs to any party;
vi. Judgment has become Final;
vii. Entry of the Derivative Judgment;
viii. The Derivative Judgment has become Final;
ix. The Settlement Securities are issued pursuant to section
3(a)(10) of the Securities Act and do not constitute "restricted securities";
x. Court approval of the Underwriters Agreement, including a
determination that the terms and conditions of the Underwriters Agreement
(including the Payment to Underwriters of Charter common stock issued pursuant
to section 3(a)(10) of the Securities Act and not constituting "restricted
securities") are fair to all parties, including Underwriters; and
xi. That the Settlement is not otherwise terminated pursuant to
the terms set forth in this Stipulation.
10.3 It shall not be a condition of effectiveness of this Settlement that
the Court approve the Andersen Settlement. If the Andersen Settlement is not
approved, or does not become Final pursuant to its terms, the terms of the
Release in the Judgment shall be modified to expressly exclude Andersen from the
definition of Released Class Action Parties.
10.4 If prior to the Settlement Hearing, Persons who otherwise would be
Members of the Settlement Class have filed with the Court valid and timely
requests for exclusion ("Requests for Exclusion") from the Settlement Class in
accordance with the provisions of the Notice Order and the Notice given pursuant
thereto, and such Persons have in the aggregate Potential Claims that equal or
exceed the sum specified in a separate Supplemental Agreement between the
Parties (the "Supplemental Agreement"), Charter shall have the option to
terminate this Stipulation in accordance with the procedures set forth in the
Supplemental Agreement. The Supplemental Agreement will not be filed with the
Court unless and until a dispute among the Settling Class Action Parties
concerning its interpretation or application arises, but the Settling Class
Action Parties will file a statement identifying the existence of the
Supplemental Agreement pursuant to Federal Rule of Civil Procedure
23(e)(1)(c)(2), and reference the Supplemental Agreement in the Notice. Copies
of all Requests for Exclusion received, together with copies of all written
revocations of
-24-
Requests for Exclusion, shall be delivered to counsel for Settling Class Action
Defendants within two (2) days of receipt thereof.
10.5 Unless otherwise ordered by the Court, in the event the Stipulation
shall terminate, or be canceled, or shall not become effective for any reason,
within ten (10) business days after written notification of such event is sent
by counsel for Settling Class Action Defendants or Plaintiff's Settlement
Counsel to the Escrow Agents: (1) the Settlement Fund (including accrued
interest), less expenses and any costs which have been disbursed from or are
chargeable to the Settlement Fund, and less any Taxes and Tax Expenses paid or
incurred pursuant to 3.7, shall be refunded by the Escrow Agents to Charter and
to Charter's Insurance Carriers; (2) Charter's obligation to cause securities to
be issued pursuant to 2.8, 2.9, 2.10, and 2.11 shall be extinguished; and (3)
the undertaking to institute the Non-monetary Consideration pursuant to 2.12
shall be void nunc pro tunc. In such event, any tax refund owing to the
Settlement Fund shall also be refunded and paid to Charter and Charter's
Insurance Carriers. At the request of Charter, the Escrow Agents or their
designee shall apply for any such refund and pay the proceeds, less the cost of
obtaining the tax refund, to Charter.
10.6 In the event that the Stipulation is not approved by the Court or the
Settlement set forth in the Stipulation is terminated or fails to become
effective in accordance with its terms, this Stipulation and all negotiations
and proceedings relating hereto shall be without prejudice to any or all
Settling Class Action Parties who shall be restored to their respective
positions in the Class Action as of August 4, 2004. In such event, the terms and
provisions of the Stipulation, with the exception of 1.1-1.33, 3.2, 3.4, 3.5,
3.6, 4.2, 8.4, 8.5, 9.2, 9.3, 10.1-10.9, 11.3, 11.4, and 11.8 herein, shall have
no further force and effect with respect to the Settling Class Action Parties
and shall not be used in the Class Action or in any other proceeding for any
purpose and any Judgment or Order entered by the Court in accordance with the
terms of the Stipulation shall be treated as vacated, nunc pro tunc.
10.7 In the event this Stipulation shall be cancelled as set forth in 10.1
above, the Settling Class Action Parties shall, within two weeks of such
cancellation, jointly request a status conference with the Court to be held on
the Court's first available date. At such status conference, the Settling Class
Action Parties shall ask the Court's assistance in scheduling continued
proceedings in the Class Action as between the Settling Class Action Parties.
Pending such status conference or the expiration of sixty (60) days from the
Settling Class Action Parties' joint request for a status conference, whichever
occurs first, none of the Settling Class Action Parties shall file or serve any
further motions or discovery requests on any of the other Settling Class Action
Parties in connection with this Class Action nor shall any response be due by
any Settling Class Action Party to any outstanding discovery or pleading by any
other Settling Class Action Party.
10.8 If a case is commenced in respect to Charter or any of Charter's
Insurance Carriers under Title 11 of the United States Code (Bankruptcy), or a
trustee, receiver or conservator is appointed under any similar law, and in the
event of the entry of a final order of a court of competent jurisdiction
determining the transfer of the Settlement Cash, or any portion thereof, by or
on behalf of Charter or any of Charter's Insurance Carriers to be a preference,
voidable transfer, fraudulent conveyance or similar transaction, then at Class
-25-
Action Plaintiff's option, this Settlement, and the releases given and Judgment
entered in favor of all Settling Defendants pursuant to this Stipulation, shall
be null and void.
10.9 Neither a modification nor a reversal on appeal of (a) any Plan of
Allocation, (b) any amount of attorneys' fees, costs, expenses and interest to
Class Action Plaintiff's Counsel, or (c) any Compensatory Award to Class Action
Plaintiff, as described in 5.1, shall constitute a condition to the Effective
Date or grounds for cancellation and termination of the Stipulation.
K. MISCELLANEOUS PROVISIONS
11.1. The Settling Class Action Parties (a) acknowledge that it is their
intent to consummate this Settlement and Stipulation; and (b) agree to cooperate
to the extent necessary to effectuate and implement all terms and conditions of
the Stipulation and to exercise their best efforts to accomplish the foregoing
terms and conditions of the Stipulation.
11.2. Settling Class Action Defendants agree to reasonable cooperation
with the Class Action Plaintiff in connection with any continuing litigation of
the Class Action after final approval of the Settlement. Such cooperation shall
consist of (i) making witnesses within the control of Charter, subject to all
applicable privileges or rights that may be asserted by such witnesses,
available to testify pursuant to the Federal Rules of Civil Procedure at
reasonable times and upon reasonable notice; and (ii) Charter making relevant
documents available, subject to all applicable privileges, upon reasonable
request and notice pursuant to the Federal Rules of Civil Procedure.
11.3. The Settling Class Action Defendants have denied, and continue to
deny, any and all allegations contained in the Class Action, and they are
entering into the Settlement in order to eliminate the burden, expense, and
uncertainties of further litigation. The Settlement and the provisions contained
in this Stipulation and the Memorandum of Understanding shall not be deemed, or
offered or received in evidence as a presumption, a concession, or an admission
of any fault, liability, or wrongdoing by any party, and except as required to
enforce the Settlement, they shall not be offered or received in evidence or
otherwise used by any person in these or any other actions or proceedings,
whether civil, criminal, or administrative.
11.4. No press announcement, press release, or other public statement
concerning the Settlement may be made by any of the Settling Class Action
Parties without approval from the other Settlement Class Action Parties, except
as required by law.
11.5. All of the Exhibits to the Stipulation are material and integral
parts hereof and are fully incorporated herein by this reference.
11.6. The Stipulation may be amended or modified, as is necessary to
effect the terms of the Settlement, only by a written instrument signed by or on
behalf of all Parties or their successors-in-interest.
11.7. The Stipulation, the Exhibits attached hereto and the Supplemental
Agreement constitute the entire agreement among the Parties hereto; in
particular, it is
-26-
understood and agreed that there are no collateral or oral agreements between
the parties that are not expressed in this Stipulation, the Exhibits or the
Supplemental Agreement. The Class Action Plaintiff and the Settling Class Action
Defendants expressly warrant that, in entering into this Stipulation, they
relied solely upon their own knowledge and investigation, and not upon any
promise, representation, warranty, or other statement by any party or any person
representing any party to this Stipulation, not expressly contained in this
Stipulation, its Exhibits, or the Supplemental Agreement. Except as otherwise
provided herein, each party shall bear its own costs.
11.8. Class Action Plaintiff's Counsel, on behalf of the Settlement Class,
is expressly authorized by the Class Action Plaintiff to take all appropriate
action required or permitted to be taken by the Settlement Class pursuant to the
Stipulation to effectuate its terms and also are expressly authorized to enter
into any modifications or amendments to the Stipulation on behalf of the
Settlement Class which they deem appropriate.
11.9. Each counsel or other Person executing the Stipulation or any of its
Exhibits on behalf of any party hereto hereby warrants that such person has the
full authority to do so. All orders and agreements entered during the course of
the Class Action relative to the confidentiality of information shall survive
this Stipulation.
11.10. The Stipulation may be executed by facsimile and in one or more
counterparts. All executed counterparts and each of them shall be deemed to be
one and the same instrument. Counsel for the Parties to the Stipulation shall
exchange among themselves original signed counterparts and a complete set of
original executed counterparts shall be filed with the Court.
11.11. The Stipulation shall be binding upon, and inure to the benefit of,
the successors and assigns of the Settling Class Action Parties hereto.
11.12. The Court shall retain jurisdiction with respect to implementation
and enforcement of the terms of the Stipulation, and all Parties hereto and
their counsel submit to the jurisdiction of the Court for purposes of
implementing and enforcing the Settlement embodied in the Stipulation.
11.13. The Stipulation and the Exhibits hereto shall be considered to have
been negotiated, executed and delivered, and to be wholly performed, in the
State of Missouri, and the rights and obligations of the parties to the
Stipulation shall be construed and enforced in accordance with, and governed by,
the laws of the State of Missouri without giving effect to that state's choice
of law principles.
-27-
IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be
executed, by their duly authorized attorneys, as of January 24, 2005.
DATED: 2/1/05 POMERANTZ HAUDEK BLOCK GROSS AND
GROSSMAN LLP
By: /s/ Stanley M. Grossman
-------------------------------------
Stanley M. Grossman, Esq.
Marc I. Gross, Esq.
100 Park Avenue, 26th Floor
New York, New York 10017
Telephone: (212) 661-1100
Facsimile: (212) 661-8665
POMERANTZ HAUDEK BLOCK GROSS
AND GROSSMAN LLP
Patrick V. Dahlstrom, Esq.
Leigh Handelman, Esq.
One North LaSalle Street, Suite 2225
Chicago, Illinois 60602-3908
Telephone: (312) 377-1181
Facsimile: (312) 377-1184
Attorneys for Class Action Plaintiff
StoneRidge Investment Partners LLC,
Individually and On Behalf of All Others
Similarly Situated
LAW OFFICES OF WOLFF AND
D'AGROSA
Donald L. Wolff, Esq.
Paul J. D'Agrosa, Esq.
8019 Forsyth Street
Clayton, Missouri 63105
Telephone: (314) 725-8019
Facsimile: (314) 277-1184
Liaison Counsel for the Settlement Class
-28-
DATED:___________ IRELL & MANELLA LLP
By: /s/ David Siegel
-------------------------------------------
David Siegel, Esq.
David A. Schwarz, Esq.
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4276
Telephone: (310) 277-1010
Facsimile: (310) 203-7199
Attorneys for Defendants Charter
Communications, Inc.
DATED: 2/1/05 THOMPSON COBURN LLP
By: /s/ Roman P. Wuller
-------------------------------------------
Stephen B. Higgins, Esq.
Roman P. Wuller, Esq.
One US Bank Plaza
St. Louis, Missouri 63101
Telephone: (314) 552-6000
Facsimile: (314) 552-7199
Attorneys for Defendants Charter
Communications, Inc.
DATED: 2/1/05 CHARTER COMMUNICATIONS, INC.
By: /s/ Lawrence G. Christopher, for:
-------------------------------------------
Curtis S. Shaw, Esq.
Executive Vice-President, General Counsel
and Secretary, Defendant Charter
Communications, Inc.
12405 Powerscourt Drive
St. Louis, Missouri 63131
Telephone: (314) 965-0555
Facsimile: (314) 965-8793
-29-
DATED: 2/1/05 BRYAN CAVE, LLP
By: /s/ James F. Bennett
-------------------------------------------
Edward L. Dowd, Jr., Esq.
James F. Bennett, Esq.
One Metropolitan Square
211 North Broadway
St. Louis, Missouri 63102-2750
Telephone:(314) 259-2000
Facsimile: (314) 259-2020
Attorneys for Defendant Carl E. Vogel
DATED: 2/1/05 DORSEY & WHITNEY, LLP
By: /s/ authorized signatory for,
-------------------------------------------
Peter S. Ehrlichman, Esq.
1420 Fifth Avenue
Suite 3400
Seattle, Washington 98101
Telephone: (206) 903-8825
Facsimile: (206) 903-8820
Attorneys for Defendant Paul G. Allen
DATED: 2/1/05 FOSTER PEPPER & SHEFELMAN PLLC
By: /s/ Timothy J. Filer
-------------------------------------------
Timothy J. Filer, Esq.
1111 Third Avenue
Suite 3400
Seattle, Washington 98101
Telephone: (206) 447-4400
Facsimile: (206) 447-9700
Attorneys for Defendant Paul G. Allen
-30-
DATED: 2/1/2005 PAUL, HASTINGS, JANOFSKY & WALKER LLP
By: /s/ Grace A. Carter
-------------------------------------------
Grace A. Carter, Esq.
John A. Reding, Esq.
55 Second Street
24th Floor
San Francisco, California 94105
Telephone: (415) 856-7000
Facsimile: (415) 856-7100
Attorneys for Defendant Jerald L. Kent
DATED: 1/26/05 CAPES SOKOL GOODMAN & SARACHAN
By: /s/ David V. Capes
-------------------------------------------
David V. Capes, Esq.
S. Todd Hamby, Esq.
7701 Forsyth Boulevard
Suite 400
Clayton, Missouri 63105
Telephone: (314) 721-7701
Facsimile: (314) 721-0554
Attorneys for Defendants Chris Fenger and
Bill Shreffler
-31-
DATED:__________ SNELL & WILMER
By: /s/ John Roche
-------------------------------------------
John Roche, Esq.
Street 1200 Suite
1900 17th
Denver, Colorado 80202
Telephone: (303) 634-2000
Facsimile: (303) 634-2020
Attorneys for Defendant James H. Smith, III
DATED: 1/27/05 GREENSFELDER, HEMKER & GALE, P.C.
By: /s/ Jeffrey T. Demerath
-------------------------------------------
Jeffrey T. Demerath, Esq.
2000 Equitable Building
10 South Broadway
St. Louis, Missouri 63102
Telephone: (314) 241-9090
Facsimile: (314) 241-8624
Attorneys for Defendant David G. Barford
DATED: 2/1/05 HAAR & WOODS, LLP
By: /s/ Robert T. Haar
-------------------------------------------
Robert T. Haar, Esq.
1010 Market Street, Suite 1620
St. Louis, Missouri 63101
Telephone: (314) 241-2224
Facsimile: (314) 241-2227
Attorneys for Defendant Kent D. Kalkwarf
-32-
DATED: 1/28/05 BURROUGHS, HEPLER, BROOM, MACDONALD, HEBRANK &
TRUE
By: /s/ Theodore J. MacDonald
-------------------------------------------
Theodore J. MacDonald, Jr., Esq.
103 W. Vandalia Street, Suite 300
Edwardsville, Illinois 62025-0510
Telephone: (618) 656-0184
Facsimile: (618) 656-1364
Attorneys for Defendant Paul E. Martin
DATED: SENNIGER, POWERS, LEAVITT & ROEDEL
By: /s/ David W. Harlan
-------------------------------------------
David W. Harlan, Esq.
One Metropolitan Square, 16th Floor
St. Louis, Missouri 63102
Telephone: (314) 231-5400
Facsimile: (314) 231-4342
Attorneys for Defendant David L. McCall
-33-
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
IN RE CHARTER COMMUNICATIONS, INC. MDL DOCKET NO. 1506 (CAS)
SECURITIES LITIGATION ALL CASES
STONERIDGE INVESTMENT PARTNERS Consolidated Case
LLC, Individually and On Behalf No. 4:02-CV-1186 CAS
of All Others Similarly Situated,
Plaintiff,
v.
CHARTER COMMUNICATIONS, INC., PAUL
ALLEN, JERALD L. KENT, CARL E. VOGEL,
KENT KALKWARF, DAVID G. BARFORD,
PAUL E. MARTIN, DAVID L. McCALL, BILL
SHREFFLER, CHRIS FENGER, JAMES H.
SMITH, III, SCIENTIFIC-ATLANTA, INC.,
MOTOROLA, INC. and ARTHUR ANDERSEN,
LLP,
Defendants.
[PROPOSED] JUDGMENT AND ORDER OF DISMISSAL
WITH RESPECT TO CHARTER COMMUNICATIONS, INC. AND THE
INDIVIDUAL DEFENDANTS
EXHIBIT A
This matter came on for hearing on _____________, 2005, upon the
application of the Class Action Plaintiff, defendant Charter Communications,
Inc. and the Individual Defendants ("Settling Class Action Defendants") for
approval of the Settlement set forth in the Stipulation of Settlement (the
"Stipulation") dated as of January 24, 2005. Due adequate notice having been
given to the Settlement Class, and the Court having considered the Stipulation,
all papers filed and proceedings had herein and all oral and written comments
received regarding the proposed Settlement, and having reviewed the entire
record in the Class Action, and good cause appearing,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED AS FOLLOWS:
1. The Court, for purposes of this Judgment and Order of Dismissal (the
"Judgment"), adopts all defined terms as set forth in the
Stipulation.
2. The Court has jurisdiction over the subject matter of the Class
Action, the Class Action Plaintiff, the other Members of the
Settlement Class, and the Class Action Defendants.
3. This Court has certified, for settlement purposes only, a Settlement
Class of all persons (except Class Action Defendants, and their
corporate affiliates; any officers or directors of Charter; or
members of their immediate families, and their heirs, successors and
assigns; and any entities controlled directly or indirectly by Paul
G. Allen) who purchased or otherwise acquired Charter common stock
during the period of November 8, 1999 through and including August
16, 2002.
4. The Court finds that the distribution of the Notice of Pendency and
Proposed Settlement of Class Action, Proof of Claim and Release, and
publication of the Summary Notice of Proposed Settlement (as
provided for in the Order Preliminarily Approving Settlement and
Approving the Form and Manner of Notice) constituted the best notice
practicable under the circumstances to apprise all Settlement Class
Members of the pendency of the Class Action, the terms of the
proposed Settlement of the Class Action and their rights with
respect to the foregoing, and afforded Settlement Class Members with
an opportunity to present their objections, if any, to the
Stipulation. The Court finds that the provision of notice to
Settlement Class Members fully met the requirements of Rule 23 of
the Federal Rules of Civil Procedure, federal law, due process, the
United States Constitution, and any other applicable law.
5. The Court finds that all Settlement Class Members have been
adequately provided with an opportunity to remove themselves from
the Settlement Class by executing and returning a "request for
exclusion" in conformance with the terms of the Stipulation
-2-
and its exhibits. The Court further finds that those persons
(identified in Exhibit 1 hereto) have timely and validly
requested exclusion from the Settlement Class.
6. With respect to the Settlement Class, this Court finds and
concludes that: (a) the Members of the Settlement Class are so
numerous that joinder of all Settlement Class Members in the
Class Action is impracticable; (b) there are questions of law
and fact common to the Settlement Class which predominate over
any individual questions; (c) the claims of the Class Action
Plaintiff are typical of the claims of the Settlement Class;
(d) the Class Action Plaintiff and Class Action Plaintiff's
Counsel have, at all times, fairly and adequately represented
and protected the interests of the Settlement Class Members;
and (e) a class action is superior to other available methods
for the fair and efficient adjudication of the controversy,
considering: (i) the interests of the members of the
Settlement Class in individually controlling the prosecution
of the separate actions; (ii) the extent and nature of any
litigation concerning the controversy already commenced by
members of the Settlement Class; (iii) the desirability or
undesirability of continuing the litigation of these claims in
this particular forum; and (iv) the difficulties likely to be
encountered in the management of the Class Action.
7. The Court approves the Settlement of the above-captioned
action, as set forth in the Stipulation, including the
releases contained therein, the relative contributions of the
Settling Class Action Defendants, and all other terms, as
fair, just, reasonable, and adequate to all Members of the
Settlement Class. The Court also approves the Underwriters
Agreement as fair, just, reasonable, and adequate as to the
signatories thereto. The Settling Class Action
Parties are directed to perform in accordance with the terms
set forth in the Stipulation.
8. The Settlement Securities and the securities issued pursuant
to the Underwriters Agreement are issued pursuant to section
3(a)(10) of the Securities Act and do not constitute
"restricted securities."
9. Except as to any individual claim of those Persons (identified
in Exhibit 1 hereto) who have validly and timely requested
exclusion from the Settlement Class, the Class Action and all
claims contained therein, as well as all of the Released
Claims are dismissed with prejudice as to the Class Action
Plaintiff and the other Members of the Settlement Class, and
as against the Released Class Action Parties. The Settling
Class Action Parties are to bear their own costs, except as
otherwise provided in the Stipulation. By operation of the
Judgment and under the terms of
-3-
the Stipulation and the releases therein, this Judgment is
intended to preclude, and shall preclude, the Class Action
Plaintiff and all other Settlement Class Members who have not
validly and timely requested exclusion from the Settlement
Class from filing or pursuing any Released Claims under any
federal, state or other law.
10. Upon the Effective Date, the Class Action Plaintiff shall
release, relinquish and discharge, and each of the Settlement
Class Members (other than those Settlement Class Members who
validly and timely request exclusion from this Settlement
Class in accordance with the provisions of the Notice Order
and the Notice given pursuant thereto) shall be deemed to
have, and by operation of this Judgment shall have, fully,
finally, and forever released, relinquished and discharged
each and all of the Released Class Action Parties (which does
not include defendants Motorola, Inc., or Scientific Atlanta,
Inc.) from all Released Claims (including "Unknown Claims"),
and from all claims (including "Unknown Claims"), arising out
of, relating to, or in connection with the defense, or
resolution of the Class Action or the Released Claims, whether
or not such Settlement Class Member executes and delivers the
Proof of Claim and Release.
For purposes of this Judgment, Unknown Claims means any
Released Claims which the Class Action Plaintiff or any
Settlement Class Member does not know or suspect to exist in
his, her or its favor at the time of the release of the
Released Class Action Parties which, if known by his, her or
it, might have affect his, her or its settlement with and
release of the Released Class Action Parties, or might have
affected his, her or its decision not to object to, or opt out
of, this Settlement. With respect to any and all Released
Claims, the Settling Class Action Parties stipulate and agree
that, upon the Effective Date, the Settlement Class Members
shall be deemed to have, and by operation of the Judgment
shall have expressly waived and relinquished, to the fullest
extent permitted by law, the provisions, rights, and benefits
of Section 1542 of the California Civil Code, which provides:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by
him must have materially affected his settlement with
the debtor.
The Class Action Plaintiff expressly waives and the
Settlement Class Members shall be deemed to have waived, and
upon the Effective Date and by operation of the Judgment shall
have waived any and all provisions, rights and benefits
conferred
-4-
by any law of the United States or of any state or territory
of the United States, or principle of common law, which is
similar, comparable or equivalent to Section 1542 of the
California Civil Code. The Class Action Plaintiff and the
Settlement Class Members may hereafter discover facts in
addition to or different from those which he, she or it now
knows or believes to be true with respect to the subject
matter of the Released Claims, but each of them hereby
stipulate and agree that the Class Action Plaintiff does
settle and release, and each Settlement Class Member shall be
deemed to have, upon the Effective Date and by operation of
the Judgment shall have, fully, finally, and forever settled
and released any and all Released Claims, known or unknown,
suspected or unsuspected, contingent or non-contingent,
whether or not concealed or hidden, which now exist, or
heretofore have existed upon any theory of law or equity now
existing or coming into existence in the future, including,
but not limited to, all Released Claims that are in any way
based on or related to conduct which is negligent,
intentional, with or without malice, or a breach of any duty,
law or rule, without regard to the subsequent discovery or
existence of such different or additional facts. The Settling
Class Action Parties acknowledge that the foregoing waiver was
bargained for and a key element of the Settlement of which
this release is a part.
11. The Court permanently bars and enjoins (a) all Settlement
Class Members who have not validly and timely requested
exclusion from the Settlement Class (and their heirs,
executors and administrators, predecessors, successors,
affiliates, and assigns) from filing, commencing, prosecuting,
intervening in, participating in (as class members or
otherwise), or receiving any benefits from, any other lawsuit,
arbitration, or other proceeding or order in any jurisdiction
that is based upon, arises out of or relates to any Released
Claims, including, but not limited to, any claim that is based
upon, arises out of or relates to the Class Action or the
transactions and occurrences referred to in the Amended
Complaint or Second Amended Complaint, and (b) all persons or
entities from organizing any Settlement Class Members for
purposes of pursuing as a purported class action (including by
seeking to amend a pending complaint to include class
allegations, or by seeking class certification in a pending
action) any lawsuit that is based upon, arises out of, or
relates to any Released Claims, including, but not limited to,
any claim that is based upon, arises out of or relates to the
Class Action or the transactions and occurrences referred to
in the Amended Complaint or Second Amended Complaint.
-5-
12. Upon the Effective Date, each of the Settling Class Action
Defendants shall be deemed to have, and by operation of this
Judgment shall have, fully, finally, and forever released,
relinquished and discharged the Class Action Plaintiff, the
Settlement Class Members (other than those Settlement Class
Members who validly and timely request exclusion from this
Settlement Class in accordance with the provisions of the
Notice Order and the Notice given pursuant thereto), Class
Action Plaintiff's Counsel, and counsel for all other
plaintiffs in the Class Action from any claims (including
"Unknown Claims") arising out of, relating to, or in
connection with the commencement, prosecution, assertion or
resolution of the Class Action or the Released Claims. Claims
for violation of the Stipulation (including any exhibits) are
preserved.
13. Only those Settlement Class Members filing valid and timely
Proofs of Claim and Release shall be entitled to participate
in the Settlement and receive a distribution from the
Settlement Fund. The Proof of Claim and Release to be executed
by the Settlement Class Members shall further release all
Released Claims against the Released Class Action Parties. All
Settlement Class Members shall, as of the Effective Date, be
bound by the releases set forth herein whether or not they
submit a valid and timely Proof of Claim and Release.
