Charter 2002 Annual Report Download - page 55

Our board of directors formed a special committee to evaluate this proposal. This Special Committee retained
Ñnancial and legal advisors to assist it.
On April 11, 2003, the Special Committee approved the terms of a backup facility and recommended
that our board approve the transaction. On April 11, 2003, our board of directors approved the facility. The
Special Committee received an opinion as to the fairness of the facility to us from a Ñnancial point of view,
and we received a separate opinion as to the fairness of the transaction which was provided to the trustees on
behalf of the holders of our bonds to the extent required under our bond indentures.
EÅective April 14, 2003, we entered into a commitment letter with Vulcan Inc., which is an aÇliate of
Paul Allen, pursuant to which Vulcan Inc. or an aÇliate (the ""lender'') would lend initially to Charter
Communications VII, LLC an aggregate amount of up to $300 million, which amount includes a subfacility of
up to $100 million for the issuance of letters of credit. The borrower would be able to draw under the facility or
have letters of credit issued, in each case within Ñve business days of the end of each quarter ending on or prior
to March 31, 2004. The loans and letters of credit could only be used to repay loans, or replace letters of credit,
under our operating subsidiaries' credit facilities to the extent required to comply with the leverage ratios
under those credit facilities or to create cushions in excess of the minimum amount necessary to comply with
such ratios. The facility would be guaranteed by us and certain of our subsidiaries and would be secured by a
lien on our corporate headquarters in St. Louis and certain corporate aircraft. We would be required to use our
commercially reasonable eÅorts to form a new interim holding company (CCH II, LLC) as a subsidiary of
Charter Holdings and to cause Charter Holdings to transfer to it the equity interests in Charter Operating,
CC VI Holdings, LLC, Charter Communications VII, LLC and CC V Holdings, LLC, which transfer we
refer to as the equity contribution. The equity interests to be transferred in the equity contribution have been
pledged as security for the loans under the Charter Operating credit facility. We would also be required to use
our commercially reasonable eÅorts to obtain the consent of the lenders under the Charter Operating credit
facility to the grant to the lender of a second priority lien on the equity interests transferred to CCH II, LLC.
Upon the equity contribution, CCH II, LLC would become the borrower under the facility.
In addition to the liens on our corporate headquarters, on the corporate aircraft and on the equity interests
transferred pursuant to the equity contribution, the facility would also be secured on a pari passu basis by liens
or security interests granted on any assets or properties (other than assets or properties of CCH II, LLC,
which shall secure the facility on a Ñrst priority basis, subject to the prior lien in favor of the lenders under
Charter Operating credit facility on the equity interests transferred pursuant to the equity contribution) to
secure any indebtedness of us or any of our subsidiaries (other than the operating company credit facilities and
other ordinary and customary exceptions to be determined).
The interest rate on the loans would be initially 13% per annum, reducing to 12% per annum at such time
as CCH II, LLC became the borrower under the facility. If the borrower were unable to receive funds from
our operating subsidiaries to pay such interest the borrower would be able to pay interest by delivering
additional notes to the lender in the amount of the accrued interest calculated at the rate of 15% per annum,
reducing to 14% per annum for any issuance after CCH II, LLC became the borrower under the facility. Such
additional notes would bear interest at the same rate as, and otherwise be on the same terms as, the notes
issued to represent the original loans under the facility. Upon the occurrence of an event of default, the interest
rate would be increased by 2% per annum over the interest rate otherwise applicable.
If letters of credit are issued pursuant to the facility, the borrower would pay a letter of credit fee of 8%
per annum of the face amount of the letter of credit.
The borrower would pay the lender a facility fee of 1.5% of the amount of the facility, payable over three
years (with 0.5% being earned upon execution of the commitment letter and 1.0% being earned upon
execution of the deÑnitive documentation). In addition to the facility fee, the borrower would pay a
commitment fee on the undrawn portion of the facility in the amount of 0.5% per annum commencing upon
execution of the deÑnitive documentation.
The borrower would have the right to terminate the facility at any time that no loans or letters of credit
are outstanding, although any fees earned prior to termination would remain payable. No amortization
53