The parties will construct a baseline case pursuant to which :
With respect to the forward Section 704(c) layer created upon contribution of the A/N assets and the Charter assets to Charter Holdco,
Charter Holdco adopts the traditional method for both the Charter and A/N contributed assets and allocates its depreciation and amortization accordingly.
Under the Tax Receivable Agreement, Charter will pay to A/N 50% of the tax benefit that Charter receives from the actual Section 743(b)
adjustment obtained from an acquisition of A/Ns interest in Charter Holdco based on the use of the traditional method for the forward Section 704(c) layer.
The parties agree to discuss the use of alternative methods under Section 704(c) in good faith. The baseline Section 704(c) methodology will be the Section
704(c) methodology unless the parties subsequently agree to another Section 704(c) methodology that results in an overall reduction to the NPV of the partners aggregate tax liabilities, taking into account the effect of such methodology on the
partners allocations of operating income and depreciation and amortization deductions, the amount of step-up recognized as a result of the back end transaction, and any other relevant items agreed upon by the parties (taking into account the
effects under the Tax Receivable Agreement). If the parties agree on an alternative methodology, then the benefits to the parties over and above the baseline case will be shared equitably between the parties, taking into account any detriments
suffered relative to the baseline.
The Managing Member may cause Charter Holdco to
distribute to Charter the stock of corporate subsidiaries of Charter Holdco in redemption of LLC units held by Charter provided that Charter immediately re-contributes all of the assets and liabilities of such subsidiaries to Charter Holdco in
consideration of the issuance of an equivalent number of LLC units.
the preferred return in respect of the preferred units will take the form of a guaranteed payment or an allocation of gross income items.