14. In accordance with 15 U.S.C. Section 78u-4(f)(7)(A), any and
all claims for contribution arising out of any Released Claim,
including, but not limited to, any claims that are based upon,
arise out of or relate to the Class Action, and/or any claims
that were alleged or could have been alleged in the Amended
Complaint or Second Amended Complaint (a) by any Person
against a Settling Class Action Defendant, and (b) by any
Settling Class Action Defendant against any Person other than
as set out in 15 U.S.C. Section 78u-4(f)(7)(A)(ii) are hereby
permanently barred, extinguished, discharged, satisfied, and
unenforceable. Accordingly, without limitation to any of the
above, any Person, including, without limitation Andersen and
each and every Non-Settling Class Action Defendant (and all
Persons purporting to act on his, its, or their behalf, and
all Persons purporting to claim by or through him, it, or
them, whether under a subrogation theory or otherwise), are
hereby permanently enjoined from commencing, prosecuting, or
asserting against any of the Settling Class Action Defendants
any such claim for contribution, and each and every Settling
Class Action Defendant is hereby permanently enjoined from
commencing, prosecuting, or asserting against any Person,
including without limitation, Andersen or any Non-Settling
Class Action Defendant, any such claim for contribution. In
accordance with 15 U.S.C. Section 78u-4(f)(7)(B), any
-6-
final verdict or judgment that may be obtained by or on behalf
of the Settlement Class or a Settlement Class Member against a
Non-Settling Class Action Defendant shall be reduced by the
greater of (a) an amount that corresponds to the percentage of
responsibility of the Settling Class Action Defendants for the
loss to the Settlement Class or a Settlement Class Member, or
(b) the amount paid by or on behalf of the Settling Class
Action Defendants to the Settlement Class in connection with
the Settlement.
15. The Court finds that the Stipulation represents a good faith
settlement of all Released Claims of all Settlement Class
Members sufficient to discharge Settling Defendants and the
Released Class Action Parties of all Released Claims of all
Settlement Class Members. In order to effectuate such
settlement, the Court hereby enters the following bar:
(a) Any and all Non-Settling Class Action Defendants and Andersen
are permanently barred, enjoined and restrained from commencing, prosecuting or
asserting any claim against any Released Class Action Party (other than
Andersen), however styled, whether legal or equitable, known or unknown,
foreseen or unforeseen, matured or unmatured, accrued or unaccrued, whether
arising under state, federal, or common law, whether for indemnification or
contribution or otherwise denominated, including, without limitation, any claim
for breach of contract or misrepresentation, where the claim is based upon,
arises out of, or relates to the Class Action or the Shareholder Derivative
Actions (including any matters that were alleged or could have been alleged in
the Class Action or Shareholder Derivative Actions) including, without
limitation, any claim in which a Non-Settling Class Action Defendant or Andersen
seeks to recover from any of the Released Class Action Parties (1) any amounts
that a Non-Settling Class Action Defendant or Andersen has paid, become liable
to pay, or may become liable to pay (whether in cash or any other form of
consideration) in the Class Action, the Shareholder Derivative Actions or any
action in which one or more Settlement Class Members who validly and timely
excluded themselves from the Settlement Class seek a recovery on account of any
matters that were alleged or that could have been alleged in the Class Action
(the "Opt-out Actions"), and/or (2) any costs, expenses, or attorneys' fees that
a Non-Settling Class Action Defendant or Andersen has incurred or may incur in
defending against any claim in the Class Action, the Shareholder Derivative
Actions or the Opt-out Actions. All such claims are hereby extinguished,
discharged, satisfied and unenforceable (hereinafter "Barred Claims");
(b) Any and all Released Class Action Parties (other than Andersen)
are permanently barred, enjoined and restrained from commencing, prosecuting or
asserting any claim against any Non-Settling Class Action Defendants or
Andersen, however styled, whether legal or equitable, known or unknown, foreseen
or unforeseen, matured or unmatured, accrued or unaccrued, whether arising under
state, federal, or common law, whether for indemnification or contribution or
otherwise denominated, including, without limitation, any claim for breach of
contract or misrepresentation, where such claim is based upon, arises out of, or
relates to the Class Action or the
-7-
Shareholder Derivative Actions (including any matters that were alleged or could
have been alleged in the Class Action or the Shareholder Derivative Actions),
including, without limitation, any claim in which a Released Class Action Party
seeks to recover from any of the Non-Settling Class Action Defendants or
Andersen (1) any amounts such Released Class Action Party has paid, become
liable to pay, or may become liable to pay (whether in cash or any other form of
consideration) in the Class Action, the Shareholder Derivative Actions or the
Opt-out actions, and/or (2) any costs, expenses, or attorneys' fees that the
Released Class Action Parties have incurred or may incur in defending against
any claim in the Class Action, the Shareholder Derivative Actions, or the
Opt-out Actions. All such claims are hereby extinguished, discharged, satisfied
and unenforceable hereinafter;
(c) Because the Non-Settling Class Action Defendants are barred from
asserting any Barred Claims against the Settling Class Action Defendants, any
judgments entered against the Non-Settling Class Action Defendants by the
Settlement Class or any Settlement Class Members shall be reduced by an amount
equal to the value as determined by the Court of such Barred Claims (provided,
however, that to the extent such Barred Claims constitute claims for
contribution within the meaning of 15 U.S.C. Section. 78u-4(f)(7)(A), the
reduction provisions set forth in 15 U.S.C. Section. 78u-4(f)(7)(B) shall
apply);
(d) If the Settlement Class or any Settlement Class Member brings a
claim against any Person that is based upon, arises out of, or relates to the
Class Action or any matters that were alleged or could have been alleged in the
Class Action (the "Underlying Action"), and notwithstanding 13 and 14(a)
above, that Person obtains a recovery against a Released Class Action Party that
is based, in whole or in part, on (1) any amounts that such Person has become
liable to pay or may become liable to pay in the Underlying Action, and/or (2)
any costs, expenses or attorneys' fees that such Person has incurred or may
incur in the Underlying Action (amounts (1) and (2) being collectively the
"Reduction Amount"), the Settlement Class and the Settlement Class Members agree
that they will reduce or credit any judgment or settlement with such Person (up
to the amount of such judgment or settlement) by the Reduction Amount, which
amount shall then also be credited to the Released Class Action Party.
(e) Provided, however, that nothing in this Judgment shall release,
bar, enjoin, or otherwise restrain any claim between Charter and any former
Charter employee regarding indemnification, advancement, and/or recoupment of
fees, costs, and expenses.
16. Nothing in this Judgment shall preclude any action to enforce
the terms of the Stipulation.
17. Neither the Stipulation nor the Settlement contained therein,
nor any act performed or document executed pursuant to or in
furtherance of the Stipulation or the Settlement: (i) is or may
be deemed to be or may be used as an admission of, or evidence
of, the validity of any Released Claim, or of any wrongdoing or
liability of the Settling Class Action Defendants; (ii) is or
may be
-8-
deemed to be or may be used as an admission of, or evidence
of, any fault or omission of any of the Settling Class Action
Defendants in any civil, criminal or administrative proceeding
in any court, administrative agency or other tribunal; or
(iii) shall be offered in evidence by any person or entity for
any purpose except as provided in this paragraph 16. Released
Class Action Parties may file the Stipulation and/or the
Judgment from this Class Action in any other action that may
be brought against them in order to support a defense or
counterclaim based on principles of res judicata, collateral
estoppel, release, good faith settlement, judgment bar or
reduction in support of any theory of claim preclusion or
issue preclusion or similar defense or counterclaim. The
Settling Class Action Parties, their respective counsel or any
other Member of the Settlement Class may file the Stipulation
in any proceeding brought to enforce any of its terms or
provisions.
18. The Court finds that the Amended Complaint and Second
Amended Complaint were filed as to the Settling Class Action
Defendants on a good faith basis, that the Amended Complaint
and Second Amended Complaint were filed in accordance with the
Private Securities Litigation Reform Act of 1995 and Rule 11
of the Federal Rules of Civil Procedure based on all publicly
available information. The Court finds that the Settling Class
Action Parties and their counsel have complied with Rule 11 of
the Federal Rules of Civil Procedure as to all proceedings
herein.
19. The Plan of Allocation set forth in the Notice is hereby
approved as fair, reasonable and equitable.
20. Class Action Plaintiffs' Counsel are hereby awarded _____% of
the Settlement Fund in fees for services rendered in
connection prosecution of this litigation, and $__________ as
reimbursement for expenses.
21. Pursuant to Par. 27A(2)(b)(4) of the Private Securities
Litigation Class Action Reform Act of 1995, Class Action
Plaintiff is hereby granted a Compensatory Award of
$_________.
22. The Court reserves exclusive and continuing jurisdiction over
the Class Action, the Class Action Plaintiff, the Settlement
Class and the Released Class Action Parties for the purposes
of supervising the distribution of the Settlement Fund and any
other matters.
-9-
IT IS SO ORDERED.
DATED: ___________ _______________________
THE HONORABLE CHARLES A. SHAW
UNITED STATES DISTRICT JUDGE
Submitted by:
POMERANTZ HAUDEK BLOCK GROSS AND GROSSMAN LLP
Stanley M. Grossman, Esq.
Marc I. Gross, Esq.
100 Park Avenue, 26th Floor
New York, NY 10017
POMERANTZ HAUDEK BLOCK GROSS AND GROSSMAN LLP
Patrick V. Dahlstrom, Esq.
Leigh Handelman, Esq.
One North LaSalle Street, Suite 2225
Chicago, IL 60602-3908
Attorneys for Class Action Plaintiff StoneRidge Investment Partners LLC,
Individually and On Behalf of All Others Similarly Situated
LAW OFFICES OF WOLFF AND D'AGROSA
Donald L. Wolff, Esq.
Paul J. D'Agrosa, Esq.
8019 Forsyth Street
Clayton, MO 63105
Liaison Counsel for the Settlement Class
IRELL & MANELLA LLP
David Siegel, Esq.
David Schwarz, Esq.
Craig Varnen, Esq.
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
-10-
THOMPSON COBURN LLP
Roman P. Wuller, Esq.
Stephen B. Higgins, Esq.
One US Bank Plaza
St. Louis, MO 63101
Attorneys for Defendant Charter
Communications, Inc.
BRYAN CAVE, LLP
Edward L. Dowd, Jr., Esq.
James F. Bennett, Esq.
One Metropolitan Square
211 North Broadway
St. Louis, MO 63102
Attorneys for Defendant Carl E. Vogel
DORSEY & WHITNEY, LLP
Peter S. Ehrlichman, Esq.
1420 Fifth Avenue
Suite 3400
Seattle, Washington 98101
FOSTER PEPPER & SHEFELMAN PLLC
Timothy J. Filer, Esq.
1111 Third Avenue
Suite 3400
Seattle, Washington 98101
Attorneys for Defendant Paul G. Allen
PAUL, HASTINGS, JANOFSKY & WALKER LLP
Grace A. Carter, Esq.
John A. Reding, Esq.
55 Second Street
24th Floor
San Francisco, California 94105
Attorneys for Defendant Jerald L. Kent
-11-
CAPES SOKOL GOODMAN & SARACHAN
David V. Capes, Esq.
S. Todd Hamby, Esq.
7701 Forsyth Boulevard
Suite 400
Clayton, Missouri 63105
Attorneys for Defendants Chris Fenger and Bill Shreffler
SNELL & WILMER
John Roche, Esq.
1200 17th Street
Suite 1900
Denver, Colorado 80202
Attorneys for Defendant James H. Smith, III
GREENSFELDER, HEMKER & GALE, P.C.
Jeffrey T. Demerath, Esq.
2000 Equitable Building
10 South Broadway
St. Louis, Missouri 63102
Attorneys for Defendant David G. Barford
HAAR & WOODS, LLP
Robert T. Haar, Esq.
1010 Market Street, Suite 1620
St. Louis, Missouri 63101
Attorneys for Defendant Kent D. Kalkwarf
BURROUGHS, HEPLER, BROOM, MACDONALD, HEBRANK & TRUE
Theodore J. MacDonald, Jr., Esq.
103 W. Vandalia Street, Suite 300
Edwardsville, Illinois 62025-0510
Attorneys for Defendant Paul E. Martin
SENNIGER, POWERS, LEAVITT & ROEDEL
David H. Harlan, Esq.
One Metropolitan Square, 16th Floor
St. Louis, Missouri 63102
Attorneys for Defendant David L. McCall
-12-
"CORPORATE GOVERNANCE" TERM SHEET
I. Formal Prohibition on Deliberate Inflation of Subscriber Numbers and
Related Matters
A. Charter will adopt a "zero tolerance policy" on holding disconnects
for the purpose of causing a deliberate inflation of subscriber
numbers, consistent with the terms of the SEC's Release No. 50098
(July 27, 2004).
1. This policy will be reflected in a formal, written policy
governing the disconnection of late paying subscribers which
shall state, inter alia, that Charter shall not keep any
"delinquent paying subscribers," as that term shall be
defined, on its subscriber rolls for the purpose of increasing
reported subscriber numbers.
2. The policy shall require that Charter shall undertake to
disconnect customers who request termination of service in a
timely fashion and in a manner consistent with state laws, to
the extent applicable.
3. Charter typically shall disconnect non-paying customer after
60 to 75 days, and shall write off or refer for collection any
non-paying customers at 90 to 120 days. The implementation of
this practice shall be consistent with the Undertakings
reflected in the SEC's Release No. 50098 at paragraph E.
4. Charter's CEO shall announce this policy through a
company-wide publication, broadcast, or email, and shall issue
quarterly written reminders to all employees regarding
Charter's "zero tolerance policy" for holding or "managing
disconnects" in order to deliberately inflate subscriber
numbers in accordance with paragraph D of the SEC's Release
No. 50098.
B. Charter's Corporate Director, Credit and Collections shall monitor
the implementation of this policy.
1. The Corporate Director, Credit and Collections shall develop
reports that monitor bad debt on a monthly basis, at a company
wide and division level.
2. These reports shall be provided to the Company's Chief
Operating Officer and to the Legal Department.
C. Charter shall institute an employee bonus program in which
subscriber growth is not a factor in bonus consideration.
D. Charter shall include a disclosure in its quarterly and annual
filings with the SEC as to the number of active subscribers whose
accounts are more than 60 days, 90 days, and 120 days overdue.
E. Charter shall instruct its internal auditors to review compliance
with Charter's formal disconnect procedures on a quarterly basis and
report the findings to its public auditors in connection with its
annual audit.
F. In connection with its budgeting process, Charter shall institute a
bottom-up budget process that eliminates industry analysts'
projections as a component of setting Charter's budget goals.
II. Corporate Compliance Program
A. Charter will provide a copy of its Code of Conduct to all its
employees, who shall be instructed to review its contents and to
sign a form acknowledging their responsibilities to read and comply
with the policies set forth in the Code of Conduct.
B. All Corporate-level employees who are given new employee training or
orientation shall be given ethics training, in which they shall be
given a copy of the Code of Conduct.
C. The Code of Conduct will reflect the Company's "zero tolerance
policy" on holding disconnects, consistent with the policy
undertakings set forth in Section I above.
D. The Code of Conduct will require that employees report violations of
the Code or other behavior that they believe might be unethical or
illegal.
E. Charter will establish a secure website and toll-free number for
employees to report suspected violations of the Code of Conduct.
1. The website and toll-free number will be accessible to any
Charter employee seven days per week.
2. The website and toll-free number will be managed by an outside
company.
3. Reports will be kept anonymous or open, depending on the
reporter's preference.
4. The Chief Compliance Officer shall have overall responsibility
for the website and toll-free number.
F. The Corporate Compliance Committee
1. Charter will institute a Corporate Compliance Committee to
oversee the Corporate Compliance Program.
2. The Committee will meet on a quarterly basis.
-2-
3. The Committee will evaluate complaints, conduct investigations
with the assistance of outside counsel, and when necessary
make disciplinary recommendations.
4. The Committee will be chaired by the Chief Compliance Officer,
who shall be the Company's General Counsel or another senior
officer, as selected by the Chief Executive Officer.
5. Other members of the Committee may include a Deputy Compliance
Officer appointed by the Chief Compliance Officer, the head of
Charter's Human Resources Department, some selected divisional
vice presidents in charge of Human Resources, and the head of
Corporate Audit Services.
6. The Chief Compliance Officer will report quarterly on the
activities of the Compliance Committee to the Board of
Directors' Audit Committee and, as necessary, to the
Disclosure Committee.
III. Disclosure Committee
A. Charter will institute and maintain a Disclosure Committee to better
ensure that the Company's SEC filings are materially correct and in
material compliance with SEC regulations.
1. The Company's Chief Financial Officer or some other senior
executive to be selected by the CEO will be the Chairman of
the Disclosure Committee.
2. The Chairman will select the other members of the Committee,
who shall have access to individuals representing the
operations, legal, financial, financial reporting, internal
audit, and government relations functions. As needed, the
Chairman may seek assistance from outside counsel.
3. The Chairman of the Disclosure Committee shall appoint
monitors who shall interview key executives with respect to
their areas of responsibility with a view to its disclosure
requirements, including without limitation, identification of
known trends and uncertainties in the Company's business that
are reasonably likely to have a material effect on its
financial condition and results of operations.
B. The Disclosure Committee will meet at least on a quarterly basis to
review the Company's periodic filings with the SEC. The Disclosure
Committee should also meet in connection with any registration
statements filed under the Securities Act of 1933 by the Company
(other than those on Form S-8 or other similar filings).
-3-
IV. Audit Committee
A. Committee Membership
1. The Audit Committee shall consist of no fewer than three
members of the Board of Directors. Requirements for membership
on the Audit Committee shall be as follows: (a) each member
shall satisfy applicable SEC, regulatory, and statutory
independence, non-affiliation, maximum stock ownership and
financial literacy requirements and shall not have a
relationship with the Company which would impair his or her
independence; and (b) if required by NASDAQ rules, at least
one member shall satisfy the financial expert requirements.
When appointing the members of the Audit Committee, the Board
shall make an affirmative determination as to satisfaction of
these requirements.
2. The Board shall appoint the members of the Audit Committee
annually and shall designate the Chairman of the Audit
Committee. The members of the Audit Committee shall serve
until their successors are appointed and qualified. The Board
shall have the power at any time to change the membership of
the Audit Committee and to fill vacancies in it, subject to
such new member(s) satisfying the requirements for Audit
Committee membership.
B. Administrative Matters
1. Audit Committee members may not receive, directly or
indirectly, any consulting, advisory or other compensatory
fees (as proscribed by applicable SEC or NASDAQ rules) from
the Company or any subsidiary thereof, other than for Board or
Board committee service.
2. The Audit Committee shall meet at least four times annually,
or more frequently as circumstances dictate. The Audit
Committee shall meet in executive session separately with
management and a representative of the Company's internal
audit at least annually, and with the registered public
accountants at least quarterly. The Audit Committee may
request that any officer or employee of the Company or the
Company's outside counsel or registered public accountants
attend a meeting of the Audit Committee or meet with any
members of, or consultants to, the Audit Committee. The Audit
Committee shall make regular reports to the Board.
3. The Audit Committee shall review and reassess the adequacy of
this Charter annually and recommend any proposed changes to
the Board for approval. The Audit Committee shall periodically
review the Audit Committee's own performance, but in no event
less frequently than required by any applicable NASDAQ rules.
-4-
4. The Audit Committee shall have the authority, at the Company's
expense, and to the extent it deems necessary or appropriate,
to retain and determine funding for special legal, accounting
or other consultants to advise the Audit Committee with
respect to its duties and obligations and to conduct or
authorize investigations into any matters within its scope of
responsibilities.
5. The Audit Committee shall prepare the audit committee report
required by the rules of the SEC to be included in the
Company's annual proxy statement.
6. The Audit Committee shall receive 4 hours of training related
to corporate governance issues each year.
C. Committee Authority And Responsibilities
1. The Audit Committee shall have the sole authority to appoint,
retain, compensate and oversee the registered public
accountants (subject, if applicable, to Board and/or
shareholder ratification), and shall approve in advance all
fees and terms for both the audit engagement and all non-audit
engagements with registered public accountants, provided that
any such non-audit services shall not be prohibited by Section
10A of the Securities Exchange Act of 1934, as amended.
Pre-approvals of non-audit services may be delegated to a
single member of the Audit Committee provided that any
pre-approvals made by the Audit Committee's designee shall be
presented at the Audit Committee's next regularly scheduled
meeting. The Audit Committee shall consult with management but
shall not delegate these responsibilities to management.
2. In its capacity as a committee of the Board, the Audit
Committee shall be directly responsible for the oversight of
the work of the registered public accounting firm (including
resolution of disagreements between management and the public
accounting firm regarding financial reporting) for the purpose
of preparing or issuing an audit report or performing other
audit, review or attest services, and the registered public
accounting firm shall report directly to the Audit Committee.
3. In performing its functions, the Audit Committee shall
undertake those tasks and responsibilities that, in its
judgment, would most effectively contribute and implement the
purposes of the Audit Committee. The following functions are
some of the common recurring activities of the Audit
Committee:
(a) Periodic Reports and the Disclosure Process. On a
quarterly basis, review and discuss with management,
internal audit and the registered public accountants:
the Company's annual
-5-
audited financial statements; the registered public
accountants' reviews of the quarterly financial statements;
disclosures made in "Management's Discussion and Analysis of
Financial Condition and Results of Operations;" the matters
required to be discussed pursuant to Statement on Auditing
Standards No. 61; significant deficiencies and material
weaknesses in the design or operation of internal controls and
procedures for financial reporting, any changes made or
proposed to such controls and procedures, and any fraud by any
person involved therewith; and any reports of the registered
independent accountants and disclosures concerning internal
controls and procedures for financial reporting and disclosure
controls and procedures and offer certifications required by
SEC rules and the underlying matters related to such
disclosures.
(b) Review of Accounting Matters. Review and discuss with
management and the registered public accountants, as
applicable: (1) major issues regarding accounting principles,
alternative accounting treatments, accounting estimates and
financial statement presentations and disclosures; (2) major
issues as to the adequacy of the Company's internal controls
and any special audit steps adopted in light of material
control deficiencies; (3) any material written communications
between the registered public accounting firm and management;
(4) any problems, difficulties or differences (including
adjustments) encountered in the course of the audit work and
management's response.
(c) Financial Risk Exposure. Discuss with management the Company's
major financial risk exposures and the steps management has
taken to monitor and control such exposures, including the
Company's risk assessment and risk management policies.
(d) Internal Audit Review. With respect to the Company's internal
auditing and controls, on an annual basis, the Audit Committee
shall review: (1) the composition of the Company's internal
audit staff; (2) the risk assessment process, scopes and
procedures to determine whether they are adequate to attain
the internal audit objectives, as determined by management;
(3) the internal audit plan developed by the Company and
explanations of deviations therefrom and proposed changes
thereto; (4) significant fraud or regulatory non-compliance;
and (5) any difficulties encountered by internal audit in the
course of their audits.
(e) Tax Matters. Review tax compliance and issues with internal
tax staff and external advisors, as needed.
-6-
(f) Relationship With Registered Independent Accountants. Evaluate
the qualifications, performance and independence of the
registered public accountants. The Audit Committee shall
establish procedures for the engagement of the registered
public accountants to provide non-audit services.
(g) Related Party Transactions. Review and approve all related
party transactions, unless otherwise approved by the Board of
Directors or a committee thereof in accordance with applicable
law and NASDAQ rules.
V. Other Provisions
A. Charter will be required to implement and maintain these reforms for
a period of three years following approval of the settlement.
B. In the event the Company determines, in the exercise of its
fiduciary duties, that maintaining any of the foregoing undertakings
is having or could have a negative impact on the Company, it shall
be empowered to modify or eliminate such reform, provided, however,
that any modification shall be approved by a majority of the
independent members of the Board of Directors or a committee
thereof, which shall propose, within 30 days following the Board's
determination, a good faith alternative to the reform that has been
modified or eliminated, should the circumstances dictate that such
maintenance is inappropriate.
-7-
CONFIDENTIAL
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is entered into as of _________,
2005, by and between Charter Communications, Inc., a Delaware corporation (the
"Company"), and _________________, a ____________, as Warrant Agent (together
with any successors and assigns, the "Warrant Agent").
RECITALS
A. WHEREAS, the Company is a defendant in a class-action lawsuit pending
in the United States District Court for the Eastern District of Missouri (the
"Court"), entitled In re Charter Communications, Inc. Securities Litigation, MDL
Docket No. 1506 (CAS) (the "Action");
B. WHEREAS, in connection with the Action and as part of the transactions
to be consummated pursuant to the Stipulation of Settlement dated the date
hereof (the "Stipulation"), the Company has agreed to issue Warrants for the
purchase of ________________ (_______) shares of Class A common stock, par value
$0.001 per share, of the Company (each, a "Warrant");
C. WHEREAS, the Stipulation contemplates that the Company will enter into
certain agreements, including, without limitation, this Agreement;
D. WHEREAS, the Company desires to issue the Warrants, each of which
entitles the holder thereof to purchase one share of its Class A Common Stock
(each of said shares of Class A Common Stock deliverable upon exercise of the
Warrants, a "Warrant Share"); and
E. WHEREAS, the Company wishes the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, division, transfer, exchange and exercise of Warrants.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein and for other good and valuable
consideration, the receipt and adequacy of which hereby are acknowledged, to
implement the terms of the Stipulation, and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants and any
security into which they may be exchanged (the "Holders"), the parties hereto
covenant and agree as follows:
1. DEFINITIONS
In this Agreement, the following terms have the meanings specified or
referred to in this Section 1 and shall be equally applicable to both the
singular and plural forms. Any agreement referred to below shall mean such
agreement as amended, supplemented and modified from time to time to the extent
permitted by the applicable provisions thereof and by this Agreement.
1.1. "Black Scholes Warrant Value", as of any date, shall mean the value
of one Warrant to purchase one Warrant Share as of that using the Black Scholes
method to determine such value with the following inputs on the Bloomberg page
titled CHTR EQUITY OV (Exotic Option Type 4) (or any subsequent page that
hereafter replaces such page), and utilizing a term equal to the duration of the
then remaining Exercise Period, a strike price equal to the then Exercise Price,
and a volatility of 50. In the event that the Company's (or any successor's)
common stock ceases to be traded on any national exchange or on Nasdaq National
Market (or such calculation is not available via the Bloomberg page for any
other reason), the Black Scholes Warrant Value shall be calculated using
assumptions determined in good faith by the Company's Board of Directors.
