Charter 2003 Annual Report Download - page 142

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 and 2001
(dollars in millions, except where indicated)
As discussed in Note 4, in April 2002, Interlink Communications Partners, LLC, Rifkin Acquisition
Partners, LLC and Charter Communications Entertainment I, LLC, each an indirect, wholly-owned
subsidiary of the Company, completed the cash purchase of certain assets of Enstar Income Program II-2,
L.P., Enstar Income Program IV-3, L.P., Enstar Income/Growth Program Six-A, L.P., Enstar Cable of
Macoupin County and Enstar Income IV/PBD Systems Venture, serving approximately 21,600 (unaudited)
customers, for a total cash sale price of approximately $48 million. In September 2002, Charter Communica-
tions Entertainment I, LLC purchased all of Enstar Income Program II-1, L.P.'s Illinois cable systems,
serving approximately 6,400 (unaudited) customers, for a cash sale price of $15 million. Enstar Communica-
tions Corporation, a direct subsidiary of Charter Holdco, is a general partner of the Enstar limited partnerships
but does not exercise control over them. All of the executive oÇcers of Charter and Charter Holdco act as
oÇcers of Enstar Communications Corporation.
On June 30, 2003, Charter Holdco entered into an agreement with Motorola for the purchase of 100,000
broadband media centers, subject to the Company's testing and approval of product performance and
functionality. It is contemplated that the software for these broadband media centers would be supplied to
Motorola by Digeo. License fees for Digeo to license such software to the Company and support fees for the
broadband media centers and relevant content and support services are currently under negotiation.
In March 2001, Charter Communications Ventures, LLC (""Charter Ventures''), the Company's indirect
subsidiary, and Vulcan Ventures formed DBroadband Holdings, LLC (""DBroadband'') for the sole purpose
of purchasing equity interests in Digeo. In connection with the execution of the broadband carriage agreement,
DBroadband purchased an equity interest in Digeo funded by contributions from Vulcan Ventures. The equity
interest is subject to a priority return of capital to Vulcan Ventures up to the amount contributed by Vulcan
Ventures on Charter Ventures' behalf. Charter Ventures has a 100% proÑt interest in DBroadband. Vulcan
Ventures also agreed to make, through January 24, 2004, certain additional contributions through DBroad-
band to acquire additional equity in Digeo as necessary to maintain Charter Ventures' pro rata interest in
Digeo in the event of certain future Digeo equity Ñnancings by the founders of Digeo. These additional equity
interests are also subject to a priority return of capital to Vulcan Ventures up to amounts contributed by
Vulcan Ventures on Charter Ventures' behalf. DBroadband is therefore not included in the Company's
consolidated Ñnancial statements.
The Company believes that Vulcan Ventures, an entity controlled by Mr. Allen, owns an approximate
60% equity interest in Digeo, Inc. Messrs. Allen and Vogel are directors of Digeo. Mr. Savoy was a director
and served on the compensation committee of Digeo until September 2003. Mr. Vogel owns options to
purchase 10,000 shares of Digeo common stock.
On January 10, 2003, Charter signed an agreement to carry two around-the-clock, high deÑnition
networks, HDNet and HDNet Movies. The Company believes that entities controlled by Mr. Mark Cuban,
co-founder and president of HDNet, owns 85% of HDNet and HDNet Movies as of December 31, 2003. As of
December 31, 2003 Mr. Cuban, owns an approximate 6.4% equity interest in Charter.
Certain related parties, including members of the board of directors and management, hold interests in
the Company's senior convertible debt and senior notes and discount notes of the Company's subsidiary of
approximately $61.5 million of face value at December 31, 2003.
As part of the acquisition of the cable systems owned by Bresnan Communications Company Limited
Partnership in February 2000, CC VIII, LLC, Charter's indirect limited liability company subsidiary, issued,
after adjustments, 24,279,943 Class A preferred membership units (collectively, the ""CC VIII interest'') with
a value and an initial capital account of approximately $630 million to certain sellers aÇliated with AT&T
Broadband, subsequently owned by Comcast Corporation (the ""Comcast sellers''). While held by the
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