1.2. "Business Day" shall mean a day other than (a) a Saturday or Sunday,
(b) any day on which banking institutions located in the City of New York, New
York are required or authorized by law or by local proclamation to close or (c)
any day on which the New York Stock Exchange is closed.
1.3. "Class A Common Stock" shall mean the shares of the Company's Class A
common stock, par value $0.001 per share.
1.4. "Class B Common Stock" shall mean the shares of the Company's Class B
common stock, par value $0.001 per share.
1.5. "Commercially Reasonable Best Efforts," when used with respect to any
obligation to be performed or term or provision to be observed hereunder, shall
mean such efforts as a prudent Person seeking the benefits of such performance
or action would make, use, apply or exercise to preserve, protect or advance its
rights or interests; provided that such efforts do not require the Person whose
performance or observance is required hereunder to incur a material financial
cost or a substantial risk of material liability unless such cost or liability
(i) is specifically contained in this Agreement or the Stipulation; (ii) would
customarily be incurred in the course of performance or observance of the
relevant obligation, term or provision, (iii) is caused by or results from the
wrongful act or negligence of the Person whose performance or observance is
required hereunder; or (iv) is not excessive or unreasonable in view of the
rights or interests to be preserved, protected or advanced. Such efforts may
include, without limitation, the expenditure of such funds and retention by such
Person of such accountants, attorneys or other experts or advisors as may be
necessary or appropriate to effect the relevant action; the undertaking of any
special audit or internal investigation that may be necessary or appropriate to
effect the relevant action; and the commencement, termination or settlement of
any action, suit or proceeding involving the Person whose performance or
observance is required hereunder to the extent necessary or appropriate to
effect the relevant action.
-2-
1.6. "Common Stock" shall mean the Class A Common Stock and/or the Class B
Common Stock of the Company, as the context requires.
1.7. "Exercise Period" shall mean the period commencing on the later of
(x) one year after the date the Warrants are issued to the initial Holders and
(y) the Effective Date and ending at 5:00 p.m., New York City time, on the 10th
anniversary of the date such Warrants are issued to the initial Holders.
1.8. "Exercise Price" shall mean the purchase price for the Warrant Shares
shall be $_____ per share, as adjusted from time to time pursuant to Sections
9.1 and 9.2 hereof.
1.9. "Market" shall mean the Nasdaq National Market, or if the Class A
Common Stock is no longer authorized for quotation on such market, such national
securities exchange upon which the Class A Common Stock is listed, or if the
Class A Common Stock is not authorized for quotation on the Nasdaq National
Market or listed on any national securities exchange, the over-the-counter
market as reported by the National Association of Securities Dealers Automated
Quotation System, or if not so quoted, as reported by National Quotation Bureau,
Incorporated or a similar organization.
1.10. "NASD" shall mean the National Association of Securities Dealers.
1.11. "Person" shall mean a natural person, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, limited liability company, limited liability partnership,
government or any agency or political subdivision thereof or any other entity or
organization.
1.12. "Qualifying Prospectus" shall mean a prospectus contained in a
Registration Statement that satisfies all legal requirements.
1.13. "Registration Statement" shall mean a registration statement
relating to the issuance of the Warrant Shares.
1.14. "SEC" shall mean the United States Securities and Exchange
Commission, or any successor governmental agency or authority thereto.
1.15. "Securities Act" shall mean the Securities Act of 1933, as amended.
1.16. "Trading Price," as of any date, shall mean the dollar weighted
average trading price per share for all round lot transactions in the Class A
Common Stock on the Market for the twenty (20) trading days ending two (2) days
prior to that date.
1.17. "Warrant Agent" shall mean _____________ and any successor
hereunder.
2. FORM OF WARRANT; EXECUTION; REGISTRATION
2.1. Form of Warrant; Execution of Warrants. The certificates evidencing
the Warrants (the "Warrant Certificates") shall be in a form satisfying the
requirements of the Market. The Warrant Certificates shall be signed on behalf
of the Company by its Chief Executive Officer, Chief Operating Officer,
President or one of its Vice Presidents. The
-3-
signature of any such officer on the Warrant Certificates may be manual or by
facsimile. Any Warrant Certificate may be signed on behalf of the Company by any
person who, at the actual date of the execution of such Warrant Certificate,
shall be a proper officer of the Company to sign such Warrant Certificate. Each
Warrant Certificate shall be dated the date it is countersigned by the Warrant
Agent pursuant to Section 2.3 hereof
2.2. Registration. The Warrant Certificates shall be numbered and shall be
registered on the books of the Company maintained at the principal office of the
Warrant Agent initially in _____________ (or such other place in the continental
United States as the Warrant Agent shall from time to time notify the Company
and the Holders in writing) (the "Warrant Register") as they are issued. The
Company and the Warrant Agent shall be entitled to treat the registered owner of
any Warrant as the owner in fact thereof for all purposes and shall not be bound
to recognize any equitable or other claim to or interest in such Warrant on the
part of any other person.
2.3. Countersignature of Warrants. The Warrant Certificates shall be
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned. Warrant Certificates may be countersigned, however, by the
Warrant Agent and may be delivered by the Warrant Agent notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature, issuance or delivery. The Warrant Agent shall, upon written
instructions of the Chief Executive Officer, the Chief Operating Officer, the
President, any Vice President, the Treasurer or the Secretary of the Company,
countersign, issue and deliver Warrant Certificates entitling the Holders
thereof to purchase not more than an aggregate of ________Warrant Shares
(subject to adjustment pursuant to Section 9 hereof) and shall countersign,
issue and deliver Warrant Certificates as otherwise provided in this Agreement.
3. TRANSFER AND EXCHANGE OF WARRANTS
Subject to the terms hereof, the Warrant Agent shall initially
countersign, register in the Warrant Register and deliver Warrants hereunder in
accordance with the written instructions of the Company. Subject to the terms
hereof and the receipt of such documentation as the Warrant Agent may reasonably
require, the Warrant Agent shall thereafter from time to time register the
transfer of any outstanding Warrants upon the Warrant Register upon surrender of
the Warrant Certificate or Certificates evidencing such Warrants duly endorsed
or accompanied (if so required by it) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Warrant Agent, duly executed by
the registered Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Subject to the terms of
this Agreement, each Warrant Certificate may be exchanged for another Warrant
Certificate or Certificates entitling the Holder thereof to purchase a like
aggregate number of Warrant Shares as the Warrant Certificate or Certificates
surrendered then entitles such Holder to purchase. Any Holder desiring to
exchange a Warrant Certificate or Certificates shall make such request in
writing delivered to the Warrant Agent, and shall surrender, duly endorsed or
accompanied (if so required by the Warrant Agent) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Warrant Agent,
the Warrant Certificate or Certificates to be so exchanged. Upon registration of
transfer, the Company shall issue and the Warrant
-4-
Agent shall countersign and deliver by certified mail a new Warrant Certificate
or Certificates to the persons entitled thereto.
No service charge shall be made for any exchange or registration of
transfer of a Warrant Certificate or of Warrant Certificates, but the Company
may require payment of a sum sufficient to cover any stamp tax or other tax or
other governmental charge that is imposed in connection with any such exchange
or registration of transfer pursuant to Section 5 hereof.
By accepting the initial delivery, transfer or exchange of Warrants, each
Holder shall be deemed to agree to the terms of this Agreement as it may be in
effect from time to time, including any amendments or supplements duly adopted
in accordance with Section 15.3 hereof. A copy of this Agreement may be obtained
by a Holder without cost upon written request to the Company at its principal
office or the Warrant Agent.
4. TERM OF WARRANTS; EXERCISE OF WARRANTS; REGISTRATION OF WARRANT SHARES
4.1. Term of Warrants. Subject to the terms of this Agreement, each Holder
shall have the right, which may be exercised on any Business Day during the
Exercise Period, to receive from the Company the number of Warrant Shares which
the Holder may at the time be entitled to receive upon exercise of such Warrants
and payment of the Exercise Price then in effect for such Warrant Shares, and
the Warrant Shares issued to a Holder upon exercise of its Warrants shall be
duly authorized, validly issued, fully paid, non-assessable and shall not have
been issued in violation of or subject to any preemptive rights. Each Warrant
not exercised prior to the expiration of the Exercise Period shall become void,
and all rights thereunder and all rights in respect thereof under this Agreement
shall cease as of the expiration of the Exercise Period, provided, however, that
if the Exercise Period ends during a suspension pursuant to Section 4.3 hereof,
the Exercise Period shall be extended for an additional period of time equal to
the longer of the period of such suspension during the Exercise Period and
twenty (20) Business Days after the date on which the Warrant Agent sends notice
to the Holders of the expiration of such suspension period. As used herein, the
term "Effective Date" means the first date on which the Company's Registration
Statement is declared effective by the SEC.
4.2. Exercise of Warrants. During the Exercise Period, except as such may
be suspended from time to time as set forth in Section 4.3 hereof, each Holder
may, subject to the terms of this Agreement, exercise from time to time some or
all of the Warrants evidenced by its Warrant Certificate(s) by (i) surrendering
to the Company at the principal office of the Warrant Agent such Warrant
Certificate(s) with the form of notice attached thereto duly filled in and
signed, which signature shall be guaranteed by an eligible guarantor institution
(a bank, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule l7Ad-15 of the
Securities Exchange Act of 1934, and (ii) paying to the Warrant Agent for the
account of the Company the aggregate Exercise Price for the number of Warrant
Shares in respect of which such Warrants are exercised. Warrants shall be deemed
exercised on the date such Warrant Certificate(s) are surrendered to the Warrant
Agent and tender of payment of the aggregate Exercise Price is made. Payment of
the aggregate Exercise Price shall be made by wire
-5-
transfer of immediately available funds to the Warrant Agent for the account of
the Company or by certified or official bank check or checks to the order of the
Company, or by any combination thereof or by such other form or method of
payment acceptable to the Warrant Agent. All payments required to be made
hereunder shall be made in lawful money of the United States of America.
Upon the exercise of any Warrants in accordance with this Agreement, the
Company shall cause the Warrant Agent, on the Company's behalf, to issue and
deliver with all reasonable dispatch, to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares issuable upon the exercise of
such Warrants and shall take such other actions or cause the Warrant Agent to
take such other actions at the Company's sole expense as are necessary to
complete the exercise of the Warrants (including, without limitation, payment of
any cash with respect to fractional interests required under Section 10 hereof).
The certificate or certificates representing such Warrant Shares shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
the Warrants are exercised hereunder. Each Warrant Share, when issued upon
exercise of the Warrants, shall be duly authorized, validly issued, fully paid
and non-assessable and will not have been issued in violation of or subject to
any preemptive rights.
In the event that less than all of the Warrants evidenced by a Warrant
Certificate are exercised, the Holder thereof shall be entitled to receive a new
Warrant Certificate or Certificates as specified by such Holder evidencing the
remaining Warrant or Warrants, and the Warrant Agent is hereby irrevocably
authorized by the Company to countersign, issue and deliver the required new
Warrant Certificate or Certificates evidencing such remaining Warrant or
Warrants pursuant to the provisions of this Section 4.2 and of Section 3 hereof.
The Company, whenever requested by the Warrant Agent, will supply the Warrant
Agent with Warrant Certificates duly executed on behalf of the Company for such
purpose.
Upon delivery of the Warrant Shares issuable upon exercise of a Warrant in
accordance herewith and of any required new Warrant Certificates, the Company
shall direct the Warrant Agent by written order to cancel the Warrant
Certificates surrendered upon exercise. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner permitted by applicable
laws and satisfactory to the Company in accordance with its written instructions
to the Warrant Agent. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
amounts received by the Warrant Agent upon exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices
given or received hereunder available for inspection by the Holders during
normal business hours at its office. The Company shall at its sole expense
supply the Warrant Agent from time to time with such numbers of copies of this
Agreement as the Warrant Agent may reasonably request.
-6-
4.3. Registration of Warrant Shares; Suspension of Exercise Period.
4.3.1. The Company shall use its Commercially Reasonable Best
Efforts to file, and to keep effective at all times during the Exercise Period,
a Registration Statement under the Securities Act, and will make such number of
Qualifying Prospectuses available to Holders as they shall reasonably request;
provided, however, that no shares of Class A Common Stock shall be issued, and
the right to exercise all Warrants shall be suspended, for all periods during
which there is not an effective a Registration Statement and/or there is not a
Qualifying Prospectus available to Holders. The Company shall promptly notify
the Warrant Agent of any such suspension, and the Warrant Agent shall have no
duty, responsibility or liability in respect of any shares of Class A Common
Stock issued or delivered prior to its receipt of such notice. The Company shall
promptly notify the Warrant Agent of the termination of any such suspension and
the Company shall cause the Warrant Agent to notify the Holders of the
termination of such suspension within twenty (20) business days following notice
to the Warrant Agent by the Company. The Company represents and warrants that
(a) the issuance of the Warrants is exempt from registration pursuant to Section
3(a)(10) of the Securities Act and (b) the Warrants are therefore transferable
without registration under the Securities Act or state "Blue Sky" laws.
4.3.2. Notwithstanding the foregoing, the Company shall have the
right, exercisable by giving written notice of the exercise of such right to the
Warrant Agent, at any time and from time to time, to suspend the Exercise Period
or delay filing for a period not in excess of 120 days beginning on the date on
which such notice is given, or such shorter period of time as may be specified
in such notice or in a subsequent notice delivered by the Company to such
effect, if (i) the Company is, in its good faith judgment, in possession of
material nonpublic information concerning the Company, its subsidiaries, or its
or their current or prospective business, financial condition, results of
operations or prospects ("Material Information"), (ii) such Material Information
would, in the judgment of the Company's board of directors (after consultation
with counsel), need to be disclosed so as to permit the Warrant Shares to be
sold in compliance with law, and (iii) disclosure of such Material Information
would, in the good faith judgment of the Company (after consultation with
counsel), be adverse to its interests.
5. PAYMENT OF TAXES
The Company will pay all documentary stamp and other like taxes, if any,
attributable to the initial issuance and delivery of the Warrants and the
initial issuance and delivery of the Warrant Shares upon the exercise of
Warrants; provided that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer of the Warrants or
involved in the issuance or delivery of any Warrant Shares in a name other than
that of the Holder of the Warrants being exercised, and the Warrant Agent shall
not register any such transfer or issue or deliver any Warrant Certificate(s) or
Warrant Shares unless or until the persons requesting the registration or
issuance shall have paid to the Warrant Agent for the account of the Company the
amount of such tax, if any, or shall have established to the reasonable
satisfaction of the Company that such tax, if any, has been paid.
-7-
6. MUTILATED OR MISSING WARRANT CERTIFICATES
In the event that any Warrant Certificate shall be mutilated, lost, stolen
or destroyed, the Company shall issue, and at the direction of the Company by
written order the Warrant Agent shall countersign and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and an indemnity or bond, if requested
by the Company or the Warrant Agent, also reasonably satisfactory to them. An
applicant for such a substitute Warrant Certificate shall also comply with such
other reasonable procedures as the Company or the Warrant Agent may reasonably
require.
7. RESERVATION OF WARRANT SHARES
There have been reserved, and the Company shall at all times keep
reserved, out of its authorized Class A Common Stock, free of all preemptive
rights, a number of shares of Class A Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the outstanding Warrants. The
transfer agent for the Class A Common Stock and every subsequent or other
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of the Warrants (each, a "Transfer Agent") will be and are hereby
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. The Company will keep a
copy of this Agreement on file with each Transfer Agent. The Warrant Agent is
hereby irrevocably authorized to requisition from time to time from the Company
or a Transfer Agent, as the case may be, the certificate for Warrant Shares
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply its Transfer Agent with
duly executed stock certificates for such purposes and will itself provide or
otherwise make available any cash which may be payable as provided in Section 10
hereof. The Company will furnish to its Transfer Agent a copy of all notices of
adjustments and certificates related thereto, transmitted to each Holder
pursuant to Section 9.3 hereof. The Company will give the Warrant Agent prompt
notice of any change in any Transfer Agent or any change of address of any
Transfer Agent.
Before taking any action which would cause an adjustment pursuant to
Section 9 reducing the Exercise Price, the Company will take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable Warrant Shares at the Exercise
Price as so adjusted.
8. STOCK EXCHANGE LISTINGS
The Company shall use its Commercially Reasonable Efforts (including
requests for waivers) to have the Warrants listed for quotation on the Market,
and shall use its Commercially Reasonable Efforts to maintain such listing or
inclusion. In the event the Warrants do not qualify for such listing or
inclusion, the Company will use its Commercially Reasonable Efforts (including,
requests for waivers) to effect such inclusion or listing whenever the Warrants
qualify therefor. Any such listing and inclusion shall be at the
-8-
Company's sole expense. In connection with any such listing or inclusion, the
Company shall cause a CUSIP number to be provided for the Warrants.
9. ADJUSTMENT OF EXERCISE PRICE: NUMBER OF WARRANT SHARES AND SHARES OF
CAPITAL STOCK INTO WHICH WARRANTS ARE EXERCISABLE
The number and kind of securities purchasable upon the exercise of each
Warrant, and the Exercise Price, shall be subject to adjustment from time to
time upon the happening of certain events, as hereinafter described.
9.1. Mechanical Adjustments. The number of Warrant Shares purchasable upon
the exercise of each Warrant and the Exercise Price shall be subject to
adjustment as follows:
(a) Adjustment for Change in Capital Stock. Subject to paragraph (b)
below, in case the Company shall (i) pay a dividend on its outstanding shares of
Common Stock in shares of Common Stock or make a distribution of shares of
Common Stock on its outstanding shares of Common Stock, (ii) make a distribution
on its outstanding shares of Common Stock in shares of its capital stock other
than Common Stock, (iii) subdivide its outstanding shares of Common Stock into a
greater number of shares of Common Stock, (iv) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (v) issue, by
reclassification of its shares of Common Stock, other securities of the Company
(including any such reclassification in connection with a consolidation or
merger in which the Company is the surviving entity), then the number of Warrant
Shares purchasable upon exercise of each Warrant immediately prior thereto shall
be adjusted so that the Holder of each Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which such
Holder would have owned or have been entitled to receive upon the happening of
any of the events described above had such Warrant been exercised in full
immediately prior to the happening of such event or any record date with respect
thereto. If a Holder is entitled to receive shares of two or more classes of
capital stock of the Company pursuant to the foregoing upon exercise of
Warrants, the allocation of the adjusted Exercise Price between such classes of
capital stock shall be determined reasonably and in good faith by the Board of
Directors of the Company. After such allocation, the exercise privilege and the
Exercise Price with respect to each class of capital stock shall thereafter be
subject to adjustment on terms substantially identical to those applicable to
Common Stock in this Section 9. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the record date for such event or,
if none, immediately after the effective date of such event. Such adjustment
shall be made successively whenever such an event occurs.
(b) Minimum Adjustment. No adjustment in the number of Warrant
Shares purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the number of
Warrant Shares purchasable upon the exercise of each Warrant; provided that any
adjustments which by reason of this paragraph (e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a Warrant Share
and the nearest cent.
-9-
(c) Adjustment in Exercise Price. Whenever the number of Warrant
Shares purchasable upon the exercise of each Warrant is adjusted as herein
provided, the Exercise Price payable upon exercise of each Warrant immediately
prior to such adjustment shall be adjusted by multiplying such Exercise Price by
a fraction, the numerator of which shall be the number of Warrant Shares
purchasable upon the exercise of each Warrant immediately prior to such
adjustment and the denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter.
(d) Shares of Common Stock. For all purposes of this Agreement, the
term "shares of Common Stock" shall mean (i) the Class A Common Stock and Class
B Common Stock of the Company at the date of this Agreement or (ii) any other
class of stock resulting from successive changes or reclassification of such
shares consisting solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 9.1, the Holders shall
become entitled to purchase any securities of the Company other than shares of
Class A Common Stock, thereafter the number of such other shares so purchasable
upon exercise of each Warrant and the Exercise Price of such shares shall be
subject to adjustment from time to time in a manner and on terms substantially
identical to the provisions with respect to the Warrant Shares contained in
paragraphs (a) through (d) above, and the provisions of this Agreement with
respect to the Warrant Shares shall apply on like terms to any such other
securities.
9.2. Voluntary Adjustment by the Company. The Company may, at its option
and at any time during the term of the Warrants, reduce the then current
Exercise Price to any amount deemed appropriate by the Board of Directors of the
Company.
9.3. Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Exercise Price of Warrant
Shares is adjusted as herein provided, the Company shall cause the Warrant Agent
promptly to mail to each Holder, at the sole expense of the Company by first
class mail, postage prepaid, notice of such adjustment or adjustments and shall
deliver to the Warrant Agent a certificate of an officer of the Company setting
forth the number of Warrant Shares purchasable upon the exercise of each Warrant
and the Exercise Price of Warrant Shares after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth in
reasonable detail the computations by which such adjustment was made. The
Warrant Agent shall be entitled to rely on such certificate and shall be under
no duty or responsibility with respect to any such certificate, except to
exhibit the same, from time to time, to any Holder requesting an inspection
thereof during reasonable business hours. The Warrant Agent shall not at any
time be under any duty or responsibility to any Holder to determine whether any
facts exist which may require any adjustment of the Exercise Price or the number
of Warrant Shares or other stock or property purchasable on exercise of
Warrants, or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed in making such adjustment.
9.4. Merger or Consolidation. In case of any consolidation of the Company
with or merger of the Company into another entity or any sale of all or
substantially all assets of the Company (collectively, a "Reorganization"), the
Company or such successor entity shall
-10-
on or before the date of consummation of the Reorganization (the "Closing
Date"), at its option, either:
(i) deliver to the Warrant Agent a notice of redemption (the
"Redemption Notice"), which shall be binding on the Company and on all
Holders, stating the Company's intent to redeem all Warrants at a price
per Warrant equal to the Black Scholes Warrant Value for each such Warrant
measured as of the date immediately prior to the Closing Date; or
(ii) execute and deliver to the Warrant Agent an agreement, which
shall be binding on the Holders, that each Holder shall have the right
thereafter upon payment of the Exercise Price in effect immediately prior
to such action (after giving effect to any applicable adjustments under
Section 9.1 hereof) to purchase upon exercise of each Warrant the kind and
amount of shares and other securities and property (including cash) which
such Holder would have owned or have been entitled to receive after the
happening of such consolidation or merger had such Warrant been exercised
immediately prior to such action. The Company shall at its sole expense
mail by first class mail, postage prepaid, to each Holder notice of the
execution of any such agreement. Such agreement shall provide for
adjustments, which shall be substantially identical to the adjustments
provided for in this Section 9.
In the event the Company delivers a Redemption Notice, any right to exercise a
Warrant shall terminate at 5:00 PM on the Closing Date. On and after the Closing
Date, the Holders of the Warrants shall have no further rights except to
receive, upon surrender of the Warrant, the Redemption Price, without interest.
In addition, the Company shall not merge or consolidate with or into any
other entity, unless the successor entity (if not the Company) shall expressly
assume, by supplemental agreement reasonably satisfactory in form and substance
to the Warrant Agent in its sole judgment and executed and delivered to the
Warrant Agent, the due and punctual performance and observance of each and every
covenant and condition of this Agreement to be performed and observed by the
Company. The provisions of this Section 9.4 shall similarly apply to successive
consolidations or mergers.
9.5. Statement on Warrants. Irrespective of any adjustments in the
Exercise Price or the number or kind of shares purchasable upon the exercise of
the Warrants, Warrants theretofore or thereafter issued may continue to express
the same Exercise Price and number and kind of Warrant Shares as are stated in
the Warrants initially issuable pursuant to this Agreement.
9.6. No Impairment. The Company shall not, for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms and
provisions of this Agreement, amend its Certificate of Incorporation or engage
in any reclassification, reorganization, consolidation, merger, dissolution,
liquidation, issue, sale or exchange of securities or any other voluntary
action, but will at all times in good faith assist in the implementation of all
such terms and provisions and in the taking of all such actions as may
-11-
be necessary or appropriate in order to enable the Holders to realize the
benefits of this Agreement and the Warrant Certificate.
10. FRACTIONAL INTERESTS
Neither the Company nor the Warrant Agent shall be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be exercised at the same time by the same Holder, the number of full
Warrant Shares which shall be issuable upon such exercise shall be computed on
the basis of the aggregate number of Warrants so exercised. If any fraction of a
Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of any Warrant, the Company shall pay an amount in cash equal to
the Trading Price for one share of Class A Common Stock on the date the Warrant
Certificate is presented for exercise, multiplied by such fraction.
11. NO RIGHTS AS STOCKHOLDERS, NOTICES TO HOLDERS
Nothing contained in this Agreement or in any of the Warrants shall be
construed as conferring upon the Holders or their transferees the right to vote
or to receive dividends or to consent or to receive notice as stockholders in
respect of any meeting of stockholders for the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
In case
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or warrants;
or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of securities or assets (other than cash dividends); or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or of the
conveyance or transfer of a substantial portion of the assets of the Company for
which approval of any stockholders of the Company is required, or of any
reclassification or change of Common Stock issuable upon exercise of the
Warrants (other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each Holder at its address appearing on the Warrant Register, at
least twenty (20) days prior to the applicable record date hereinafter
specified, or promptly in the case of events for which there is no record date,
by first class mail, postage prepaid, a written notice stating (i) the date as
of which the Holders of record of shares of Common Stock entitled to receive any
such rights, options, warrants or distribution are to be determined, (ii) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock,
-12-
or (iii) the date on which any such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective or consummated, as well as the date as of which it is expected
that Holders of record of shares of Common Stock shall be entitled to exchange
such shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation, or winding up. The failure to give the notice required by this
Section 11 or any defect therein shall not affect the legality or validity of
any distribution, right, option, warrant, reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation, winding up or action, or
the vote upon any of the foregoing.
12. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT
Any corporation into which the Warrant Agent may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporation trust business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor Warrant Agent
under the provisions of Section 14 hereof. In case at the time such successor to
the Warrant Agent shall succeed to the agency created by this Agreement, any of
the Warrant Certificates shall have been countersigned but not delivered, any
such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrant Certificates so countersigned;
and in case at that time any of the Warrant Certificates shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of the predecessor Warrant Agent or in the name
of the successor Warrant Agent; and in all such cases such Warrant Certificates
shall be fully valid and effective as provided therein and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrant Certificates so countersigned; and in case at that
time any of the Warrant Certificates shall not have been countersigned, the
Warrant Agent may countersign such Warrant Certificates either in its prior name
or in its changed name; and in all such cases such Warrant Certificates shall be
fully valid and effective as provided therein and in this Agreement.
13. APPOINTMENT OF WARRANT AGENT
The Company hereby appoints the Warrant Agent to act as agent for the
Company hereunder and in accordance with the terms and conditions hereof, and
the Warrant Agent hereby accepts such appointment.
The Warrant Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the Holders, by their acceptance of the Warrant Certificates, shall be
bound:
-13-
13.1. Correctness of Statements. The statements contained herein and in
the Warrant Certificates shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any of the same
except such as described the Warrant Agent or action taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrant
Certificates or Warrants except as herein otherwise provided.
13.2. Breach of Covenants. The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the covenants contained in this
Agreement or in the Warrants to be complied with by the Company.
13.3. Performance of Duties. The Warrant Agent may execute and exercise
any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents and shall not be
responsible for the misconduct or negligence of any attorney or agent (which
shall not include an employee of the Warrant Agent) appointed with due care.
13.4. Reliance on Counsel. The Warrant Agent may consult at any time with
legal counsel satisfactory to it (who may be counsel for the Company), and the
Warrant Agent shall incur no liability or responsibility to the Company or to
any Holder in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
13.5. Proof of Action Taken. Whenever in the performance of its duties
under this Agreement the Warrant Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed conclusively to
be proved and established by a certificate signed by the Chairman of the Board,
the President, a Vice President, the Treasurer or the Secretary of the Company
and delivered to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
13.6. Compensation. The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the performance
of its duties under this Agreement, to reimburse the Warrant Agent for all
reasonable expenses, taxes and governmental charges and other charges of any
kind and nature incurred by the Warrant Agent in the performance of its duties
under this Agreement (including but not limited to legal fees and expenses), and
to indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent or any of its agents in the performance of its
duties under this Agreement, except as a result of the Warrant Agent's gross
negligence or willful misconduct as determined in a final judgment of a court of
competent jurisdiction and authority. The Company's obligations under this
Section 13.6 and any claim arising hereunder shall survive the resignation or
removal of the Warrant Agent and the termination or discharge of the Company's
obligations under this Agreement.
-14-
13.7. Legal Proceeding. The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or any one or more Holders shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred or any liabilities which may arise, but this
provision shall not affect the power of the Warrant Agent to take such action as
the Warrant Agent may consider proper, whether with or without any such security
or indemnity. All rights of action of any Holder under this Agreement or under
any of the Warrants may be enforced by the Warrant Agent without the possession
of any of the Warrant Certificates or the production thereof at any trial or
other proceeding relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant Agent,
and any recovery of judgment shall be for the ratable benefit of the Holders, as
their respective rights or interests may appear.
13.8. Other Transactions in Securities of the Company. The Warrant Agent
and any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or any other securities of the Company or
acquire a pecuniary interest in any transaction in which the Company may be
interested or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other Person.
13.9. Liability of Warrant Agent. The Warrant Agent shall act hereunder
solely as agent, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for anything which it may do or
refrain from doing in connection with this Agreement except for its own gross
negligence or bad faith.
13.10. Reliance on Documents. The Warrant Agent will not incur any
liability or responsibility to the Company or to any Holder for any action taken
in reliance on any notice, resolution, waiver, consent, order, certificate or
other paper, document or instrument reasonably believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties.
13.11. Validity of Agreement. The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Warrant Agent) or in
respect of the validity or execution of any Warrant Certificate (except its
countersignature thereto) or any Warrant; nor shall the Warrant Agent by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Shares (or other securities) to be
issued pursuant to this Agreement or any Warrant, or as to whether any Warrant
Shares (or other securities) will, when issued, be validly issued, fully paid
and non-assessable, or as to the Exercise Price or the number or amount of
Warrant Shares or other securities or any assets or other property issuable upon
exercise of any Warrant.
13.12. Instructions from Company. The Warrant Agent is hereby authorized
and directed to accept instructions with respect to the performance of its
duties hereunder from the Chairman of the Board, the President, a Vice
President, the Treasurer or the Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and shall not
be liable for any action taken or suffered to be taken by it in good faith
-15-
in accordance with instructions of any such officer or officers, provided such
instructions are not in contravention of this Agreement.
14. CHANGE OF WARRANT AGENT
The Warrant Agent may resign and be discharged from its duties under this
Agreement by giving to the Company thirty (30) days' notice in writing. The
Company may remove the Warrant Agent if: (1) the Warrant Agent fails to comply
with the terms of this Agreement; (2) the Warrant Agent is adjudged bankrupt or
insolvent or an order for relief is entered with respect to the Warrant Agent
under any bankruptcy law; (3) a custodian or public officer takes charge of the
Warrant Agent or its property; or (4) the Warrant Agent becomes incapable of
acting. The Warrant Agent may be removed by like notice to the Warrant Agent and
the Holders from the Company, such notice to specify the date when removal shall
become effective. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Warrant Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after such removal or notification in writing of such
resignation or incapacity by the resigning or incapacitated Warrant Agent or by
any Holder (who shall with such notice submit his Warrant Certificate or
Certificates for inspection by the Company), then any Holder may apply to any
court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Any successor Warrant Agent, whether appointed by the Company or
such a court, shall be a bank or trust Company, in good standing, incorporated
under the laws of the United States of America or any state thereof and having
at the time of its appointment as Warrant Agent a combined capital and surplus
of at least $100,000,000. After appointment and acceptance of such appointment
in writing, the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor Warrant Agent any property at the time
held by it hereunder, and shall execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Failure to file any notice
provided for in this Section 14, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case may be. In
the event of such resignation or removal, the successor Warrant Agent shall
mail, by first class mail, postage prepaid, to each Holder, written notice of
such removal or resignation and the name and address of such successor Warrant
Agent.
15. MISCELLANEOUS
15.1. Notices. Any notice pursuant to this Agreement by the Company or by
any Holder to the Warrant Agent, or by the Warrant Agent or by any Holder to the
Company, shall be in writing and shall be delivered in person or by facsimile
transmission, or mailed first class, postage prepaid, (a) to the Company, at its
offices at 12405Powerscourt Drive, St. Louis, MO 63131, Attention: Curtis S.
Shaw, General Counsel, No.: (314) ___-____. Each party hereto may from time to
time change the address to which notices to it are to be delivered or mailed
hereunder by notice to the other party.
Any notice mailed pursuant to this Agreement by the Company or the Warrant
Agent to the Holders shall be in writing and shall be mailed first class,
postage prepaid, or
-16-
otherwise delivered, to such Holders at their respective addresses in the
Warrant Register. The initial address of each Holder shall be as provided by the
Company to the Warrant Agent. Any Holder may change its address by notice to the
Company and the Warrant Agent given in accordance with this Section 15.1.
15.2. Cancellation of Warrants. In the event the Company shall purchase or
otherwise acquire Warrants, the same shall thereupon be delivered to the Warrant
Agent and be cancelled by it and retired. The Warrant Agent shall cancel any
Warrant Certificate surrendered for exchange, substitution, transfer or exercise
in whole or in part.
15.3. Supplements and Amendments. The Company and the Warrant Agent may
from time to time supplement or amend this Agreement, the Warrants and the
Warrant Certificates without approval of any Holder, in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to comply with
the requirements of any national securities exchange or the Market (including
but not limited to the deletion of Section 9.2), or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and this Agreement. Any other
supplement or amendment to this Agreement may be made with the approval of the
holders of a majority of the then outstanding Warrants; provided, however, that
any such amendment or supplement that (i) increases the Exercise Price; (ii)
decreases the number of shares of Class A Common Stock issuable upon exercise of
a Warrant; or (iii) shortens the period during which the Warrants may be
exercised shall require the consent of each Holder of a Warrant affected
thereby.
15.4. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of the Company or the Warrant Agent and their respective successors
hereunder.
15.5. Applicable Law. This Agreement, the Warrants, the rights and
obligations of the parties hereto and any claims or disputes relating thereto
shall be governed by and construed in accordance with the laws of Delaware
(excluding the choice of law rules thereof).
15.6. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give any person or corporation other than the Company, the Warrant
Agent and the Holders any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company, the Warrant Agent, their respective assigns and the Holders.
15.7. Execution in Counterparts. This Agreement may be executed in
multiple counterparts, which, when taken together, shall constitute one and the
same instrument.
15.8. Captions. The captions of the sections and subsections of this
Agreement have been inserted for convenience only and shall have no substantive
effect.
[SIGNATURES APPEAR ON NEXT PAGE]
-17-
SIGNATURES
IN WITNESS WHEREOF, each of the undersigned have duly caused this
Agreement to be executed on its behalf as of the day and year first above
written.
Charter Communications, Inc.
__________________________________
Name: ____________________________
Title: ___________________________
[WARRANT AGENT]
__________________________________
Name: ____________________________
Title: ___________________________
-18-
CUSIP No. _________
THIS WARRANT IS GOVERNED BY AND SUBJECT TO THE TERMS AND CONDITIONS
CONTAINED IN THE WARRANT AGREEMENT (AS DEFINED HEREIN). A COPY OF THE WARRANT
AGREEMENT MAY BE OBTAINED UPON REQUEST FROM CHARTER COMMUNICATIONS, INC. OR THE
WARRANT AGENT (AS DEFINED HEREIN).
Warrant to Purchase Class A Common Stock of Charter Communications, Inc. Void
after __________ __, 2014 [10 YEARS FROM DATE OF ISSUE]
This Warrant (the "Warrant") is issued to _________________________, or
his, her or its registered assigns (the "holder") by Charter Communications,
Inc., a Delaware corporation (the "Company"), on ___________________, 2004 (the
"Warrant Issue Date"). This Warrant is issued pursuant to that certain Warrant
Agreement dated as of _______, 2004 (the "Warrant Agreement"), between the
Company and ______________, as Warrant Agent (together with any successors and
assigns, the "Warrant Agent") and in furtherance of that certain Stipulation of
Settlement in settlement of a class-action lawsuit (the "Action") pending in the
United States District Court for the ______, entitled ________________ (the
"Stipulation").
All capitalized terms not defined herein shall have the meanings ascribed
to them in the Warrant Agreement.
1. Purchase Shares. Subject to the terms and conditions hereinafter set
forth, the holder is entitled, upon surrender of this Warrant to the Warrant
Agent (or at such other place as the Company shall notify the holder hereof in
writing), to purchase from the Company up to _____________________________
(____________) fully paid and non-assessable shares of the Company's Class A
common stock, par value $0.001 per share, as constituted on the Warrant Issue
Date (the "Common Stock"). The number of shares of Common Stock issuable
pursuant to this Section 1 (the "Warrant Shares") shall be subject to adjustment
pursuant to Section 9 of the Warrant Agreement.
2. Exercise Price. The purchase price for the Warrant Shares shall be
$_____ per share, as adjusted from time to time pursuant to Sections 9.1(c) and
9.2 of the Warrant Agreement (the "Exercise Price"). All payments required to be
made hereunder shall be made in lawful money of the United States of America.
3. Exercise Period. This Warrant shall be exercisable, in whole or in
part, on any Business Day, from and after the later of ___________ __, 2005 and
the Effective Date and until 5:00 p.m., New York City time, on ________ [tenth
anniversary of issue date] (the "Exercise Period").
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by: (a) the surrender of the Warrant, together with a duly executed
copy of the form of Notice of Election attached hereto, to the Warrant Agent at
its principal offices; and (b) the payment to the Warrant Agent for the account
of the Company in the manner provided for and in an amount equal to
-19-
the aggregate Exercise Price as set forth in Section 2 herein for the number of
Warrant Shares being purchased.
5. Certificates for Warrant Shares. Upon the exercise of the purchase
rights evidenced by this Warrant, one or more certificates for the number of
Warrant Shares so purchased shall be issued as soon as practicable thereafter
(with appropriate restrictive legends, if applicable), and in any event within
thirty (30) days of the delivery of the Notice of Election. In case the holder
shall exercise this Warrant with respect to less than all of the Warrant Shares
that may be purchased under this Warrant, the Company shall execute a new
warrant in the form of this Warrant for the balance of such Warrant Shares and
deliver such new warrant to the holder of this Warrant.
6. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
7. No Shareholder Rights. Prior to exercise of this Warrant, the holder
shall not be entitled to any rights of a shareholder with respect to the Warrant
Shares, including (without limitation) the right to vote such Warrant Shares,
receive dividends or other distributions thereon, exercise preemptive rights or
be notified of shareholder meetings, and such holder shall not be entitled to
any notice or other communication concerning the business or affairs of the
Company. However, nothing in this Section 7 shall limit the right of the holder
to be provided the notices required under the Warrant Agreement.
8. Transfers of Warrant. Subject to compliance with applicable federal and
state securities laws, this Warrant and all rights (but only with all related
obligations) hereunder are transferable in whole or in part by the holder. The
transfer shall be recorded on the books of the Company upon (i) the surrender of
this Warrant, properly endorsed, or as otherwise provided for in Section 3 of
the Warrant Agreement to the Warrant Agent at its principal offices, and (ii)
the payment to the Company of all transfer taxes and other governmental charges
imposed on such transfer. In the event of a partial transfer, the Company shall
issue to the holders one or more appropriate new warrants.
9. Successors and Assigns. The terms and provisions of this Warrant and
the Warrant Agreement shall inure to the benefit of, and be binding upon, the
Company and the holders hereof and their respective successors and assigns.
10. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), with the
written consent of the Company and the holder. Any waiver or amendment effected
in accordance with this Section shall be binding upon each holder of any Warrant
Shares purchased under this Warrant at the time outstanding (including
securities into which such Warrant Shares have been converted), each future
holder of all such Warrant Shares, and the Company.
11. Notices. All notices required under this Warrant shall be deemed to
have been given or made for all purposes (i) upon personal delivery, (ii) upon
confirmation receipt
-20-
that the communication was successfully sent to the applicable number if sent by
facsimile; (iii) one (1) business day after being sent, when sent by
professional overnight courier service, or (iv) five (5) days after posting when
sent by registered or certified mail. Notices to the Company shall be sent to
the principal office of the Company (or at such other place as the Company shall
notify the holder hereof in writing). Notices to the holder shall be sent to the
address of the holder on the books of the Company (or at such other place as the
holder shall notify the Company hereof in writing). Notices to the Warrant Agent
shall be sent to: _______________________________ or such other address as the
Warrant Agent shall indicate in a notice to the Company and the holder.
12. Captions. The section and subsection headings of this Warrant are
inserted for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
13. Governing Law. This Warrant shall be governed by the laws of Delaware
(excluding the choice of law rules thereof).
14. Warrant Agreement. This Warrant is governed by and subject to the
terms and conditions contained in the Warrant Agreement. In the event of a
conflict between the provisions of the Warrant Agreement and this Warrant, the
provisions of the Warrant Agreement shall govern. A copy of the Warrant
Agreement may be obtained at no cost upon request from the Company at its
principal office or from the Warrant Agent.
IN WITNESS WHEREOF, the Company and the Warrant Agent have caused this
Warrant to be executed by officers thereunto duly authorized.
Charter Communications, Inc.
_________________________________
Name: ____________________________
Title: ___________________________
[WARRANT AGENT]
_________________________________
Name: ____________________________
Title: ___________________________
-21-
CHARTER COMMUNICATIONS, INC.
WARRANT NOTICE OF EXERCISE
To: [WARRANT AGENT][ADDRESS]
(a) The undersigned hereby elects to purchase ___________________ shares
of Class A Common Stock of Charter Communications, Inc. (the "Company"),
pursuant to the terms of the attached Warrant and the Warrant Agreement
referenced therein. To the extent the undersigned is not exercising this Warrant
in full, please reissue and return to the undersigned a new warrant to purchase
the remaining number of shares of Class A Common Stock.
(b) Payment of the Exercise Price per share required under such Warrant
accompanies this notice in the form of cash in the amount of __________________
by means of [check as applicable]:
_____ wire transfer of immediately available funds to the Warrant Agent
for the account of the Company, or
_____ certified or official bank check or checks to the order of the
Company.
_______________________________________________
By:_____________________________________________
[NAME]
Taxpayer I.D. No. or Soc. Sec. No: _______________________
Address: _________________________________________________
__________________________________________________________
Date:__________________
Name in which shares should be registered: ___________________________
Taxpayer I.D. No. or Soc. Sec. No.____________________________________
Address: ____________________________________________________________
______________________________________________________________________
Signatures must be guaranteed by an eligible guarantor institution (a
bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program) pursuant to Rule l7Ad-15
of the Securities Exchange Act of 1934.
Signature Guaranteed by: __________________________________________________
_______________________________________________
-22-
CHARTER COMMUNICATIONS, INC.
WARRANT TRANSFER
To: [WARRANT AGENT][ADDRESS]
For value received, the undersigned hereby sells, assigns and transfers
unto __________________________________________________________ the right to
purchase __________________________ (________) shares of Series A Common Stock,
par value $0.00l per share, of Charter Communications, Inc. (the "Corporation")
pursuant to the attached Warrant and does hereby irrevocably constitute and
appoint ___________ attorney to transfer the Warrant, or such portion as is
transferred hereby, on the books of the Corporation with full power of
substitution in the premises. The undersigned requests said attorney to issue to
the transferee a Warrant certificate evidencing such transfer and to issue to
the undersigned a new Warrant evidencing the right to purchase Series A Common
Stock for the balance not so transferred, if any.
Signature: _________________________________________
By:_________________________________________
[NAME]
Taxpayer I.D. No. or Soc. Sec. No: _________________
Address: _________________________________________
__________________________________________________
Date:__________________
Name in which new Warrant(s) should be registered:
Right to Purchase No. of Shares of Series A Common Stock: __________________
Name: _________________________________________________
Taxpayer I.D. No. or Soc. Sec. No: _________________________
Address: ________________________________________________
______________________________________________
______________________________________________
The balance of the attached Warrant not so transferred shall be returned
to the transferor in the form of a new Warrant reflecting such reduced amount.
Signatures must be guaranteed by an eligible guarantor institution (a
bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program) pursuant to Rule l7Ad-15
of the Securities Exchange Act of 1934.
Signature Guaranteed by: ______________________________________________
______________________________________________
-23-
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
IN RE CHARTER COMMUNICATIONS, INC. MDL DOCKET NO. 1506 (CAS)
SECURITIES LITIGATION ALL CASES
STONERIDGE INVESTMENT PARTNERS Consolidated Case
LLC, Individually and On Behalf of All Others No. 4:02-CV-1186 CAS
Similarly Situated,
Plaintiff,
v.
CHARTER COMMUNICATIONS, INC., PAUL
ALLEN, JERALD L. KENT, CARL E. VOGEL,
KENT KALKWARF, DAVID G. BARFORD, PAUL E.
MARTIN, DAVID L. McCALL, BILL SHREFFLER,
CHRIS FENGER, JAMES H. SMITH, III,
SCIENTIFIC-ATLANTA, INC., MOTOROLA, INC.
and ARTHUR ANDERSEN, LLP,
Defendants.
[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT AND
APPROVING THE FORM AND MANNER OF NOTICE
EXHIBIT E
The Court has received the Stipulations of Settlement, dated as of January
24, 2005 that have been entered into by the Class Action Plaintiff, on the one
hand, and Charter Communications, Inc., Paul G. Allen, Jerald L. Kent, Carl E.
Vogel, Kent Kalkwarf, David G. Barford, Paul E. Martin, David L. McCall, Bill
Shreffler, Chris Fenger, James H. Smith III, on the other hand, and by the Class
Action Plaintiff and Arthur Andersen LLP (collectively, the "Stipulations"). The
Court has reviewed the Stipulations and its attached exhibits, and, good cause
appearing,
IT IS HEREBY ORDERED as follows:
1. The Court, for purposes of this preliminary order (the "Notice
Order"), adopts all defined terms as set forth in the
Stipulations (unless such terms are otherwise defined herein).
2. The Court hereby certifies, for purposes of effectuating this
Settlement, a Settlement Class of all Persons (except Class
Action Defendants and their corporate affiliates; any officers
or directors or Charter; or members of their immediate
families, and their heirs, successors and assigns; and any
entities controlled directly or indirectly by Paul G. Allen)
who purchased or otherwise acquired the common stock of
Charter during the period of November 8, 1999 through and
including August 16, 2002.
3. The Court hereby appoints the Class Action Plaintiff,
StoneRidge Investment Partners LLC, as the representative of
the Settlement Class.
4. With respect to the Settlement Class, this Court finds and
concludes that: (a) the members of the Settlement Class are so
numerous that joinder of all Settlement Class members in the
litigation is impracticable; (b) there are questions of law
and fact common to the Settlement Class which predominate over
any individual questions; (c) the claims of the Class Action
Plaintiff are typical of the claims of the Settlement Class;
(d) the Class Action Plaintiff and Class Action Plaintiff's
Counsel have fairly and adequately represented and protected
the interests of all of the Settlement Class Members; and (e)
a class action is superior to the controversy, considering:
(i) the interests of the Members of the Settlement Class in
individually controlling the prosecution of the separate
actions; (ii) the extent and nature of any litigation
concerning the controversy already commenced by members of the
Settlement Class; (iii) the desirability or undesirability of
continuing the litigation of these claims in this particular
forum; and (iv) the difficulties likely to be encountered in
the management of the Class Action.
-2-
5. The Court preliminarily approves: (1) the settlement of the
Class Action as set forth in the Stipulations and (2) the
proposed Plan of Allocation described in the Notice of
Pendency and Proposed Settlement of Class Action (the
"Notice"), subject to the right of any Settlement Class Member
to challenge the fairness, reasonableness, and adequacy of the
Stipulations, the proposed Plan of Allocation and to show
cause, if any exists, why a final judgment dismissing the
Class Action based on the Stipulations should not be ordered
herein after due and adequate notice to the Settlement Class
has been given in conformity with this Order.
6. The Court approves as to form and content, and for
distribution to Settlement Class Members or for publication (as
ordered below):(a) the Notice, substantially in the form of
Exhibit A hereto, (b) the Summary Notice of Proposed Settlement
of Class Action ("Summary Notice"), substantially in the form
of Exhibit B hereto, and (c) the Proof of Claim and Release
("Proof of Claim"), substantially in the form of Exhibit C
hereto.
7. Pending resolution of these settlement proceedings, Class
Action Plaintiff and all other potential Settlement Class
Members, whether or not such persons have appeared in the
Class Action, are hereby enjoined from instituting or
prosecuting any claims, whether directly, representatively, or
in any other capacity, against the Settling Class Action
Defendants or the Released Class Action Parties which have
been or could have been asserted in the Class Action, or that
arise out of all or any part of the subject matter of this
litigation.
8. Class Action Plaintiff's Counsel is authorized to act on
behalf of the Settlement Class with respect to all acts
required by, or which may be done pursuant to, the
Stipulations or such other acts which are reasonably necessary
to consummate the proposed Settlement set forth in the
Stipulations.
9. Class Action Plaintiff's Counsel is hereby authorized to
retain the firm of Berdon Claims Administration, LLC as Claims
Administrator to supervise and administer the notice and
claims procedures. The Claims Administrator, subject to such
supervision of the Court as may be necessary or as
circumstances may require, shall provide notice to the
Settlement Class and administer the processing of Proof of
Claim and Release forms. The Claims Administrator is
authorized, inter alia, to mail and distribute the Notice to
Settlement Class Members; arrange for publication of the
Summary Notice; reimburse nominal holders for reasonable
expenses in locating Settlement Class Members and distributing
the Notice; receive, evaluate and calculate Proofs of Claim
and
-3-
supporting documents; communicate with Settlement Class
Members regarding their claims; and perform such additional
functions as are provided for in the Stipulations. The Claims
Administrator shall be compensated as provided for in the
Stipulations.
10. Charter shall use its best efforts to arrange for production
of its common stock transfer records for the period November
8, 1999 through September 30, 2002 to the Claims
Administrator.
11. No later than _________, 2005 (the "Notice Date"), the Claims
Administrator will send the Notice and the Proof of Claim by
first class mail to all Settlement Class Members who appear on
the foregoing transfer records of Charter. At the same time,
the Claims Administrator will post key documents relating to
this litigation on its website, including the Consolidated
Amended Complaint; the Second Consolidated Amended Complaint;
the Indictment; the July 27, 2004 Order by the Securities
Exchange Commission, and the Stipulations of Settlement.
12. Pursuant to the Notice, each nominee shall either: (1) send
the Notice and Proof of Claim to Settlement Class Members for
which they act as nominee by first class mail within ten (10)
days after the nominee receives the Notice; or (2) send a list
of the names and addresses of such beneficial owners to the
Claims Administrator within ten (10) days after the nominee
receives the Notice and, in the event of the latter, the
Claims Administrator shall send by first class mail the Notice
and Proof of Claim to all Settlement Class Members who are on
the list received from the nominee. The Claims Administrator
shall, if requested, reimburse banks, brokerage houses or
other nominees out of the Settlement Fund solely for their
reasonable out-of-pocket expenses incurred in providing notice
to beneficial owners who are Settlement Class Members, which
expenses would not have been incurred except for the sending
of such notice, subject to further order of this Court with
respect to any dispute concerning such compensation. Class
Action Plaintiff's Counsel shall file with the Court and serve
upon Settling Class Action Defendants' counsel no later than
seven (7) days prior to the Settlement Hearing an affidavit or
declaration describing the efforts taken to comply with this
order and stating that the mailings have been completed in
accordance with the terms of this order.
13. Within ten (10) business days of the Notice Date, Class Action
Plaintiff's Counsel shall publish a Summary Notice
substantially in the form of Exhibit B hereto once in The Wall
Street Journal, and shall distribute said Summary Notice twice
through an Internet
-4-
wire service. Class Action Plaintiff's Counsel shall file with
the Court and serve upon Settling Class Action Defendants'
counsel no later than seven (7) days prior to the Settlement
Hearing an affidavit or declaration stating that the Summary
Notice has been published in accordance with the terms of this
order.
14. The Court finds that dissemination of the Notice and Proof of
Claim in the manner required by 11 - 12 herein, and
publication of the Summary Notice in the manner required by
13 herein (a) constitute the best notice practicable under the
circumstances to Settlement Class Members, (b) meet the
requirements of Rule 23 of the Federal Rules of Civil
Procedure, the due process clause of the United States
Constitution, and all other applicable laws, and(c) constitute
due and sufficient notice to all Persons entitled thereto.
15. Any Settlement Class Member may, upon request, be excluded
from the Settlement. Any such Person must submit to the Claims
Administrator a request for exclusion ("Request for
Exclusion"), postmarked no later than _____________, 2005. A
Request for Exclusion must state: (1) the name, address, and
telephone number of the Person requesting exclusion; (2) the
Person's purchases and sales of Charter common stock made
during the Settlement Class Period, including the dates, the
number of shares of common stock, and price paid or received
per share for each such purchase or sale, and provide
documentation thereof; and (3) that the Person wishes to be
excluded from the Settlement Class. All Persons who submit
valid and timely Requests for Exclusion in the manner set
forth in this paragraph shall have no rights under the
Stipulations, shall not share in the distribution of the
Settlement Fund, and shall not be bound by the Stipulations or
the Judgment.
16. Any Settlement Class Member who has not requested to be
excluded from the Settlement Class may object to the
Settlement of the Class Action, the proposed Plan of
Allocation, the application by Class Action Plaintiff's
Counsel for attorneys' fees, costs, and expenses, or the
application for a Compensatory Award to Class Action Plaintiff
(for time and expenses relating to representation of the
Class, pursuant to Section. 27(2)(B)(4) of the Private
Securities Litigation Reform Act of 1995), and shall have a
right to appear and be heard at the Settlement Hearing. Any
Settlement Class Member may enter an appearance through
counsel of such member's own choosing and at such member's own
expense or may appear on their own. However, no Settlement
Class Member shall be heard at the Settlement Hearing unless,
on or before _____________________, 2005, such Person has
filed with the Court a written notice of objection, and the
grounds for objecting
-5-
to any of the foregoing matters along with documentation
evidencing membership in the Settlement Class, including the
number of shares of Charter common stock purchased and sold
during the Settlement Class Period, and delivered a copy to
the following counsel: Pomerantz Haudek Block Grossman & Gross
LLP, Stanley Grossman, Esq., Marc Gross, Esq., 100 Park
Avenue, New York, NY 10017-5516; Irell & Manella LLP, David
Siegel, Esq., David Schwarz, Esq., Craig Varnen, Esq., 1800
Avenue of the Stars, Suite 900, Los Angeles, CA 90067;
Thompson Coburn LLP, Roman P. Wuller, Esq., Stephen B.
Higgins, Esq., One US Bank Plaza, St. Louis, MO 63101; and
Mayer, Brown, Rowe & Maw LLP, Jonathan C. Medow, Esq., John J.
Tharp, Jr., Esq. 190 South LaSalle Street, Chicago, IL
60603-3441. Only Settlement Class Members who have filed and
delivered valid and timely written notices of objection will
be entitled to be heard at the Settlement Hearing unless the
Court orders otherwise.
17. The Court authorizes payment out of the Settlement Fund of the
expenses described in 3.5 of the Stipulation of Settlement
with Charter.
18. A Settlement Hearing will be held on ______________, 2005, at
_____ _.m. before this Court to determine whether the proposed
settlement of the Class Action as set forth in the
Stipulations, should be approved as fair, just, reasonable and
adequate as to the Members of the Settlement Class; whether
the Judgment approving the Settlement should be entered;
whether Class Action Plaintiff's Counsel's proposed Plan of
Allocation of the Settlement Fund should be approved; whether
the application of Class Action Plaintiff's Counsel for an
award of attorneys' fees, costs, and expenses should be
approved; and whether the request for grant of a Compensatory
Award to Class Action Plaintiff should be approved.
19. The Court may adjourn or continue the Settlement Hearing
without further notice to Settlement Class Members.
20. The passage of title and ownership of the Settlement Fund to
the Escrow Agents in accordance with the terms of the
Stipulations is approved. No Person that is not a Settlement
Class Member or Class Action Plaintiff's Counsel shall have
any right to any portion of, or any distribution from, the
Settlement Fund unless otherwise ordered by the Court or
otherwise provided in the Stipulations.
21. All funds held by the Escrow Agents shall be deemed and
considered to be in custodia legis of the Court in accordance
with
-6-
the Stipulations, and shall remain subject to the jurisdiction
of the Court, until such time as such funds shall be
distributed pursuant to the Stipulations, the Plan of
Allocation and/or further order(s) of the Court, consistent
with the terms of the Stipulations.
22. No later than _____________, 2005 any Settlement Class Member
who wishes to participate in the Settlement Fund must submit a
valid Proof of Claim form to the Claims Administrator. Proof
of Claim forms shall be deemed to have been submitted when
postmarked, if mailed by first class, or by registered or
certified mail, postage prepaid, addressed in accordance with
the instructions given in the Proof of Claim and Release. All
other Proof of Claim and Release forms shall be deemed to have
been submitted at the time they are actually received by the
Claims Administrator. To be valid, a Proof of Claim must: (1)
be completed in a manner that permits the Claims Administrator
to determine the eligibility of the claim as set forth in the
Proof of Claim; (2) include the release by the Claimant of all
Released Class Action Parties as set forth in the
Stipulations; and (3) be signed with an affirmation that the
information is true and correct. All Settlement Class Members
who do not submit valid and timely Proof of Claim forms shall
be forever barred from receiving any payments from the
Settlement Fund, but will in all other respects be subject to
and bound by the provisions of the Stipulations and the
Judgment, if entered.
23. If prior to the Settlement Hearing, Persons who otherwise
would be Members of the Settlement Class have filed with the
Court valid and timely Requests for Exclusion from the
Settlement Class in accordance with the provisions of this
Notice Order and the Notice given pursuant thereto, and such
Persons have in the aggregate Potential Claims that equal or
exceed the sum specified in separate Supplemental Agreements
between the Parties (collectively, the "Supplemental
Agreements," which have not been filed with the Court),
Charter and Andersen shall have the option to terminate their
respective Stipulation in accordance with the procedures set
forth in the Supplemental Agreements. Provided, however, that
the termination of one Stipulation shall not cause the
termination of the other Stipulation. The existence of the
Supplemental Agreements and Charter's and Andersen's rights to
terminate the Settlement pursuant thereto shall be referenced
in the Notice without disclosure of its terms. Pursuant to the
Private Securities Litigation Reform Act of 1995, Section.
27(a)(2)(B)(5), this Court finds that good cause has been
shown for not filing the Supplemental Agreements, which shall
be filed under seal only if a dispute among the Settling Class
Action Parties arises concerning its interpretation or
application.
-7-
24. Neither Settling Class Action Defendants nor their counsel
shall have any responsibility for, or any liability with
respect to the Plan of Allocation or the allocation,
management, disposition, computation, or distribution from the
Settlement Fund, and the Plan of Allocation will be considered
separately from the fairness, reasonableness and adequacy of
the Settlement.
25. No later than ____________, 2005, all briefs supporting the
Settlement, the Plan of Allocation, the request for attorneys'
fees and costs, and/or the request for a Compensatory Award to
Class Action Plaintiff, shall be served and filed. No later
than _____________, 2005, all papers in response to objections
to any of the foregoing shall be served and filed.
26. In the event that the Plan of Allocation is not approved by
the Court, Class Action Plaintiff may propose an amended Plan
of Allocation without further notice of the amended Plan,
unless a Settlement Class Member requests in writing such
notice, which request shall be sent to the Claims
Administrator no later than _____________, 2005.
27. Neither the Stipulations nor the Settlement contained therein,
nor any act performed or document executed pursuant to or in
furtherance of the Stipulations or the Settlement: (i) is or
may be deemed to be or may be used as an admission of, or
evidence of, the validity of any Released Claim, or of any
wrongdoing or liability of the Released Class Action Parties;
or (ii) is or may be deemed to be or may be used as an
admission of, or evidence of, any fault or omission of any of
the Class Action Defendants in any civil, criminal or
administrative proceeding in any court, administrative agency
or other tribunal.
28. All proceedings in the Class Action as to the Settling Class
Action Defendants are stayed until further order of the Court,
except as may be necessary to implement the settlement or
comply with the terms of the Stipulations.
29. The Court may, for good cause, extend any of the deadlines set
forth in this order without further notice to Settlement Class
Members.
-8-
IT IS SO ORDERED.
DATED: ________________ ___________________________
THE HONORABLE CHARLES A. SHAW
UNITED STATES DISTRICT JUDGE
Submitted by:
POMERANTZ HAUDEK BLOCK GROSS AND GROSSMAN LLP
Stanley M. Grossman, Esq.
Marc I. Gross, Esq.
100 Park Avenue, 26th Floor
New York, NY 10017
POMERANTZ HAUDEK BLOCK GROSS AND GROSSMAN LLP
Patrick V. Dahlstrom, Esq.
Leigh Handelman, Esq.
One North LaSalle Street, Suite 2225
Chicago, IL 60602-3908
Attorneys for Class Action Plaintiff StoneRidge Investment Partners LLC,
Individually and On Behalf of All Others Similarly Situated
LAW OFFICES OF WOLFF AND D'AGROSA
Donald L. Wolff, Esq.
Paul J. D'Agrosa, Esq.
8019 Forsyth Street
Clayton, MO 63105
Liaison Counsel for the Settlement Class
IRELL & MANELLA LLP
David Siegel, Esq.
David Schwarz, Esq.
Craig Varnen, Esq.
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
-9-
THOMPSON COBURN LLP
Roman P. Wuller, Esq.
Stephen B. Higgins, Esq.
One US Bank Plaza
St. Louis, MO 63101
Attorneys for Defendant Charter
Communications, Inc.
BRYAN CAVE, LLP
Edward L. Dowd, Jr., Esq.
James F. Bennett, Esq.
One Metropolitan Square
211 North Broadway
St. Louis, MO 63102
Attorneys for Defendant Carl E. Vogel
DORSEY & WHITNEY, LLP
Peter S. Ehrlichman, Esq.
1420 Fifth Avenue
Suite 3400
Seattle, Washington 98101
FOSTER PEPPER & SHEFELMAN PLLC
Timothy J. Filer, Esq.
1111 Third Avenue
Suite 3400
Seattle, Washington 98101
Attorneys for Defendant Paul G. Allen
PAUL, HASTINGS, JANOFSKY & WALKER LLP
Grace A. Carter, Esq.
John A. Reding, Esq.
55 Second Street
24th Floor
San Francisco, California 94105
Attorneys for Defendant Jerald L. Kent
-10-
CAPES SOKOL GOODMAN & SARACHAN
David V. Capes, Esq.
S. Todd Hamby, Esq.
7701 Forsyth Boulevard
Suite 400
Clayton, Missouri 63105
Attorneys for Defendants Chris Fenger and Bill Shreffler
SNELL & WILMER
John Roche, Esq.
1200 17th Street
Suite 1900
Denver, Colorado 80202
Attorneys for Defendant James H. Smith, III
GREENSFELDER, HEMKER & GALE, P.C.
Jeffrey T. Demerath, Esq.
2000 Equitable Building
10 South Broadway
St. Louis, Missouri 63102
Attorneys for Defendant David G. Barford
HAAR & WOODS, LLP
Robert T. Haar, Esq.
1010 Market Street, Suite 1620
St. Louis, Missouri 63101
Attorneys for Defendant Kent D. Kalkwarf
BURROUGHS, HEPLER, BROOM, MACDONALD, HEBRANK & TRUE
Theodore J. MacDonald, Jr., Esq.
103 W. Vandalia Street, Suite 300
Edwardsville, Illinois 62025-0510
Attorneys for Defendant Paul E. Martin
SENNIGER, POWERS, LEAVITT & ROEDEL
David H. Harlan, Esq.
One Metropolitan Square, 16th Floor
St. Louis, Missouri 63102
Attorneys for Defendant David L. McCall
-11-
MAYER, BROWN, ROWE & MAW LLP
Jonathan C. Medow, Esq.
John J. Tharp, Jr., Esq.
190 South LaSalle Street
Chicago, IL 60603-3441
Attorneys for Defendant Arthur Andersen LLP
-12-
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
IN RE CHARTER COMMUNICATIONS, INC. MDL DOCKET NO. 1506 (CAS)
SECURITIES LITIGATION ALL CASES
STONERIDGE INVESTMENT PARTNERS Consolidated Case
LLC, Individually and On Behalf of All Others No. 4:02-CV-1186 CAS
Similarly Situated,
Plaintiff,
v.
CHARTER COMMUNICATIONS, INC., PAUL
ALLEN, JERALD L. KENT, CARL E. VOGEL,
KENT KALKWARF, DAVID G. BARFORD, PAUL E.
MARTIN, DAVID L. McCALL, BILL SHREFFLER,
CHRIS FENGER, JAMES H. SMITH, III,
SCIENTIFIC-ATLANTA, INC., MOTOROLA, INC.
and ARTHUR ANDERSEN, LLP,
Defendants.
NOTICE OF PENDENCY AND PROPOSED SETTLEMENT
OF CLASS ACTION
EXHIBIT E-1
If you bought Charter Communications, Inc. ("Charter") common stock
between November 9, 1999 and August 16, 2002 inclusive, you could get a payment
from the Class Action Settlement described below.*
A FEDERAL COURT AUTHORIZED THIS NOTICE. THIS IS NOT A SOLICITATION FROM A
LAWYER.
THIS NOTICE EXPLAINS IMPORTANT RIGHTS YOU MAY HAVE INCLUDING YOUR POSSIBLE
RECEIPT OF CASH AND STOCK FROM THE SETTLEMENT. YOUR LEGAL RIGHTS ARE AFFECTED
WHETHER YOU DO OR DO NOT ACT. ALSO ENCLOSED IS A CLAIM FORM THAT YOU MUST
COMPLETE AND MAIL, POSTMARKED ON OR BEFORE ___________, 2005 TO PARTICIPATE IN
THE SETTLEMENT. PLEASE READ THIS NOTICE CAREFULLY!
1. STATEMENT OF CLASS MEMBERS' RECOVERY: This Notice has been sent
to you pursuant to an Order of the United States District Court, Eastern
District of Missouri (the "Court"). The purpose of this Notice is to
inform you of the proposed Settlement of this Class Action for
$146,250,000, consisting of $66,250,000 in cash; Charter common stock
having an aggregate value of $40,000,000 (as of the date the stock is
transferred to the Settlement Fund); and warrants to purchase Charter
common stock having an aggregate value of $40,000,000 (as of the date the
warrants are transferred to the Settlement Fund). The amount of Charter
common stock is subject to a potential upward adjustment according to the
terms of the Stipulation of Settlement. The Settlement also provides for
Charter's adoption of certain corporate governance provisions. This Notice
describes the rights you may have in connection with the Settlement and
what steps you may take in relation to the Settlement and this Class
Action, as well as the hearing to be held by the Court to consider the
fairness, reasonableness, and adequacy of the Settlement.
2. REASONS FOR THE SETTLEMENT: The Settlement resolves claims
against the Settling Class Action Defendants regarding alleged violations
of the federal securities laws. The Settling Class Action Defendants deny
all allegations of wrongdoing. In light of the amount of the Settlement
and the immediacy of recovery to the Settlement Class, Class Action
Plaintiff believes that the proposed Settlement is fair, reasonable and
adequate, and in the best interests of the Settlement Class. The
Settlement provides a substantial benefit, namely $146,250,000 in cash and
stock, less the various deductions described in this Notice, as compared
to the risk that a similar, smaller, or no recovery would be achieved
after a trial and appeals, possibly years in the future, in which the
Settling Class Action Defendants would have the opportunity to assert
substantial defenses to the claims asserted against them. Class Action
Plaintiff will continue to pursue claims against the Non-Settling Class
Action Defendants.
- --------------------
* All capitalized terms not defined herein are defined in the Stipulations of
Settlement dated as of January 24, 2005.
-2-
3. STATEMENT OF AVERAGE AMOUNT OF DAMAGE PER SHARE: Class Action
Plaintiff and Settling Class Action Defendants do not agree on the average
amount of damages per share that would be recoverable if Class Action
Plaintiff were to have prevailed on each claim alleged under the Exchange
Act. The issues on which the Parties disagree include (1) the appropriate
economic model for determining the amount by which Charter's common stock
was allegedly artificially inflated (if at all) during the Settlement
Class Period; (2) the amount by which Charter's common stock was allegedly
artificially inflated (if at all) during the Settlement Class Period; (3)
the various market forces influencing the trading price of Charter's
common stock at various times during the Settlement Class Period; (4) the
extent to which external factors, such as general market conditions,
influenced the trading price of Charter's common stock at various times
during the Settlement Class Period; (5) the extent to which the various
matters that Class Action Plaintiff alleged were false or misleading
influenced (if at all) the trading price of Charter's common stock at
various times during the Settlement Class Period; (6) the extent to which
the various allegedly material facts that Class Action Plaintiff alleged
were omitted influenced (if at all) the trading price of Charter's common
stock at various times during the Settlement Class Period; and (7) whether
the statements made or facts omitted were actionable under the federal
securities laws.
Class Action Plaintiff's damages expert estimates that
approximately 455,917,540 million shares of Charter common stock traded
during the Settlement Class Period were damaged. Assuming that the owners
of all affected shares elect to participate in the Settlement, and
assuming that the value of the stock remains the same as the current
estimated value, the average recovery per share of Charter common stock is
estimated by Class Action Plaintiff's damages expert at approximately
$0.53 per share, before deduction of any fees, expenses, costs and awards
referenced in 8 above. The actual amount disbursed to Authorized
Claimants may be more or less than this figure.
4. STATEMENT OF ATTORNEY FEES AND EXPENSES: Class Action Plaintiff's
Counsel has not received any payment for their services in conducting this
litigation on behalf of Class Action Plaintiff and the members of the
Settlement Class, nor has it been reimbursed for its out-of-pocket
expenditures. If the Settlement is approved by the Court, Class Action
Plaintiff's Counsel will apply to the Court for attorneys' fees of 20% of
the settlement proceeds and reimbursement of expenses not to exceed
$750,000 to be paid from the settlement proceeds. If the amount requested
by counsel is approved by the Court, the average cost per share would be
$0.065.
5. IDENTIFICATION OF ATTORNEY'S REPRESENTATIVES: For further
information regarding this settlement you may contact: Marc I. Gross,
Esq., Pomerantz Haudek Block Grossman & Gross LLP, 100 Park Avenue, New
York, NY 10017-5516, Telephone: 212-661-1100, www.pomlaw.com.
DO NOT CONTACT THE COURT
-3-
[END OF COVER PAGE]
YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT:
DATE
----
SUBMIT A CLAIM The only way to get a payment.
FORM
EXCLUDE YOURSELF Get no payment. This is the only option that allows
you to ever be part of any other lawsuit against the
Settling Class Action Defendants with respect to the
claims in this case.
OBJECT Write to the Court and explain why you do not like
the Settlement.
REQUEST NOTICE OF You will be notified if the plan of distribution of the
CHANGE OF PLAN OF Settlement is rejected by the Court and resubmitted in
ALLOCATION altered form by Class Action Plaintiff's Counsel.
GO TO A HEARING Ask to speak in Court about the fairness of the
Settlement.
DO NOTHING Get no payment. Give up your rights.
Alternatively, submit a claim.
WHAT THIS NOTICE CONTAINS
Why did I get this Notice? Page 5
How do I know if I am part of the Settlement? Page 6
What recovery does the Settlement Provide? Page 6
Why is there a Settlement? Page 7
What might happen if there was no Settlement? Page 8
What is this case about? What has happened so far? Page 8
What led up to the Settlement? Page 11
What are the Class Action Plaintiff's reasons for the Settlement? Page 11
Why have the Settling Class Action Defendants agreed to the Settlement? Page 12
How much will my payment be? What is the Plan of Allocation? Page 13
-4-
How do I participate in the Settlement? What do I need to do? Page 17
What rights am I giving up by agreeing to the Settlement? Page 17
What if I do not want to participate in the Settlement? How do I exclude myself? Page 19
What payments are the attorneys for the Class and the Class Plaintiff
seeking for their work in this case? Page 21
Are there other conditions that may affect the Settlement? Page 21
When and where will the Court decide whether to approve the Settlement
and related matters? Do I have to come to the Hearing? May I speak at
the Hearing if I don't like the Settlement or the other matters referenced
in this Notice? Page 22
What if I bought shares on someone else's behalf, or represent a broker, banker
or other nominee? Page 23
Can I see the Court file? Who should I contact if I have questions? Page 24
WHY DID I GET THIS NOTICE?
1. You or someone in your family may have purchased shares of Charter
common stock during the period November 8, 1999 through August 16, 2002,
inclusive. The Court sent you this Notice because, as a potential Settlement
Class Member, you have a right to know about a proposed Settlement of certain
claims in a class action lawsuit and your options, before the Court decides
whether to approve the Settlement. A class action is a lawsuit in which one of
more persons sues on behalf of all other persons who appear to have similar
claims.
2. If the Court approves the Settlement, and after objections and appeals
are resolved, a claims administrator approved by the Court will make payments
pursuant to the Settlement.
3. The Court in charge of this case is the United States District Court
for the Eastern District of Missouri, and the case is known as In re Charter
Communications, Inc. Securities Litigation, MDL Docket No. 1506 (CAS). The
entity that filed this lawsuit is the Class Action Plaintiff, StoneRidge
Investment Partners LLC, an investment management firm. The entities and people
who have been sued are the Defendants. Your interests have been represented in
this lawsuit by Court appointed Class Action Plaintiff's Counsel, Pomerantz
Haudek Block Grossman & Gross, LLP, 100 Park Avenue, New York, NY 10025.
4. This Notice explains the lawsuit, the Settlement, your legal rights,
what benefits are available, who is eligible for them, and how to get them. The
purpose of this Notice is to inform you of the terms of the proposed Settlement
and to inform you of a hearing to be held by the Court to consider the fairness,
reasonableness, and adequacy of the proposed Settlement and to consider the
application for attorney fees and reimbursement of litigation expenses (the
"Settlement Hearing").
-5-
5. The Settlement Hearing will be held on __________, 2005, at ____ _.m.,
before the Honorable Charles A. Shaw, United States District Judge, at the
United States Courthouse, 111 South 10th Street, Suite 12.148, St. Louis, MO
63102 (the "Settlement Hearing"). The purpose of the Settlement Hearing will be
to determine:
(1) whether the settlement for at least $146,250,000, consisting of
$66.25 million in cash plus accrued interest, Charter common stock having an
aggregate value of $40 million (subject to a potential upward adjustment), and
warrants to purchase Charter common stock having an aggregate value of $40
million, as well as adoption of certain corporate governance provisions, should
be approved as fair, just, reasonable and adequate to each of the Settling Class
Action Parties;
(2) whether the proposed plan to distribute the Settlement proceeds
(the "Plan of Allocation") is fair, just, reasonable, and adequate;
(3) whether the application by Class Action Plaintiff's Counsel for
an award of attorneys' fees and expenses should be approved;
(4) whether Class Action Plaintiff should be granted a Compensatory
Award; and
(5) whether the Class Action should be dismissed with prejudice
against the Settling Class Action Defendants.
6. The Court may adjourn or continue the Settlement Hearing without
further notice to the Settlement Class. The issuance of this Notice is not an
expression of the Court's opinion on the merits of any claim in the lawsuit, and
the Court still has to decide whether to approve the Settlement. If the Court
approves the Settlement, payments will be made after appeals are resolved and
after the completion of all claims processing. Please be patient.
HOW DO I KNOW IF I AM PART OF THIS SETTLEMENT?
7. By order dated _______________, 2005, the Court has decided that all
persons and entities that purchased Charter common stock during the period of
November 8, 1999 through and including August 16, 2002, are eligible to
participate in the Settlement, with the exception of the Class Action Defendants
and their corporate affiliates; any officers or directors of Charter; or members
of their immediate families, and their heirs, successors and assigns; and any
entities controlled directly or indirectly by Paul G. Allen. Also excluded from
the Settlement is any person or entity that files a request for exclusion in
accordance with the requirements set forth in this Notice (see "What if I Do Not
Want to Participate in the Settlement? How Do I Exclude Myself," below ).
-6-
RECEIPT OF THIS NOTICE DOES NOT NECESSARILY MEAN THAT YOU
ARE A CLASS MEMBER OR ARE ENTITLED TO RECEIVE PROCEEDS
FROM THE SETTLEMENT. IF YOU WISH TO PARTICIPATE IN THE
SETTLEMENT, YOU MUST MAIL THE ACCOMPANYING CLAIM FORM,
POSTMARKED ON OR BEFORE ____________, 2005.
WHAT RECOVERY DOES THE SETTLEMENT PROVIDE?
8. The total monetary value of the Settlement is $146,250,000 consisting
of $66.25 million in cash plus accrued interest; Charter common stock having an
aggregate value of $40 million subject to a potential upward adjustment (as of
the date the shares are transferred to the Settlement Fund); and warrants to
purchase Charter common stock having an aggregate value of $40 million (as of
the date the shares are transferred to the Settlement Fund), as well as adoption
of certain corporate governance provisions. Attorney fees and expenses,
notification costs, any compensatory award to the Class Action Plaintiff, and
claims administration costs will be deducted from these settlement proceeds. The
balance of the Settlement Fund (the "Net Settlement Fund") will be distributed
to the Class. The Settlement also provides that upon consultation with the Class
Action Plaintiff and its Counsel, the Settlement shares may be sold prior to
distribution to Class Members, but only after the Effective Date and only at a
price at least equal to the price of Charter common stock on the date the
Judgment is entered, or in the case of warrants, the pro-rated value of the
warrants on the date the warrants are transferred to the Settlement Fund.
9. Of the total Settlement, $144 million in cash and securities will be
paid for by or on behalf of defendant Charter. The balance will be paid for by
defendant Arthur Andersen LLP.
10. In connection with the Settlement, Charter will take steps reasonably
required to implement certain corporate governance provisions.
11. The average expected recovery will depend on a number of factors
including when and for what price Class Members purchased and/or sold their
shares of Charter common stock, the total number of shares for which timely and
valid Claim Forms are submitted by Settlement Class Members ("Authorized
Claimants"), and the value of the stock and warrants being issued and delivered
pursuant to the Settlement at the time of distribution. See "How Much Will My
Payment Be," below.
WHY IS THERE A SETTLEMENT?
12. Under the proposed Settlement, the Court will not decide in favor of
either the Class Action Plaintiff or the Settling Class Action Defendants. By
agreeing to a
-7-
Settlement, both the Class Action Plaintiff and the Settling Class Action
Defendants avoid the costs and risk of a trial, and the Settlement Class Members
are compensated.
13. In light of the amount of the Settlement and the immediacy of recovery
to the Settlement Class, Class Action Plaintiff believe that the proposed
Settlement is fair, reasonable and adequate, and in the best interests of
Settlement Class Members. The Settlement provides a substantial benefit, namely
at least $146,250,000 in cash and stock, less the various deductions described
in this Notice, (and adoption of certain corporate governance provisions) as
compared to the risk that a similar, smaller, or no recovery would be achieved
after a trial and appeals, possibly years in the future, in which the Settling
Class Action Defendants would have the opportunity to assert substantial
defenses to the claims asserted against them.
WHAT MIGHT HAPPEN IF THERE WAS NO SETTLEMENT?
14. If there were no settlement and Class Action Plaintiff failed to
establish any essential legal or factual element of their claims, neither they
nor the Settlement Class would recover anything from the Settling Class Action
Defendants. Also, if the Settling Class Action Defendants were successful in
proving any of their defenses, the Settlement Class likely would recover
substantially less than the amount provided in the Settlement, or nothing at
all.
WHAT IS THIS CASE ABOUT? WHAT HAS HAPPENED SO FAR?
A. BACKGROUND
15. Charter is a broadband communications company. The Company provides
analog video, digital video, cable modem, and telephony services to more than 6
million customers residing in 37 different states. Charter is headquartered in
St. Louis, Missouri, Arthur Andersen LLP (as defined below, "Andersen") served
as Charter's outside auditor for fiscal years 1999-2001
16. On July 18, 2002, a Merrill Lynch analyst issued a report that
questioned several of Charter's accounting practices, including the
capitalization of certain customer service representative costs. The following
day, the price of Charter's common stock declined from $4.06 per share to $3.50
per share.
17. On August 16, 2002, Charter announced that the U.S. Attorney's Office
for the Eastern District of Missouri had initiated a grand jury investigation
into certain of Charter's operations. The day after this announcement, the price
of Charter's common stock declined from $2.71 per share to $2.53 per share.
-8-
18. On April 1, 2003, Charter announced that it was restating its
financial reports for 2000 and 2001, and the first three quarters of 2002.
19. On July 24, 2003, a Grand Jury indicted David G. Barford, Kent
Kalkwarf, David L. McCall, and James H. Smith, III for a conspiracy allegedly
carried out from May 2001 through March 2002 to inflate Charter's subscriber
numbers and subscriber growth numbers. It further charged Messrs. Barford and
Kalkwarf with causing Charter to enter into allegedly sham agreements with
Scientific-Atlanta, Inc. ("Scientific-Atlanta") and Motorola, Inc. ("Motorola")
in the Fall of 2000. Messrs. McCall, Barford, Smith, and Kalkwarf subsequently
pled guilty to one count of conspiracy to commit wire fraud.
20. On July 27, 2004, the Securities and Exchange Commission ("SEC") filed
an Order Instituting Cease-And-Desist Proceedings, Making Findings, And Imposing
A Cease-And-Desist Order Pursuant to Section 21C of the Securities Exchange Act
of 1934 (the "SEC Order") on the consent of Charter, which neither admitted nor
denied the allegations therein, regarding certain subscriber count practices and
the accounting for certain agreements with Scientific-Atlanta and Motorola. The
SEC Order did not allege any wrongdoing regarding Charter's accounting, except
with respect to the agreements with Motorola and Scientific-Atlanta.
B. THE CLASS ACTIONS
21. On or after July 31, 2002, fourteen federal securities class action
complaints, including StoneRidge Investment Partners LLC v. Charter
Communications, Inc., No. 4:02-CV-1186 CAS, were filed against Charter and
various other defendants, including Paul G. Allen, Jerald L. Kent, Carl E.
Vogel, Kent Kalkwarf, David G. Barford, Paul E. Martin, David L. McCall, Bill
Shreffler, Chris Fenger, James H. Smith III, Scientific-Atlanta, Motorola, and
Andersen. These complaints were consolidated, pursuant to order of the
Multi-District Litigation Panel, in the U.S. District Court for the Eastern
District of Missouri, and captioned In re Charter Communications, Inc.
Securities Litigation, MDL Docket No. 1506 (CAS) (the "Class Action").(1)
- ---------------------
(1) The effectiveness of this Settlement is contingent on the settlement of
shareholder derivative actions that have been brought on behalf of Charter in
the United States District Court for the Eastern District of Missouri, entitled
Arthur J. Cohn, Derivatively on behalf of Nominal Defendant Charter
Communications, Inc. v. Ronald L. Nelson, et al., and Charter Communications,
Inc., Case No. 4:03CV00177 ERW, and in the Circuit Court for the City of St.
Louis, entitled Kenneth Stacey, Derivatively on Behalf of Nominal Defendant
Charter Communications, Inc. v. Ronald L. Nelson, et al., and Charter
Communications, Inc., No. 022-10625, Aaron Cane, Derivatively on behalf of
Nominal Defendant Charter Communications, Inc., v. Ronald L. Nelson, et al., and
Charter Communications, Inc., No. 022-11450, and Thomas Schimmel, Derivatively
on behalf of Nominal Defendant Charter Communications, Inc. v. Ronald L. Nelson,
et al., and Charter Communications, Inc., No. 044-0858 (collectively, the
"Shareholder Derivative Actions").
-9-
22. By Order dated April 16, 2003, the Court appointed StoneRidge
Investment Partners, LLC as lead plaintiff (hereinafter "Class Action
Plaintiff"), and appointed Pomerantz Haudek Block Grossman & Gross LLP as lead
counsel (hereinafter "Class Action Plaintiff's Counsel").
23. Class Action Plaintiff's Counsel, aided by private investigators and
forensic accountants, conducted a thorough investigation of the claims prior to
filing an Amended Consolidated Class Action Complaint (the "Amended Complaint")
on August 5, 2003. The Amended Complaint alleged that during the Settlement
Class Period, Charter issued false and misleading statements that materially
inflated the Company's reported operating cash flow growth rate, by among other
things, improperly accounting for costs associated with customer service
representatives, acquisitions of new customers, and other matters. Class Action
Plaintiff asserted that these manipulations boosted Charter's operating cash
flow by over $400 million during the Settlement Class Period. In addition, the
Amended Complaint alleged that Charter artificially inflated its reported growth
rate for new customers by improperly delaying the termination of a significant
number of subscribers who had either requested such termination or were
significantly delinquent in payments. Finally, Class Action Plaintiff alleged
that Charter engaged in a kick-back scheme with Motorola and Scientific Atlanta,
whereby Charter paid these suppliers $20 more for certain equipment (digital set
top boxes) in return for an equivalent amount of advertising spending by the
suppliers. Accounting manipulation for these transactions allegedly enabled
Charter to boost its income for fourth quarter 2000 by $17 million.
24. The Amended Complaint further alleged that Andersen failed to audit
Charter's 1999-2001 financial statements in accordance with Generally Accepted
Auditing Standards ("GAAS"), and that Andersen's audit opinions for those years
incorrectly represented that such financial statements were fairly presented, in
all material respects, in accordance with Generally Accepted Accounting
Principles ("GAAP").
25. The Amended Complaint asserted claims against Charter, the Individual
Defendants, Andersen, Scientific Atlanta and Motorola for alleged violations of
sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5
promulgated thereunder, and sections 11, 12 and 15 of the Securities Act of
1933. The Amended Complaint sought recovery for purchasers of Charter common
stock during the period of November 8, 1999 through July 17, 2002, and damages
through August 16, 2002. Class Action Plaintiff subsequently amended the Amended
Complaint to include a class from July 17, 2002 to August 16, 2002, when the
grand jury investigation was first announced (the "Second Amended Complaint").
26. On August 26, 2003, Charter filed a Motion to Dismiss the Class
Action, which Class Action Plaintiff opposed. Other defendants in the Class
Action filed Motions to Dismiss between September 8, 2003 to October 17, 2003,
which the Class Action Plaintiff also opposed. Charter, along with various other
defendants, asserted that some of the statements alleged to be misleading were
in fact not misleading, and that the alleged inflation of customers, operating
cash flow, and revenues was immaterial as a matter of law relative to the total
number of Charter customers and the Company's total cash flow and revenues.
Charter also asserted that the decline in its stock price was due
-10-
to general cable industry related matters, including intense competition from
satellite TV providers, and not any revelation of alleged wrongdoing. Charter
also asserted that the SEC had previously approved of its accounting for matters
challenged in the Amended Complaint, and had subsequently changed its
interpretation of GAAP applicable to cable companies, thereby prompting a
significant portion of the restatement. Many of the Individual Defendants also
asserted that the Amended Complaint failed to adequately allege any direct
participation or knowledge of the alleged wrongdoing. Andersen argued that the
Amended Complaint failed to allege sufficient facts justifying an inference that
Andersen had acted with the required state of mind. As discussed below, Class
Action Plaintiff, Charter and the Individual Defendants entered into a
Stipulation of Settlement as of January 24, 2004 (the "Charter Stipulation").
The hearing on the Motions to Dismiss filed by Charter and the Individual
Defendants was taken off-calendar in light of the Settlement.
27. By Memorandum Decision dated October 12, 2004, the Honorable Charles
A. Shaw denied the Motion to Dismiss the Amended Complaint by Andersen, but
granted the Motions to Dismiss by Scientific-Atlanta and Motorola. Class Action
Plaintiff filed a Motion for Reconsideration on October 26, 2004. That motion
was denied on December 20, 2004. The decision is being appealed by Class Action
Plaintiff.
C. DISCOVERY, INVESTIGATION, AND RESEARCH CONDUCTED BY CLASS ACTION
PLAINTIFF
28. Before agreeing to the Settlement, Class Action Plaintiff's Counsel
conducted discovery and investigation during the prosecution of the Class
Action. This discovery and investigation has included: (1) inspection of
documents produced by certain of the Settling Class Action Defendants pursuant
to agreement during the Mediation and in the Memorandum of Understanding; (2)
interviews with various current and former Charter employees; (3) consultations
with experts; (4) review of Charter's public filings, annual reports, and other
public statements; and (5) research of the applicable law with respect to the
claims asserted in the Class Action and the potential defenses thereto.
WHAT LED UP TO THE SETTLEMENT?
29. On March 22 and 23, 2004, April 13 and 14, 2004, May 7, 2004, June 16,
2004, and August 2, 2004, Class Action Plaintiff, Charter and the Individual
Defendants, along with their insurers, through their respective counsel,
participated in lengthy mediation sessions with Hon. Edward A. Infante (Ret.).
In addition to other negotiations the settling parties to the Derivative
Actions, through their respective counsel, participated in the August 2, 2004
mediation session. During these meetings, which followed extensive briefing of
Judge Infante, the participants discussed with Judge Infante, among other
things, the respective claims and defenses, expert damages analyses, legal
analyses, the discovery and motion practice conducted and expected to be
conducted in the Class Action, the evidence expected to be offered by the
parties at trial,
-11-
and other important factual and legal issues and matters relating to the merits
of the Class Action.
30. Subsequent to the mediation and the October 12, 2004 decision denying
the motion to dismiss filed by Andersen, negotiations took place that resulted
in the agreement to settle all claims against that defendant. Class Action
Plaintiff and Andersen entered into a Stipulation of Settlement as of January
24, 2005 (the "Andersen Stipulation" and together with the Charter Stipulation,
the "Stipulation").
WHAT ARE CLASS ACTION PLAINTIFF'S REASONS FOR THE SETTLEMENT?
31. The Class Action Plaintiff believes that the claims asserted in the
Class Action have merit and that the evidence developed to date in the Class
Action supports the claims asserted. The Class Action Plaintiff asserts, and
believes it would present supporting evidence at trial, that Defendants caused
the price of Charter common stock to be artificially inflated during the
Settlement Class Period by the issuance of materially false statements and by
omitting to state material information concerning Charter and that as a result
Class Action Plaintiff and Settlement Class Members were injured.
32. However, Class Action Plaintiff's Counsel recognizes and acknowledges
the expense and length of continued proceedings, trial, and appeals. Class
Action Plaintiff's Counsel also has taken into account the uncertain outcome and
the risk of any litigation, especially in complex actions such as the Class
Action, as Class Action Plaintiff is also mindful of the inherent problems of
proof under and possible defenses to the federal securities law violations
asserted in the Class Action, including the defenses asserted by Defendants
during the litigation, in motions on the pleadings, settlement negotiations and
in the mediation proceedings. Class Action Plaintiff also considered the
difficulties in collecting any potential judgment against Charter and Andersen.
Andersen no longer maintains any licenses to practice public accounting, and any
potential exposure it might have in this case is not covered by insurance.
33. In light of the foregoing, Class Action Plaintiff's Counsel believes
that the Settlement set forth in the Stipulation confers substantial benefits
upon the Settlement Class (as defined below) and Settlement Class Members. Based
on its evaluation, Class Action Plaintiff's Counsel has determined that the
settlement set forth in the Stipulation is in the best interests of the Class
Action Plaintiff and the Settlement Class.
WHY HAVE THE SETTLING CLASS ACTION DEFENDANTS AGREED TO THE SETTLEMENT?
-12-
34. The Settling Class Action Defendants have denied and continue to deny
each and all of the claims and contentions alleged by the Class Action Plaintiff
on behalf of the Settlement Class. The Settling Class Action Defendants also
have denied and continue to deny, among other things, the allegations that the
prices of Charter stock were artificially inflated by reasons of alleged
misrepresentations, non-disclosures or otherwise, or that the Class Action
Plaintiff or the Settlement Class were harmed by the conduct alleged in the
Class Action. Settling Class Action Defendants believe that throughout the
Settlement Class Period they fully and adequately disclosed all material facts
regarding Charter and made no misrepresentations of material facts regarding
Charter.
35. Nonetheless, the Settling Class Action Defendants have concluded that
further conduct of the Class Action would be protracted and expensive, and that
it is desirable that the Class Action be fully and finally settled in the manner
and upon the terms and conditions set forth in the Stipulation in order to limit
further expense, inconvenience and distraction, to dispose of the burden of
protracted litigation, and to permit the operation of the Company's business
without further distraction and diversion of the Company's executive personnel
with respect to matters at issue in the Class Action. The Settling Class Action
Defendants also have taken into account the uncertainty and risks inherent in
any litigation, especially in complex cases like this litigation.
36. The Settling Class Action Defendants have, therefore, determined that
it is desirable and beneficial to them that the Class Action be settled in the
manner and upon the terms and conditions set forth in the Stipulation. The
Settling Class Action Defendants entered into the Stipulation and Settlement
without in any way acknowledging any fault, liability, or wrongdoing of any
kind. There has been no adverse determination by any court against any of the
Settling Class Action Defendants on the merits of the claims asserted by the
Class Action Plaintiff. Neither the Stipulation, nor any of its terms or
provisions, nor any of the negotiations or proceedings connected with it, shall
be construed as an admission or concession by any of the Settling Class Action
Defendants of the merit or truth of any of the allegations or wrongdoing of any
kind on the part of any of the Settling Class Action Defendants. The Settling
Class Action Defendants entered into the Stipulation and Settlement based upon,
among other things, the parties' agreement herein that, to the fullest extent
permitted by law, neither the Stipulation nor any of the terms or provisions,
nor any of the negotiations or proceedings connected therewith, shall be offered
as evidence in the Class Action or in any pending or future civil, criminal, or
administrative action or other proceeding to establish any liability or
admission by any of the Settling Class Action Defendants or to any of their
respective Related Entities or any other matter adverse to any of the Settling
Class Action Defendants or any of their respective Related Entities, except as
expressly set forth therein.
HOW MUCH WILL MY PAYMENT BE? - WHAT IS THE PLAN OF ALLOCATION?
-13-
37. Your share of the Net Settlement Fund will depend on the number of
valid Claim Forms that Settlement Class Members send in, how many shares of
Charter stock you bought, and when you bought and sold your shares.
38. The Settling Class Action Defendants have agreed to pay a total of
$66,250,000 in cash, Charter common stock worth at least $40,000,000 and Charter
warrants worth $40,000,000 for a combined value of at least $146,250,000 (the
"Settlement Fund"). After deduction of any court awarded attorneys' fees and
expenses, compensatory awards, taxes, and administrative costs (including the
cost of this notice and the notice in the Shareholder Derivative Actions), the
"Net Settlement Fund" will be distributed, subject to Court approval, to
Authorized Claimants in accordance with the Plan of Allocation described below.
39. To receive any distribution from the Net Settlement Fund, Settlement
Class Members must complete a Claim Form and mail it and all required
documentation to the Claims Administrator on or before _____________, 2005.
Settlement Class Members who do not submit acceptable Claim Forms will not share
in the settlement proceeds. Settlement Class Members who do not submit either a
request for exclusion or an acceptable Claim Form will nevertheless be bound by
the Settlement and the Judgment of the Court dismissing the claims against the
Settling Class Action Defendants.
40. The Claims Administrator shall determine each Authorized Claimant's
pro rata share of the Net Settlement Fund based upon each Authorized Claimant's
"Net Recognized Loss" (i.e., total Recognized Losses less Recognized Profits).
The Net Recognized Loss formula is not intended to be an estimate of the amount
that a Settlement Class Member might have been able to recover after a trial;
nor is it an estimate of the amount that will be paid to Authorized Claimants
pursuant to the Settlement. The Net Recognized Loss formula is the basis upon
which the Net Settlement Fund will be proportionately distributed to Authorized
Claimants.
41. Class Action Plaintiff's damages expert analyzed the market price
reaction to the disclosures made by Charter during the Settlement Class Period.
Recognized Losses are based on the price declines allegedly associated with the
corrective disclosures of alleged prior misrepresentations as set forth in the
Complaint. No loss amount is recognized when both the purchase and sale occur
without intervening public disclosure of adverse information.
42. RECOGNIZED LOSSES UNDER THE PLAN OF ALLOCATION
FOR SHARES PURCHASED FROM NOVEMBER 8, 1999 THROUGH MAY 2, 2000
1. For Charter shares purchased from November 8, 1999 through May 2, 2000
(prior to the release of the 2000 financial statements that were subsequently
restated) and:
(a) sold prior to July 18, 2002, the Recognized Loss is $0.00 per share;
-14-
(b) sold after July 17, 2002, but before August 16, 2002, the Recognized
Loss is $0.15 per share;
(c) retained until August 16, 2002, the Recognized Loss is $0.35 per
share.
2. For Charter shares purchased from May 3, 2000 through July 29, 2001
(after the release of the 2000 financial statements, but prior to alleged
criminal activity in connection with alleged customer count inflation) and:
(a) sold prior to prior to November 1, 2001, the Recognized Loss is
$0.00 per share;
(b) sold after October 30, 2001, but before July 18, 2002, the
Recognized Loss is $0.25 per share;
(c) sold after July 17, 2002, but before August 16, 2002, the Recognized
Loss is $0.50 per share;
(d) retained until August 16, 2002, the Recognized Loss is $0.70 per
share.
3. For Charter shares purchased from July 30, 2001 through October 30,
2001 (the period allegedly affected by both Charter's 2000 financial statements
and alleged criminal activity in connection with alleged customer count
inflation) and:
(a) sold prior to November 1, 2001, the Recognized Loss is $0.00 per
share;
(b) sold after October 30, 2001, but before July 18, 2002, the
Recognized Loss is $0.94 per share;
(c) sold after July 17, 2002, but before August 16, 2002, the Recognized
Loss is $1.19 per share;
(d) retained until August 16, 2002, the Recognized Loss is $1.39 per
share.
4. For Charter shares purchased from November 1, 2000 through July 17,
2002 (through partial disclosure of the alleged customer count inflation) and:
(a) sold prior to July 18, 2002, the Recognized Loss is $0.00 per share;
(b) sold after July 17, 2002, but before August 16, 2002, the Recognized
Loss is $0.25 per share;
(c) retained until August 16, 2002, the Recognized Loss is $0.45 per
share.
5. For Charter shares purchased from July 18, 2002 through August 16, 2002
(through disclosure of the grand jury investigation) and:
(a) sold prior to August 16, 2002, the Recognized Loss is $0.00 per
share;
(b) retained until August 16, 2002, the Recognized Loss is $0.20.
43. To the extent there are sufficient funds in the Net Settlement Fund
after payment of attorneys fees and expenses, administration costs (including
taxes), and any Compensatory Award to Class Action Plaintiff (the "Net
Settlement Fund"), each Authorized Claimant will receive an amount equal to the
Authorized Claimant's Net Recognized Loss, as defined above. If, however, the
amount in the Net Settlement Fund
-15-
is not sufficient to permit such payment, then each Authorized Claimant shall be
paid their pro rata share of the Net Settlement Fund based on the percentage of
the Net Settlement Fund that each Authorized Claimant's Net Recognized Loss
bears to the total of the Net Recognized Losses of all Authorized Claimants.
Payment in this manner shall be deemed conclusive against all Authorized
Claimants.
44. For those shares that were purchased during the Settlement Class
Period and sold at a profit, the claim amounts computed in the manner described
above shall constitute Recognized Profits. For those shares that were sold at a
loss, the claim amounts computed in the manner described above shall constitute
Recognized Losses. All Recognized Profits will be subtracted from Recognized
Losses in order to determine the Net Recognized Loss of each Authorized
Claimant. Only those Authorized Claimants who sustained a Net Recognized Loss
shall be entitled to share in the proceeds from the Net Settlement Fund.
45. No distribution will be made on a claim where the potential
distribution amount is $10 or less, or less than five (5) Charter shares or
warrants.
GENERAL PROVISIONS:
46. In processing claims, the first-in, first-out basis ("FIFO") will be
applied to purchases and sales.
47. The date of purchase or sale is the "contract" or "trade" date, and
not the "settlement" date.
48. Brokerage commissions, fees and taxes should be excluded from the
purchase or sale price of Charter common stock.
49. Members of the class who do not file acceptable Proofs of Claim will
not share in the Settlement proceeds, yet will nevertheless be bound by the
Court judgments and the Settlement.
50. Shares of Charter common stock acquired during the Settlement Class
Period by means of a gift, inheritance or operation of law, do not qualify as
purchases on the dates of such acquisitions. If, however, such stock was
purchased during the Settlement Class Period by the donor, descendent or
transferor, then, unless the donor, descendent or transferor submits a Claim
Form with respect to the shares, the recipient's Claim Form will be computed by
using the price of such stock on the original date and price of purchase and not
the date of transfer.
51. Payments pursuant to the Plan of Allocation, as approved by the Court,
will be conclusive against all Authorized Claimants. No person shall have any
claim against Class Action Plaintiff's Counsel, the Settlement Administrator or
other agent designated by Class Action Plaintiff's Counsel based on a
distribution made substantially in accordance with the Stipulation and the Plan
of Allocation or further Orders of the court. Charter, the Individual
Defendants, Andersen and their counsel shall have no
-16-
responsibility for, interest in, or liability whatsoever with respect to any
allocation, management, disposition, computation, or distribution from the
Settlement Fund.
52. The Court has reserved jurisdiction to allow, disallow or adjust the
claim of any Settlement Class Member on equitable grounds.
53. ALTERATION OF THE PLAN OF ALLOCATION: In the event that the Court does
not approve the Plan of Allocation, Class Action Plaintiff may alter the plan
(subject to Court approval) without any further notice to Members, unless such
Settlement Class Members expressly request notice of alteration of the plan. In
order to receive such notice, you must send a request no later than _______ to
the Claims Administrator at the address set forth below.
54. The Court also may modify the Plan of Allocation without further
notice to the Class.
HOW DO I PARTICIPATE IN THE SETTLEMENT? WHAT DO I NEED TO DO?
55. If you fall within the definition of the Settlement Class, you will
remain a Settlement Class Member unless you elect to be excluded from the
Settlement Class. If you do not request to be excluded from the Settlement
Class, you will be bound by any judgment entered in the Class Action whether or
not you file a Proof of Claim, including the dismissal with prejudice of any
Released Claims against the Defendants you may possess under Federal law,
Missouri, or the law of any state.
56. If you wish to remain a Settlement Class Member, you need do nothing
(other than timely file a Proof of Claim and Release if you wish to participate
in the distribution of the Net Settlement Fund). Your interests will be
represented by Class Action Plaintiff's Counsel. If you choose, you may enter an
appearance individually or through your own counsel at your own expense.
57. TO PARTICIPATE IN THE DISTRIBUTION OF THE NET SETTLEMENT FUND, YOU
MUST TIMELY COMPLETE AND RETURN THE PROOF OF CLAIM AND RELEASE FORM THAT
ACCOMPANIES THIS NOTICE. The Proof of Claim and Release must be postmarked on or
before _______, 2005, and mailed to the Claims Administrator at the address
below. Unless the Court orders otherwise, if you do not timely submit a valid
Proof of Claim, you will be barred from receiving any payments from the Net
Settlement Fund, but will in all other respects be bound by the provisions of
the Stipulation and the Judgment.
58. Extra copies of the Claim Form can be requested from the Claims
Administrator by mail, phone, fax, or website as noted below in Paragraph 61 or
downloaded from Class Action Plaintiff Counsel's website at www.pomlaw.com.
[Graphic Appears Here]
-17-
WHAT RIGHTS AM I GIVING UP BY AGREEING TO THE SETTLEMENT?
59. If the Settlement is approved, the Court will enter a Judgment and
Order of Dismissal (the "Judgment"). The Judgment will dismiss the claims
against the Settling Class Action Defendants with prejudice and provide that
Class Action Plaintiff and all other Settlement Class Members, except those who
validly and timely request to be excluded from the Settlement Class, shall upon
the Effective Date of the Judgment be deemed to have, and by operation of the
Judgment shall have, fully, finally, and forever released, relinquished and
discharged the Released Parties from all Released Claims (including "Unknown
Claims"), and from all claims (including "Unknown Claims") arising out of,
relating to, or in connection with the defense or resolution of this case.
a. "Released Claims" shall collectively mean all claims (including
Unknown Claims as defined below, but excluding any claim as between
Charter and any current or former Charter employee regarding
indemnification, advancement, and/or recoupment of fees, costs, and
expenses), demands, rights, liabilities and causes of action of
every nature and description whatsoever, known or unknown, whether
in contract, tort, equity or otherwise, whether or not concealed or
hidden, asserted or that might have been asserted in this or any
other forum or proceeding, including, without limitation, claims for
negligence, gross negligence, indemnification, breach of duty of
care and/or breach of duty of loyalty, fraud, misrepresentation,
breach of fiduciary duty, negligent misrepresentation, unfair
competition, insider trading, professional negligence,
mismanagement, corporate waste, breach of contract, or violations of
any state or federal statutes, rules or regulations, by or on behalf
of the Class Action Plaintiff, the Settlement Class, or any
Settlement Class Member against the Released Class Action Parties
(as defined below) which are in any way based upon or related to (a)
the purchase of, acquisition of, or investment in Charter common
stock by any Settlement Class Member during the Settlement Class
Period (whether on the open market or otherwise), (b) the facts,
transactions, events, occurrences, acts, disclosures, statements,
omissions or failures to act and/or to supervise Charter officers or
employees which were or could have been alleged in the Class Action
or the Shareholder Derivative Actions, (c) the facts which were
alleged in any papers filed in the Class Action or in the
Shareholder Derivative Actions, and/or (d) the administration of the
Escrow Account and Settlement Fund, Net Settlement Fund or Plan of
Allocation.
b. "Released Class Action Parties" shall mean each and every one of
the following: The Settling Class Action Defendants, that is,
Charter, Andersen, Paul G. Allen, Jerald L. Kent, Carl E. Vogel,
Kent Kalkwarf, David G. Barford, Paul E. Martin, David L. McCall,
Bill Shreffler, Chris Fenger, and James H. Smith III and all
entities owned, affiliated or controlled by them, all current and
former Charter directors and officers
-18-
and each of their respective agents, employees, consultants,
insurers, attorneys, advisors, successors, heirs, assigns,
executors, personal representatives, marital communities and
immediate families. "Andersen" includes Arthur Andersen LLP, AWSC
Societe Cooperative, en liquidation, and all of their past and
present member firms, and all of their respective current and former
partners, members, principals, participating principals, national
directors, managing or other agents, management personnel, officers,
directors, shareholders, administrators, servants, employees,
consultants, advisors, insurers, reinsurers, attorneys, accountants,
representatives, parent companies, subsidiaries, related entities,
divisions, affiliates, predecessors, successors and assigns, along
with the heirs, spouses, executors, administrators, insurers,
reinsurers, representatives, estates, successors and assigns of any
such persons or entities. However, Released Class Action Parties
does not include defendants Motorola, Inc., and Scientific Atlanta,
Inc.
c. "Unknown Claims" shall mean any Released Claims which the Class
Action Plaintiff or any Settlement Class Member does not know or
suspect to exist in his, her or its favor at the time of the release
of the Released Class Action Parties which, if known by him, her or
it, might have affected his, her or its settlement with and release
of the Released Class Action Parties, or might have affected his,
her or its decision not to object to, or opt out of, this
settlement. With respect to any and all Released Claims, the
Settling Class Action Parties stipulate and agree that, upon the
Effective Date, the Class Action Plaintiff expressly waives and
relinquishes, and the Settlement Class Members shall be deemed to
have, and by operation of the Judgment shall have expressly waived
and relinquished, to the fullest extent permitted by law, the
provisions, rights, and benefits of Section 1542 of the California
Civil Code, which provides:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have
materially affected his settlement with the debtor.
The Class Action Plaintiff expressly waives and the Settlement Class
Members shall be deemed to have waived, and upon the Effective Date
and by operation of the Judgment shall have waived, any and all
provisions, rights and benefits conferred by any law of the United
States or of any state or territory of the United States, or
principle of common law, which is similar, comparable or equivalent
to Section 1542 of the California Civil Code. The Class Action
Plaintiff and the Settlement Class Members may hereafter discover
facts in addition to or different from those which he, she or it now
knows or believes to be true with respect to the subject matter of
the Released Claims, but each of them hereby stipulate and agree
that the Class Action Plaintiff does settle and release, and each
Settlement Class Member shall be deemed to have, and upon the
Effective Date and
-19-
by operation of the Judgment shall have, fully, finally, and forever
settled and released any and all Released Claims, known or unknown,
suspected or unsuspected, contingent or non-contingent, whether or
not concealed or hidden, which now exist, or heretofore have existed
upon any theory of law or equity now existing or coming into
existence in the future, including, but not limited to, all Released
Claims that are in any way based on or related to conduct which is
negligent, intentional, with or without malice, or a breach of any
duty, law or rule, without regard to the subsequent discovery or
existence of such different or additional facts.
WHAT IF I DO NOT WANT TO PARTICIPATE IN THE SETTLEMENT? HOW DO I EXCLUDE
MYSELF?
60. You may request to be excluded from the Settlement Class. To do so,
you must mail a written request to:
Charter Securities Litigation
c/o Claims Administrator
Berdon Claims Administration LLC
P.O. Box 9014,
Jericho, NY 11753-8914,
Telephone: 800/766-3330,
Fax: 516/931-0810
61. The request for exclusion must: (1) state your name, address, and
telephone number; (2) provide documentation reflecting all purchases and sales
of Charter common stock made during the Settlement Class Period, including the
dates, the number of shares of Charter common stock, and price paid or received
per share for each such purchase or sale; and (3) state that you wish to be
excluded from the Settlement Class. TO BE VALID, A REQUEST FOR EXCLUSION MUST
STATE ALL OF THE FOREGOING INFORMATION. YOUR EXCLUSION REQUEST MUST BE
POSTMARKED ON OR BEFORE _______, 2005. If you submit a valid and timely request
for exclusion, you shall have no rights under the settlement, shall not share in
the distribution of the Net Settlement Fund, and shall not be bound by the
Stipulation or the Judgment.
-20-
WHAT PAYMENTS ARE THE ATTORNEYS FOR THE CLASS AND THE CLASS PLAINTIFF SEEKING
FOR THEIR WORK IN THIS CASE?
62. Class Action Plaintiff's Counsel have not received any payment for
their services in pursuing this lawsuit on behalf of the Settlement Class, nor
have they been reimbursed for their considerable out-of-pocket expenses. Class
Action Plaintiff's Counsel intend to apply to the Court for an award of attorney
fees on behalf of all Plaintiffs' Counsel not to exceed 20% of the Settlement
Fund. In addition, Class Action Plaintiff's Counsel intend to apply for
reimbursement of litigation expenses advanced in connection with the Class
Action in an amount not to exceed $750,000. If the application for attorney fees
and reimbursement of litigation expenses is approved by the Court, the average
cost per share would be approximately $0.065. All such fees and expenses will be
paid out of the Settlement Fund.
63. The fee requested by Class Action Plaintiff's Counsel would compensate
counsel for its efforts in achieving the Settlement for the benefit of the
Class, and for their risk in undertaking this representation on a contingency
basis.
64. At the Settlement Hearing, Class Action Plaintiff's Counsel will also
request that the Court grant a Compensatory Award to the Class Action Plaintiff
up to $30,000 for its time and expenses incurred in representing the Class
pursuant to Section 27 A(2)(b)(4) of the Private Securities Litigation Class
Action Reform Act of 1995.
65. At the Settlement Hearing, counsel in the Shareholder Derivative
Actions will request an award of fees and expenses, subject to Court approval.
Any such award shall be paid from the Settlement Cash, but in no event shall
exceed $2.25 million.
66. THE COURT HAS NOT EXPRESSED ANY OPINION ON THE APPLICATION FOR
ATTORNEY FEES, REIMBURSEMENT OF LITIGATION EXPENSES, OR CLASS ACTION PLAINTIFF'S
COMPENSATORY AWARD.
ARE THERE OTHER CONDITIONS THAT MAY EFFECT THE SETTLEMENT?
67. The Settlement is conditioned upon the occurrence of certain events.
Those events include, among other things: (1) entry of the Judgment by the
Court, as provided for in the Stipulation; (2) expiration of the time to appeal
from the Judgment, or if an appeal is taken, a final resolution of the appeal in
favor of the Judgment; and (3) dismissal with prejudice of all Shareholder
Derivative Actions brought on behalf of Charter according to the terms of a
Stipulation of Settlement dated as of January 24, 2005. (For information
regarding that Settlement, contact Schiffrin & Barroway LLP, Three Bala Plaza
East, Suite 400, Bala Cynwyd, PA 19004, and Wechsler Harwood LLP,
-21-
488 Madison Avenue, 8th Floor, New York, NY 10022). In addition, pursuant to the
terms of separate Supplemental Agreements, Charter and Andersen have the right
to terminate their respective settlements should requests for exclusion exceed a
certain threshold. If, for any reason, any one of the conditions described in
either the Andersen Stipulation or the Charter Stipulation is not met, that
Stipulation might be terminated and, if terminated, will become null and void,
and the parties to that Stipulation will be restored to their respective
positions as of August 4, 2004 (December 1, 2004 in the case of Andersen).
Provided, however, that the termination of one Stipulation shall not cause the
termination of the other Stipulation.
WHEN AND WHERE WILL THE COURT DECIDE WHETHER TO APPROVE THE SETTLEMENT AND
RELATED MATTERS? DO I HAVE TO COME TO THE HEARING? MAY I SPEAK AT THE HEARING
IF I DON'T LIKE THE SETTLEMENT OR THE OTHER MATTERS REFERENCED IN THIS
NOTICE?
IF YOU DO NOT WISH TO OBJECT TO THE PROPOSED SETTLEMENT, THE PLAN OF ALLOCATION,
OR THE APPLICATION FOR ATTORNEY FEES AND REIMBURSEMENT OF LITIGATION EXPENSES,
OR THE PROPOSED COMPENSATORY AWARD TO THE CLASS ACTION PLAINTIFF , YOU NEED NOT
ATTEND THE SETTLEMENT HEARING SCHEDULED FOR _______, 2005.
68. Any Settlement Class Member who has not validly and timely requested
to be excluded from the Settlement Class, and who objects to any aspect of the
Settlement with Charter or Andersen, the Plan of Allocation, the application for
attorneys' fees, costs and expenses, or the request for a Compensatory Award to
Class Action Plaintiff, may appear and be heard at the Settlement Hearing. Any
such Person must submit a written notice of objection, postmarked on or before
_______, 2005, to each of the following:
Clerk of the Court
United States District Court
Eastern District of Missouri
111 S. 10th Street, Suite 3.300
St. Louis, MO 63102
POMERANTZ HAUDEK BLOCK GROSSMAN & GROSS LLP
Stanley Grossman, Esq.
Marc Gross, Esq.
100 Park Avenue
New York, NY 10017-5517
Lead Counsel for Plaintiff StoneRidge Investment Partners LLC
IRELL & MANELLA LLP
David Siegel, Esq.
David Schwarz, Esq.
-22-
Craig Varnen, Esq.
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
THOMPSON COBURN LLP
Roman P. Wuller, Esq.
Stephen B. Higgins, Esq.
One US Bank Plaza
St. Louis, MO 63101
Attorneys for Defendant Charter
Communications, Inc.
MAYER, BROWN, ROWE & MAW LLP
Jonathan C. Medow, Esq.
John J. Tharp, Jr., Esq.
190 South LaSalle Street
Chicago, IL 60603-3441
Attorneys for Defendant Arthur Andersen LLP
69. The notice of objection must demonstrate the objecting Person's
membership in the Settlement Class, including documentation reflecting the
number of Charter shares purchased and sold during the Settlement Class period,
and contain a statement of the reasons for objection. Only members of the
Settlement Class who have submitted written notices of objection and related
documentation in this manner will be entitled to be heard at the Settlement
Hearing, unless the Court orders otherwise.
70. The Settlement Hearing may be delayed from time to time by the Court
without further written notice to the Class. If you intend to attend the
Settlement Hearing, you should confirm the date and time with Class Action
Plaintiff's Counsel.
71. UNLESS OTHERWISE ORDERED BY THE COURT, ANY SETTLEMENT CLASS MEMBER WHO
DOES NOT OBJECT IN THE MANNER DESCRIBED HEREIN WILL BE DEEMED TO HAVE WAIVED ANY
OBJECTION AND SHALL BE FOREVER FORECLOSED FROM MAKING ANY OBJECTION TO THE
PROPOSED SETTLEMENT, THE APPLICATION FOR ATTORNEY FEES AND REIMBURSEMENT OF
LITIGATION EXPENSES, AND/OR THE PROPOSED PLAN OF ALLOCATION AND/OR THE
COMPENSATORY AWARD TO CLASS ACTION PLAINTIFF. SETTLEMENT CLASS MEMBERS DO NOT
NEED TO APPEAR AT THE HEARING OR TAKE ANY OTHER ACTION TO INDICATE THEIR
APPROVAL.
WHAT IF I BOUGHT SHARES ON SOMEONE ELSE'S BEHALF OR REPRESENT A BROKER, BANK OR
OTHER NOMINEE?
72. If you hold any Charter common stock purchased during the Settlement
Class Period as nominee for a beneficial owner, then, within ten (10) days after
you receive this
-23-
Notice, you must either: (1) send a copy of this Notice and the Proof of Claim
by first class mail to all such Persons; or (2) provide a list of the names and
addresses of such beneficial owners to the Claims Administrator, PREFERABLY ON
COMPUTER-GENERATED MAILING LABELS OR, ELECTRONICALLY IN MS WORD OR WORDPERFECT
FILES (LABEL SIZE AVERY 5162), OR IN AN MS EXCEL DATA TABLE, SETTING FORTH (a)
TITLE/REGISTRATION, (b) STREET ADDRESS, (c) CITY/STATE/ZIP; or (3) send a copy
of this Notice and the Proof of Claim and Release by first class mail to all
such beneficial owners, providing written confirmation to the Claims
Administrator of having done so. If you choose to mail the Notice and Proof of
Claim and Release yourself, you may obtain (without cost to you) as many
additional copies of these documents as you will need to complete the mailing by
contacting the Claims Administrator at:
Charter Securities Litigation
c/o Berdon Claims Administration LLC
P.O. Box 9014
Jericho, NY 11753-8914
Telephone: 800/766-3330
Fax: 516/931-0810
Website:www.berdonllp.com/claims
73. Regardless of whether you choose to complete the mailing yourself or
elect to have the mailing performed for you, you may obtain reimbursement of
reasonable administrative costs actually incurred in connection with forwarding
the Notice and Proof of Claim and which would not have been incurred but for the
obligation to forward the Notice and Proof of Claim, upon submission of
appropriate documentation.
CAN I SEE THE COURT FILE? WHO SHOULD I CONTACT IF I HAVE QUESTIONS?
II. EXAMINATION OF PAPERS
74. This Notice is a summary and does not describe all of the details of
the Stipulation. For full details of the matters discussed in this Notice, you
may desire to review the Stipulation filed with the Court, which may be
inspected during business hours, at the office of the Clerk of the Court, United
States Courthouse, 111 S. 10th Street, Suite 3.300, St. Louis, MO 63102.
-24-
75. If you have any questions about the settlement of the Class Action,
you may contact Class Action Plaintiff's Counsel by writing:
POMERANTZ HAUDEK BLOCK GROSSMAN & GROSS LLP
Stanley Grossman, Esq.
Marc Gross, Esq.
100 Park Avenue
New York, NY 10017-5517
DO NOT TELEPHONE THE COURT OR ANY REPRESENTATIVE OF CHARTER, THE INDIVIDUAL
DEFENDANTS OR ANDERSEN REGARDING THIS NOTICE.
DATED: _________________________
BY ORDER OF THE UNITED STATES DISTRICT COURT,
EASTERN DISTRICT OF MISSOURI
-25-
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
IN RE CHARTER COMMUNICATIONS, INC. MDL DOCKET NO. 1506 (CAS)
SECURITIES LITIGATION ALL CASES
STONERIDGE INVESTMENT PARTNERS Consolidated Case
LLC, Individually and On Behalf of No. 4:02-CV-1186 CAS
All Others Similarly Situated,
Plaintiff,
v.
CHARTER COMMUNICATIONS, INC., PAUL
ALLEN, JERALD L. KENT, CARL E.
VOGEL, KENT KALKWARF, DAVID G.
BARFORD, PAUL E. MARTIN, DAVID L.
McCALL, BILL SHREFFLER, CHRIS
FENGER, JAMES H. SMITH, III,
SCIENTIFIC-ATLANTA, INC., MOTOROLA,
INC. and ARTHUR ANDERSEN, LLP,
Defendants.
SUMMARY NOTICE OF PROPOSED SETTLEMENT
OF CLASS ACTION
EXHIBIT E-2
-1-
TO: ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIRED THE COMMON STOCK OF CHARTER
COMMUNICATIONS, INC. ("CHARTER") DURING THE PERIOD FROM NOVEMBER 8, 1999 THROUGH
AND INCLUDING AUGUST 16, 2002 (THE "SETTLEMENT CLASS");
I.
YOU ARE HEREBY NOTIFIED that the plaintiff (the "Class Action Plaintiff")
in the action pending in the United States District Court, Eastern District of
Missouri (the "Federal Court"), and entitled In re Charter Communications, Inc.
Securities Litigation, MDL Docket No. 1506 (CAS) (the "Class Action"), has
entered into Stipulations of Settlement, dated as of January 24, 2005 (the
"Stipulations") with defendants Charter Communications, Inc., Paul G. Allen,
Jerald L. Kent, Carl E. Vogel, Kent Kalkwarf, David G. Barford, Paul E. Martin,
David L. McCall, Bill Shreffler, Chris Fenger, James H. Smith III, and Arthur
Andersen LLP (the "Settling Class Action Defendants") to resolve the issues
raised in the Class Action as against the Settling Class Action Defendants.
PLEASE BE FURTHER ADVISED that pursuant to a Court order, a hearing will
be held on ______, 2005, at ______.m., before the Honorable Charles A. Shaw,
Judge of the United States District Court, at the United States Courthouse, 111
South 10th Street, Suite 12.148, St. Louis, MO 63102 (the "Class Action
Settlement Hearing") to determine: (1) whether the settlement of claims in the
Class Action against the Settling Class Action Defendants for $146,250,000,
consisting of cash in the amount of $66.25 million (plus accrued interest),
Charter common stock having an aggregate value of $40 million and warrants to
purchase Charter common stock having an aggregate value of $40 million (the
"Class Action Settlement Fund") subject to a potential upward adjustment, (as
well as the adoption of certain corporate governance provisions), should be
approved as fair, just, reasonable and adequate to all members of the Settlement
Class; (2) whether the proposed Plan of Allocation is fair, just, reasonable,
and adequate; (3) whether the application of Class Action Plaintiff's Counsel
for an award of attorneys' fees and expenses should be approved; (4) whether the
Class Action Plaintiff should be granted a Compensatory Award; and (5) whether
the Class Action should be dismissed with prejudice as set forth in the
Stipulations filed with the Court.
If you purchased or otherwise acquired Charter common stock during the
period from November 8, 1999 through and including August 16, 2002, your rights
may be affected by the settlement of this Class Action, including through the
release and extinguishment of claims you may possess relating to your purchase
or acquisition of Charter common stock during the class period. To share in the
distribution of the Settlement Fund, you must establish your rights by filing a
Proof of Claim and Release form on or before ______, 2005.
If you desire to be excluded from the Class, you must file a request for
exclusion by ______, 2005, in the manner and form explained in the detailed
Notice referred to below. All members of the Settlement Class who have not
requested
-2-
exclusion from the Settlement Class will be bound by any judgment entered in the
Class Action pursuant to the settlement agreement.
Any objection to the settlement, plan of allocation, or the application
for fees, costs and expenses to be awarded to Class Action Plaintiff's Counsel,
or the request for a grant of a compensatory award to Class Action Plaintiff
must be filed no later than ______, 2005 and show due proof of service on each
of:
POMERANTZ HAUDEK BLOCK GROSSMAN & GROSS LLP
Stanley Grossman, Esq.
Marc Gross, Esq.
100 Park Avenue
New York, NY 10017-5517
Lead Counsel for Class Action Plaintiff
IRELL & MANELLA LLP
David Siegel, Esq.
David Schwarz, Esq.
Craig Varnen, Esq.
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
THOMPSON COBURN LLP
Roman P. Wuller, Esq.
Stephen B. Higgins, Esq.
One US Bank Plaza
St. Louis, MO 63101
Attorneys for Defendant Charter
Communications, Inc.
MAYER, BROWN, ROWE & MAW LLP
Jonathan C. Medow, Esq.
John J. Tharp, Jr., Esq.
190 South LaSalle Street
Chicago, IL 60603-3441
Attorneys for Defendant Arthur Andersen LLP
If you are a Member of the Settlement Class and have not received a
detailed printed Notice of Pendency and Proposed Settlement of Class Action and
a Proof of Claim and Release form, you may obtain copies by writing to: Charter
Securities Litigation, c/o Berdon Claims Administration LLC, P.O. Box 9014,
Jericho, NY 11753-8914, Telephone: 800/766-3330, Fax: 516/931-0810 or
downloading these documents at www.berdonllp.com/claims. You may also download
the Complaint in the Litigation and the Stipulations at the same site. These
documents are also available for review at the Court. PLEASE DO NOT TELEPHONE OR
OTHERWISE CONTACT THE
-3-
COURT, THE CLERK'S OFFICE, CHARTER, ANDERSEN OR ANY OTHER SETTLING CLASS ACTION
DEFENDANT FOR INFORMATION.
Any inquiries about the Class Action can be made in writing to Class
Action Plaintiff's Counsel: Pomerantz Haudek Block Grossman & Gross LLP, 100
Park Avenue, New York, NY 10017-5517.
DATED: _________________________
BY ORDER OF THE UNITED STATES DISTRICT COURT,
EASTERN DISTRICT OF MISSOURI
-4-
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
IN RE CHARTER COMMUNICATIONS, INC. MDL DOCKET NO. 1506 (CAS)
SECURITIES LITIGATION ALL CASES
STONERIDGE INVESTMENT PARTNERS LLC, Consolidated Case
Individually and On Behalf of No. 4:02-CV-1186 CAS
All Others Similarly Situated,
Plaintiff,
v.
CHARTER COMMUNICATIONS, INC., PAUL
ALLEN, JERALD L. KENT, CARL E.VOGEL,
KENT KALKWARF, DAVID G. BARFORD,
PAUL E. MARTIN, DAVID L. McCALL,
BILL SHREFFLER, CHRIS FENGER, JAMES
H. SMITH, III, SCIENTIFIC-ATLANTA,
INC., MOTOROLA, INC. and ARTHUR
ANDERSEN, LLP,
Defendants.
PROOF OF CLAIM AND RELEASE
EXHIBIT E-3
TO: ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIRED SHARES OF THE COMMON STOCK
OF CHARTER COMMUNICATIONS, INC. ("CHARTER") DURING THE PERIOD OF NOVEMBER
8, 1999 THROUGH AND INCLUDING AUGUST 16, 2002.
If you purchased or otherwise acquired Charter common stock during the period
described above, and are not a Defendant in this Class Action, or one of
their corporate affiliates, or an officer or director of Charter, or a
member of any of the Defendants' immediate families, or any of their
heirs, successors and assigns, or an entity controlled directly or
indirectly by Paul G. Allen, and have not requested exclusion from the
Settlement Class (as defined below Part IV.B.12), you should read the
accompanying Notice of Pendency and Proposed Settlement of Class Action
("Notice") and complete this Proof of Claim and Release Form.
IN ORDER TO BE ELIGIBLE TO PARTICIPATE IN THE SETTLEMENT DESCRIBED IN THE
ACCOMPANYING NOTICE, YOU MUST MAIL YOUR COMPLETED PROOF OF CLAIM AND RELEASE TO
THE CLAIMS ADMINISTRATOR ON OR BEFORE ________, 2005.
GENERAL INSTRUCTIONS
1. To recover as a member of the Settlement Class based on your
claims in the Charter class action (the "Class Action"), you
must complete and on page __ hereof, sign this Proof of Claim
and Release. If you fail to file a properly addressed (as set
forth in paragraph 3 below) Proof of Claim and Release, your
claim may be rejected and you may be precluded from any
recovery from the Settlement Fund created in connection with
the proposed Settlement of the Class Action.
2. Submission of this Proof of Claim and Release, however, does
not assure that you will share in the proceeds of the
settlement of the Class Action.
3. YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OF CLAIM AND
RELEASE POSTMARKED ON OR BEFORE __________, 2005, ADDRESSED AS
FOLLOWS:
Charter Securities Litigation
c/o Berdon Claims Administration LLC
P.O. Box 9014
Jericho, NY 11753-8914
Telephone: 800/766-3330
516/931-0810
Website: www.berdonllp.com/claims
-2-
4. If you are a member of the Settlement Class and you do not
timely request exclusion in connection with the proposed
Settlement, you are bound by the terms of any judgment entered
in the Class Action, WHETHER OR NOT YOU SUBMIT A PROOF OF
CLAIM AND RELEASE.
5. If you are NOT a member of the Settlement Class (as defined in
Part IV.B.12 below), DO NOT submit a Proof of Claim and
Release Form.
CLAIMANT IDENTIFICATION
1. If you purchased or otherwise acquired Charter common stock
and held the certificate(s) in your name, you are the
beneficial owner as well as the record owner. If, however, you
purchased or otherwise acquired these securities, and the
certificate(s) were registered in the name of a third party,
such as a nominee or brokerage firm, you are the beneficial
owner and the third party is the record owner.
2. Use Part I of this form entitled "Claimant Identification" to
identify each owner of record, if different from the
beneficial owner ("nominee") of Charter common stock which
forms the basis of this claim. THIS CLAIM MUST BE FILED BY THE
ACTUAL BENEFICIAL OWNER OR OWNER(S), OR THE LEGAL
REPRESENTATIVE OF SUCH OWNER OR OWNER(S), OF THE STOCK UPON
WHICH THIS CLAIM IS BASED.
3. All joint owners must sign this claim. Executors,
administrators, guardians, conservators and trustees must
complete and sign this claim on behalf of persons represented
by them and their authority must accompany this claim and
their titles or capacities must be stated. The Social Security
(or taxpayer identification) number and telephone number of
the beneficial owner may be used in verifying the claim.
Failure to provide the foregoing information could delay
verification of your claim or result in rejection of the
claim.
4. A claimant whose stock was held in a custodian account under a
Uniform Gift to Minors Act ("UGMA"), may file in his or her
own name, if he or she is now of age. In this event, the
former custodian does not have to sign the Proof of Claim.
Custodians under the UGMA should identify themselves as
beneficial purchasers, not nominees (e.g., John Smith,
Custodian for Jack Smith UGMA). In this instance, use the
minor's Social Security Number.
5. Corporate officers or partners filing for a claimant
corporation or partnership should fill in the name of the
entity as the beneficial purchasers, and sign their names and
titles where indicated on the signature page.
-3-
TRANSACTION SCHEDULE INSTRUCTIONS FORM
1. Use Part II of this form entitled "Schedule of Transactions in
Charter Common Stock," to supply all required details of your
transaction(s) in these securities. If you need more space,
attach separate, numbered sheets giving all of the required
information in the same format. Print your name and Social
Security or Taxpayer Identification number on the top of each
additional sheet.
2. On the schedules, provide all of the requested information
with respect to all of your purchases and all of your sales of
Charter common stock which took place at any time between
November 8, 1999 through and including August 16, 2002 (the
"Settlement Class Period"), whether such transactions resulted
in a profit or a loss. Failure to report all such transactions
may result in the rejection of your claim.
3. List each transaction in the Settlement Class Period
separately and in chronological order, by trade date,
beginning with the earliest. You must accurately provide the
month, day and year of each transaction you list.
4. The term "Price Per Share" means the amount paid for the
securities or the amount realized on the sale of the
securities (both exclusive of commissions and transfer taxes).
5. The date of purchase or sale is the "contract" or "trade" date
as distinguished from the "settlement" date. The date of
covering a "short sale" is deemed to be the date of purchase
of the security. The date of a "short sale" is deemed to be
the date of sale of the security.
6. In processing claims, the first-in, first-out basis ("FIFO")
will be applied to match purchases and sales.
7. No cash payment will be made on a claim where the potential
distribution amount is $10 or less.
8. You must attach COPIES of documentation supporting the trading
activity listed in Part II in order for your claim to be
valid. Use ONE of the following: brokerage confirmation slips
or monthly statements, or similar documents to confirm the
date of purchase or sale, the quantity purchased or sold, the
price per share purchased or sold, and your ownership of
Charter common stock on August 16, 2002. If such documents are
not available, a complete list of acceptable supporting
documentation can be found on the Claims Administrator's
website at www.berdonllp.com/claims.
9. Any claim submitted that contains more than 50 transactions
must be filed electronically on: (a) a 3 1/2 diskette; (b) a
CD-ROM; or (c) ZIP media. The data must be provided in a
spreadsheet (MS Excel 4.0) or in ASCII
-4-
fixed-length text files. For complete electronic filing
instructions, please refer to the Claims Administrator's
website at www.berdonllp.com/claims.
-5-
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
In re Charter Communications, Inc. Securities Litigation
No. 4:02-CV-1186 CAS
PROOF OF CLAIM AND RELEASE
Must be Postmarked No Later Than:
__________________, 2005
Please Type or Print
PART I: CLAIMANT IDENTIFICATION
__________________________________________________________________________
Beneficial Owner's Name (First, Middle, Last)
__________________________________________________________________________
Street Address
__________________________________ _______________________________
City State Zip Code
__________________________________ _______________________________
Foreign Province Foreign Country
__________________________________ _____________ Individual
Social Security Number or
Taxpayer Identification Number _____________ Corporation/Other
_________ ________________ (work)
Area Code Telephone Number
_________ ________________ (home)
Area Code Telephone Number
__________________________________________________________________________
Record Owner's Name (if different from beneficial owner listed above)
-6-
PART II: SCHEDULE OF TRANSACTIONS IN CHARTER COMMON STOCK
A) Separately list each and every purchase of Charter common stock during the
period November 8, 1999 THROUGH August 16, 2002, and provide the following
information (must be documented):
Trade Date Price Per Share
(list chronologically) (excluding commissions, taxes &
Month/day/Year Number of Shares Purchased fees)
______________________ __________________________ _______________________________
______________________ __________________________ _______________________________
______________________ __________________________ _______________________________
______________________ __________________________ _______________________________
______________________ __________________________ _______________________________
(B) Separately list each an every sale of Charter common stock during the
period November 8, 1999 THROUGH August 16, 2002, and provide the following
information (must be documented):
Trade Date Price Per Share
(list chronologically) (excluding commissions, taxes &
Month/day/Year Number of Shares Purchased fees)
______________________ __________________________ _______________________________
______________________ __________________________ _______________________________
______________________ __________________________ _______________________________
______________________ __________________________ _______________________________
______________________ __________________________ _______________________________
(C) State the total number of shares of Charter common stock owned at the
close of trading on August 16, 2002, long or short (must be documented):
IF YOU NEED ADDITIONAL SPACE, ATTACH THE REQUIRED INFORMATION ON SEPARATE,
NUMBERED SHEETS, GIVING ALL REQUIRED INFORMATION, SUBSTANTIALLY IN THE SAME
FORMAT, AND PRINT YOUR NAME AND SOCIAL SECURITY OR TAXPAYER IDENTIFICATION
NUMBER AT THE TOP OF EACH SHEET.
YOU MUST ALSO READ AND SIGN THE RELEASE ON PAGE _________,
-7-
PART III: SUBMISSION TO JURISDICTION OF COURT AND ACKNOWLEDGEMENTS
I (we) submit this Proof of Claim and Release under the terms of the
Stipulation of Settlement described in the Notice. I (we) also submit to the
jurisdiction of the United States District Court, Eastern District of Missouri
with respect to my claim as a Settlement Class Member and for purposes of
enforcing the release set forth herein and any Judgment which may be entered in
the Class Action. I (we) further acknowledge that I (we) am (are) bound by and
subject to the terms of any Judgment that may be entered in the Class Action.
I (we) agree to furnish additional information to the Claims Administrator to
support this claim if required to do so.
PART IV: RELEASE
A. I (we) hereby acknowledge full and complete satisfaction of,
and do hereby fully, finally and forever settle, discharge and
release (1) all Released Claims (including Unknown Claims)
against all Released Class Action Parties, and (2) all claims
(including Unknown Claims) against all Released Class Action
Parties arising out of, relating to, or in connection with the
defense or resolution of this lawsuit or the Released Claims.
B. The terms used in this release are defined below:
1. "Arthur Andersen LLP" shall mean Defendant Arthur
Andersen LLP, AWSC Societe Cooperative, en liquidation,
and all of their past and present member firms, and all
of their respective current and former partners,
members, principals, participating principals, national
directors, managing or other agents, management
personnel, officers, directors, shareholders,
administrators, servants, employees, consultants,
advisors, insurers, reinsurers, attorneys, accountants,
representatives, parent companies, subsidiaries, related
entities, divisions, affiliates, predecessors,
successors and assigns, along with the heirs, spouses,
executors, administrators, insurers, reinsurers,
representatives, estates, successors and assigns of any
such persons or entities.
2. "Charter" shall mean defendant Charter Communications,
Inc., a Delaware corporation, and all of its
predecessors, successors, present and former parents,
subsidiaries, divisions, and related or affiliated
entities.
3. "Class Action Plaintiff" shall mean StoneRidge
Investment Partners, LLC.
-8-
4. "Effective Date" shall mean the first date by which all of the
events and conditions specified in Section IV, 10.2 of the
Charter Stipulation of Settlement have been met and have
occurred.
5. "Escrow Accounts" shall mean the interest-bearing escrow
accounts to which the Settlement Cash will be transferred no
later than five (5) business days after preliminary approval
of the Settlement of the Class Action to be controlled by the
Escrow Agents, and to which the Settlement Securities will be
transferred after entry of Judgment.
6. "Judgment" shall mean the judgment to be rendered by the Court
dismissing the Class Action with prejudice.
7. "Net Settlement Fund" shall mean the balance of the Settlement
Fund after payment of all applicable costs, expenses, taxes,
and fees, as dictated by the Stipulations of Settlement with
Charter and Arthur Andersen LLP.
8. "Plan of Allocation" shall mean a plan or formula of
allocation of the Net Settlement Fund which shall be described
in the "Notice of Pendency and Proposed Settlement of Class
Action" to be sent to Settlement Class Members in connection
with the Settlement whereby the Settlement Fund shall be
distributed to Authorized Claimants after payment of expenses
of notice and administration of the Settlement, any taxes,
penalties or interest or tax preparation fees owed by the
Escrow Account or the Settlement Fund, such attorneys' fees,
costs, expenses and interest as may be awarded by the Court,
and any Compensatory Award awarded by the Court to Class
Action Plaintiff, as described in 5.1 of the Charter
Stipulation of Settlement. Any Plan of Allocation is not part
of the Stipulation.
9. "Released Claims" shall collectively mean all claims
(including "Unknown Claims" as defined below, but excluding
any claim between Charter and any current or former Charter
employee regarding indemnification, advancement, and/or
recoupment of fees, costs, and expenses), demands, rights,
liabilities and causes of action of every nature and
description whatsoever, known or unknown, whether in contract,
tort, equity or otherwise, whether or not concealed or hidden,
asserted or that might have been asserted in this or any other
forum or proceeding, including, without limitation, claims for
negligence, gross negligence, indemnification, breach of duty
of care and/or breach of duty of loyalty, fraud,
misrepresentation, breach of fiduciary duty, negligent
- 9 -
misrepresentation, unfair competition, insider trading,
professional negligence, mismanagement, corporate waste,
breach of contract, or violations of any state or federal
statutes, rules or regulations, by or on behalf of the Class
Action Plaintiff, the Settlement Class, or any Settlement
Class Member against the Released Class Action Parties (as
defined below) which are in any way based upon or related to
(a) the purchase of, acquisition of, or investment in Charter
common stock by any Settlement Class Member during the
Settlement Class Period (whether on the open market or
otherwise), (b) the facts, transactions, events, occurrences,
acts, disclosures, statements, omissions or failures to act
and/or to supervise Charter officers or employees which were
or could have been alleged in the Class Action or the
Shareholder Derivative Actions, (c) the facts which were
alleged in any papers filed in the Class Action or in the
Shareholder Derivative Actions, and/or (d) the administration
of the Escrow Account and Settlement Fund, Net Settlement Fund
or Plan of Allocation.
10. "Released Class Action Parties" shall mean each and every one
of the following: (a) the Settling Class Action Defendants and
all entities owned, affiliated or controlled by them, all
current and former Charter directors and officers and each of
their respective agents, employees, consultants, insurers,
attorneys, advisors, successors, heirs, assigns, executors,
personal representatives, marital communities and immediate
families, and (b) Arthur Andersen LLP. Released Class Action
Parties does not include defendants Motorola, Inc., and
Scientific Atlanta, Inc.
11. "Settlement Cash" shall mean the principal amount of $66.25
million in cash, for and on behalf of the Settling Class
Action Defendants, less the cost of notice, plus interest
earned or accrued thereon.
12. "Settlement Class" shall mean all persons or entities that
purchased or otherwise acquired Charter common stock during
the period of November 8, 1999 through and including August
16, 2002. Excluded from the Class shall be the Class Action
Defendants and their corporate affiliates; any officers or
directors of Charter; or members of their immediate families,
and their heirs, successors and assigns; and any entities
controlled directly or indirectly by Paul G. Allen
13. "Settlement Class Member" or "Member of the Settlement Class"
shall mean a Person who falls within the definition of the
Settlement Class as set FORTH above.
- 10 -
14. "Settlement Class Period" shall mean the period from November
8, 1999 through and including August 16, 2002.
15. "Settlement Fund" shall mean the Settlement Cash and
Settlement Securities.
16. "Settlement Securities" shall mean the $40 million in common
stock (subject to the adjustments set forth in 2.8 of the the
Charter Stipulation of Settlement) and $40 million in warrants
to purchase common stock, to be issued by Charter pursuant to
the Charter Stipulation of Settlement.
17. "Settling Class Action Defendants" shall mean Charter
Communications, Inc., Paul G. Allen, Jerald L. Kent, Carl E.
Vogel, Kent Kalkwarf, David G. Barford, Paul E. Martin, David
L. McCall, Bill Shreffler, Chris Fenger, James H. Smith III,
and Arthur Andersen LLP (to the extent the Court approves the
Settlement with Arthur Andersen LLP (the "Andersen
Settlement") and the Andersen Settlement becomes Final
pursuant to its terms).
18. "Settling Class Action Parties" shall mean Class Action
Plaintiff, each Settlement Class Member, and Settling Class
Action Defendants.
19. "Shareholder Derivative Actions" shall mean the shareholder
derivative actions that have been brought on behalf of Charter
shareholders in the United States District Court for the
Eastern District of Missouri, entitled Arthur J. Cohn,
Derivatively on behalf of Nominal Defendant Charter
Communications, Inc. v. Ronald L. Nelson, et al., and Charter
Communications, Inc., Case No. 4:03CV00177 ERW, and in the
Circuit Court for the City of St. Louis, entitled Kenneth
Stacey, Derivatively on Behalf of Nominal Defendant Charter
Communications, Inc. v. Ronald L. Nelson, et al., and Charter
Communications, Inc., No. 022-10625, Aaron Cane, Derivatively
on behalf of Nominal Defendant Charter Communications, Inc.,
v. Ronald L. Nelson, et al., and Charter Communications, Inc.,
No. 022-11450, and Thomas Schimmel, Derivatively on behalf of
Nominal Defendant Charter Communications, Inc. v. Ronald L.
Nelson, et al., and Charter Communications, Inc., No.
044-0858, and consolidated as In re Charter Communications,
Inc. Shareholder Derivative Litigation, Index No. 022-10625.
20. "Unknown Claims" shall mean any Released Claims which the
Class Action Plaintiff or any Settlement Class Member does not
know or suspect to exist in his, her or its favor at the time
of the release of the Released Class Action Parties which,
- 11 -
if known by him, her or it, might have affected his, her or
its settlement with and release of the Released Class Action
Parties, or might have affected his, her or its decision not
to object to, or opt out of, this settlement. With respect to
any and all Released Claims, the Settling Class Action Parties
stipulate and agree that, upon the Effective Date, the Class
Action Plaintiff expressly waives and relinquishes, and the
Settlement Class Members shall be deemed to have, and by
operation of the Judgment shall have, expressly waived and
relinquished, to the fullest extent permitted by law, the
provisions, rights, and benefits of Section 1542 of the
California Civil Code, which provides:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by
him must have materially affected his settlement with
the debtor.
The Class Action Plaintiff expressly waives and the Settlement
Class Members shall be deemed to have waived, and upon the
Effective Date and by operation of the Judgment shall have
waived, any and all provisions, rights and benefits conferred
by any law of the United States or of any state or territory
of the United States, or principle of common law, which is
similar, comparable or equivalent to Section 1542 of the
California Civil Code. The Class Action Plaintiff and the
Settlement Class Members may hereafter discover facts in
addition to or different from those which he, she or it now
knows or believes to be true with respect to the subject
matter of the Released Claims, but each of them hereby
stipulate and agree that the Class Action Plaintiff does
settle and release, and each Settlement Class Member shall be
deemed to have, and upon the Effective Date and by operation
of the Judgment shall have, fully, finally, and forever
settled and released any and all Released Claims, known or
unknown, suspected or unsuspected, contingent or
non-contingent, whether or not concealed or hidden, which now
exist, or heretofore have existed upon any theory of law or
equity now existing or coming into existence in the future,
including, but not limited to, all Released Claims that are in
any way based on or related to conduct which is negligent,
intentional, with or without malice, or a breach of any duty,
law or rule, without regard to the subsequent discovery or
existence of such different or additional facts.
- 12 -
C. This release shall be of no force or effect unless and until,
among other things, the Court enters the Judgment, and the
Judgment becomes Final.
PART V: REPRESENTATIONS
I (we) hereby warrant and represent that I (we) have not assigned or
transferred or purported to assign or transfer, voluntarily or involuntarily,
any matter released pursuant to this release or any other part or portion
thereof.
I (we) certify that I am (we are) not subject to backup withholding under
the provisions of Section 3406(a) (1) (c) of the Internal Revenue Code.
NOTE: If you have been notified by the Internal Revenue Service that you are
subject to backup withholding, please strike out the word "Not" in the
certification above.
I declare under penalty of perjury under the laws of the State of Missouri and
the United States of America that the foregoing information supplied by the
undersigned is true and correct and that this Proof of Claim and Release form
was executed this _____ day of _______________ in ________________________
(month) (year) (City, State, Country)
_______________________________________________
(Sign your name here)
_______________________________________________
(Type or print your name here)
_______________________________________________
(Capacity of persons signing, e.g., Beneficial
Purchaser, Executor or Administrator)
ACCURATE CLAIMS PROCESSING TAKES A
SIGNIFICANT AMOUNT OF TIME
- 13 -
THANK YOU FOR YOUR PATIENCE
Reminder Checklist:
1. Please sign the above release and declaration.
2. Remember to attach only COPIES of your supporting documentation, a
complete list of which can be found on the claims Administrator's
website.
3. Do not send originals or copies of stock certificates.
4. Keep a copy of your completed claim form and documentation for your
records.
5. If you desire an acknowledgment of receipt of your claim form,
please send it Certified Mail, Return Receipt Requested, or its
equivalent. YOU WILL BEAR ALL RISKS OF DELAY OR NON-DELIVERY OF YOUR
CLAIM.
6. If your address changes in the future, or if these documents were
sent to an old or incorrect address, please send us written
notification of your new address.
7. If you have any questions or concerns regarding your claim, please
contact the Claims Administrator at:
Charter Securities Litigation
c/o Berdon Claims Administration LLC
P.O. Box 9014
Jericho, NY 11753-8914
Telephone: 800/766-3330
516/931-0810
Website: www.berdonllp.com/claims
- 14 -
EXECUTION COPY
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
IN RE CHARTER COMMUNICATIONS, INC. MDL DOCKET NO. 1506 (CAS)
SECURITIES LITIGATION ALL CASES
STONERIDGE INVESTMENT PARTNERS CONSOLIDATED CASE
LLC, Individually and On Behalf NO. 4:02-CV-1186 CAS
of All Others Similarly Situated,
Plaintiff,
SUPPLEMENTAL AGREEMENT
v.
[CONFIDENTIAL - NOT TO BE
CHARTER COMMUNICATIONS, INC., PAUL FILED WITH THE COURT]
ALLEN, JERALD L. KENT, CARL E. VOGEL,
KENT KALKWARF, DAVID G. BARFORD, PAUL E.
MARTIN, DAVID L. McCALL, BILL SHREFFLER,
CHRIS FENGER, JAMES H. SMITH, III,
SCIENTIFIC-ATLANTA, INC., MOTOROLA, INC.
and ARTHUR ANDERSEN, LLP,
Defendants.
For the purposes of Paragraph 10.4 of the Stipulation of Settlement, dated
as of January 24, 2005 (the "Stipulation") between Class Action Plaintiff and
the Settling Class Action Defendants, the terms under which Charter
Communications, Inc. (as defined in the Stipulation, "Charter") may withdraw
from and terminate the Stipulation are as follows (capitalized terms used, but
not defined herein, shall have the meanings ascribed to them in the
Stipulation).
1. Charter, in its sole and absolute discretion, shall have the right, but
not the obligation, to terminate the Settlement in the event that Settlement
Class Members whose aggregate Potential Claims meet or exceed $10 million
delivered timely and otherwise valid requests for the exclusion from the
Settlement Class. For purposes of this Supplemental Agreement, "Potential
Claims" shall mean the aggregated difference between the price at which a
Settlement Class Member purchased Charter common stock and either: (1) the price
at which that Settlement Class Member sold that stock, if the stock was sold
during the Settlement Class Period; or (2) the average of the daily trading
price of Charter common stock, determined as of the close of the market each
day, during the ninety-day period after the last day of the Settlement Class
Period, if the stock was not sold before the end of the Settlement Class Period.
2. The Settling Class Action Parties will propose an order to be entered
by the Court preliminarily approving the Settlement that shall provide that
requests for exclusion shall be received by a date to be determined by the
Court. Upon the receipt by the Claims Administrator of any request(s) for
exclusion pursuant to the Notice, Class Action Plaintiff's Counsel shall
promptly notify and provide copies to counsel for the Settling Class Action
Defendants of such request(s) for exclusion.
3. If Charter elects to exercise the option set forth in paragraph 1
hereof, written notice of such election must be provided to Class Action
Plaintiff's Counsel on or before five (5) business
- 2 -
days prior to the Settlement Hearing, provided, however, that Charter shall have
a minimum of three (3) business days from receipt by its counsel of any request
for exclusion to invoke its option set forth in paragraph 1 hereof.
4. In the event that Charter sends a written notice of its intent to
terminate the Settlement pursuant to paragraph 3 hereof, Charter may withdraw
its notice of intent to terminate the Settlement by providing written notice of
such withdrawal to Class Action Plaintiff's Counsel no later than 5:00 P.M.
Central Time on the day prior to the Settlement Hearing, or by such later date
as shall be agreed upon in writing as between Class Action Plaintiff's Counsel
and counsel for Charter.
5. If Charter elects to withdraw from the Settlement pursuant to this
Supplemental Agreement, Class Action Plaintiff's Counsel may, within five (5)
days of receipt of such notice of intention to withdraw from the Settlement (or
such longer period as shall be agreed upon in writing between Class Action
Plaintiff's Counsel and counsel for Charter), review the validity of any request
for exclusion and may attempt to cause retraction or withdrawal of any request
for exclusion. If, within the five (5) day period (or longer period agreed upon
in writing), Class Action Plaintiff's Counsel succeeds in causing the filing of
retractions or withdrawals of a sufficient number of requests for exclusion such
that the aggregate Potential Claims held by the Settlement Class Members who
submitted by the remaining requests for exclusion is less than $10 million, then
any withdrawal from the Stipulation by Charter shall automatically be deemed to
be a nullity.
6. If Charter elects to withdraw from the Settlement in accordance with
this Supplemental Agreement and such withdrawal is not nullified in accordance
with paragraphs 4 or 5 of this Supplemental Agreement, the Settlement shall be
withdrawn and terminated and deemed null and void, and the termination
provisions of the Stipulation, including paragraphs 10.4 and 10.5 shall apply.
- 3 -
7. This Supplemental Agreement shall not be filed with the Court prior to
the Settlement Hearing. The Parties shall seek to keep the terms of this
Supplemental Agreement confidential before the deadline for submitting exclusion
requests. Prior to the deadline for submitting exclusion requests, the
substantive contents of this Supplemental Agreement may be brought to the
attention of the Court (in camera, if so requested by the attorneys for any of
the Settling Class Action Parties and permitted by the Court).
IN WITNESS WHEREOF, the Parties hereto have caused the Stipulation to be
executed by their duly authorized attorneys dated as of _______, 2005.
DATED:____________ POMERANTZ HAUDEK BLOCK GROSS AND
GROSSMAN LLP
By: __________________________________________
Stanley M. Grossman, Esq.
Marc I. Gross, Esq.
100 Park Avenue, 26th Floor
New York, New York 10017
Telephone: (212) 661-1100
Facsimile: (212) 661-8665
POMERANTZ HAUDEK BLOCK GROSS AND
GROSSMAN LLP
Patrick V. Dahlstrom, Esq.
Leigh Handelman, Esq.
One North LaSalle Street, Suite 2225
Chicago, Illinois 60602-3908
Telephone: (312) 377-1181
Facsimile: (312) 377-1184
Attorneys for Class Action Plaintiff StoneRidge
Investment Partners LLC, Individually and On
Behalf of All Others Similarly Situated
LAW OFFICES OF WOLFF AND D'AGROSA
Donald L. Wolff, Esq.
Paul J. D'Agrosa, Esq.
- 4 -
8019 Forsyth Street
Clayton, Missouri 63105
Telephone: (314) 725-8019
Facsimile: (314) 277-1184
Liaison Counsel for the Settlement Class
DATED:____________ IRELL & MANELLA LLP
By: __________________________________________
David Siegel, Esq.
David A. Schwarz, Esq.
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4276
Telephone: (310) 277-1010
Facsimile: (310) 203-7199
Attorneys for Defendants Charter Communications,
Inc.
DATED:____________ THOMPSON COBURN LLP
By: __________________________________________
Roman P. Wuller, Esq.
Stephen B. Higgins, Esq.
One US Bank Plaza
St. Louis, Missouri 63101
Telephone: (314) 552-6199
Facsimile: (314) 552-7199
Attorneys for Defendants Charter Communications,
Inc.
DATED:____________ CHARTER COMMUNICATIONS, INC.
By: __________________________________________
Curtis S. Shaw, Esq.
Executive Vice-President, General Counsel and
Secretary, Defendant Charter Communications,
Inc.
- 5 -
12405 Powerscourt Drive
St. Louis, Missouri 63131
Telephone: (314) 965-0555
Facsimile: (314) 965-8793
DATED:____________ BRYAN CAVE, LLP
By: _________________________________
Edward L. Dowd, Jr., Esq.
James F. Bennett, Esq.
One Metropolitan Square
211 North Broadway
St. Louis, Missouri 63102-2750
Telephone: (314) 259-2000
Facsimile: (314) 259-2020
Attorneys for Defendant Carl E. Vogel
DATED:____________ DORSEY & WHITNEY, LLP
By: _________________________________
Peter S. Ehrlichman, Esq.
1420 Fifth Avenue
Suite 3400
Seattle, Washington 98101
Telephone: (206) 903-8825
Facsimile: (206) 903-8820
Attorneys for Defendant Paul G. Allen
DATED:____________ FOSTER PEPPER & SHEFELMAN PLLC
By: _________________________________
Timothy J. Filer, Esq.
1111 Third Avenue
Suite 3400
Seattle, Washington 98101
Telephone: (206) 447-4400
Facsimile: (206) 447-9700
Attorneys for Defendant Paul G. Allen
- 6 -
DATED:____________ PAUL, HASTINGS, JANOFSKY & WALKER LLP
By: __________________________________________
Grace A. Carter, Esq.
John A. Reding, Esq.
55 Second Street
24th Floor
San Francisco, California 94105
Telephone: (415) 856-7000
Facsimile: (415) 856-7100
Attorneys for Defendant Jerald L. Kent
DATED:____________ CAPES SOKOL GOODMAN & SARACHAN
By: __________________________________________
David V. Capes, Esq.
S. Todd Hamby, Esq.
7701 Forsyth Boulevard
Suite 400
Clayton, Missouri 63105
Telephone: (314) 721-7701
Facsimile: (314) 721-0554
Attorneys for Defendants Chris Fenger and Bill
Shreffler
DATED:____________ SNELL & WILMER
By: __________________________________________
John Roche, Esq.
1200 17th Street
Suite 1900
Denver, Colorado 80202
Telephone: (303) 634-2000
Facsimile: (303) 634-2020
Attorneys for Defendant James H. Smith, III
- 7 -
DATED:____________ GREENSFELDER, HEMKER & GALE, P.C.
By: __________________________________________
Jeffrey T. Demerath, Esq.
2000 Equitable Building
10 South Broadway
St. Louis, Missouri 63102
Telephone: (314) 241-9090
Facsimile: (314) 241-8624
Attorneys for Defendant David G. Barford
DATED:____________ HAAR & WOODS, LLP
By: __________________________________________
Robert T. Haar, Esq.
1010 Market Street, Suite 1620
St. Louis, Missouri 63101
Telephone: (314) 241-2224
Facsimile: (314) 241-2227
Attorneys for Defendant Kent D. Kalkwarf
DATED:____________ BURROUGHS, HEPLER, BROOM, MACDONALD, HEBRANK & TRUE
By: __________________________________________
Theodore J. MacDonald, Jr., Esq.
103 W. Vandalia Street, Suite 300
Edwardsville, Illinois 62025-0510
Telephone: (618) 656-0184
Facsimile: (618) 656-1364
Attorneys for Defendant Paul E. Martin
- 8 -
DATED: SENNIGER, POWERS, LEAVITT & ROEDEL
By: __________________________________________
David H. Harlan, Esq.
One Metropolitan Square, 16th Floor
St. Louis, Missouri 63102
Telephone: (314) 231-5400
Facsimile: (314) 231-4342
Attorneys for Defendant David L. McCall
- 9 -