Charter 2005 Annual Report Download - page 158

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2005 FORM 10-K
Notes to Consolidated Financial Statements (continued)
ultimately be held by Charter Holdco or Charter Holdings or Customary anti-dilution protections have been provided that
another entity owned directly or indirectly by them. could cause future changes to the Exchange Rate. Additionally,
Mr. Allen disagreed with the Special Committee’s determi- the Charter Holdco Class A Common units received will be
nations described above and so notified the Special Committee. exchangeable by the holder into Charter common stock in
Mr. Allen contended that the transaction was accurately accordance with existing agreements between CII, Charter and
reflected in the transaction documentation and contemporane- certain other parties signatory thereto. Beginning February 28,
ous and subsequent company public disclosures. The Special 2009, if the closing price of Charter common stock is at or
Committee and Mr. Allen determined to utilize the Delaware above the Exchange Rate for a certain period of time as
Court of Chancery’s program for mediation of complex business specified in the Exchange Agreement, Charter Holdco may
disputes in an effort to resolve the CC VIII interest dispute. require the exchange of the Note for Charter Holdco Class A
As of October 31, 2005, Mr. Allen, the Special Committee, Common units at the Exchange Rate.
Charter, Charter Holdco and certain of their affiliates, agreed to CCHC has the right to redeem the Note under certain
settle the dispute, and execute certain permanent and irrevocable circumstances, for cash in an amount equal to the then accreted
releases pursuant to the Settlement Agreement and Mutual value, such amount, if redeemed prior to February 28, 2009,
Release agreement dated October 31, 2005 (the ‘‘Settlement’’). would also include a make whole up to the accreted value
Pursuant to the Settlement, CII has retained 30% of its CC VIII through February 28, 2009. CCHC must redeem the Note at its
interest (the ‘‘Remaining Interests’’). The Remaining Interests are maturity for cash in an amount equal to the initial stated value
subject to certain drag along, tag along and transfer restrictions plus the accreted return through maturity.
as detailed in the revised CC VIII Limited Liability Company The Board of Directors has determined that the transferred
Agreement. CII transferred the other 70% of the CC VIII CC VIII interests remain at CCHC.
interest directly and indirectly, through Charter Holdco, to a Helicon. In 1999, the Company purchased the Helicon cable
newly formed entity, CCHC (a direct subsidiary of Charter systems. As part of that purchase, Mr. Allen entered into a put
Holdco and the direct parent of Charter Holdings). Of the 70% agreement with a certain seller of the Helicon cable systems that
of the CC VIII preferred interests, 7.4% has been transferred by received a portion of the purchase price in the form of a
CII to CCHC for a subordinated exchangeable note with an preferred membership interest in Charter Helicon, LLC with a
initial accreted value of $48 million, accreting at 14%, com- redemption price of $25 million plus accrued interest. Under the
pounded quarterly, with a 15-year maturity (the ‘‘Note’’). The Helicon put agreement, such holder had the right to sell any or
remaining 62.6% has been transferred by CII to Charter Holdco, all of the interest to Mr. Allen prior to its mandatory
in accordance with the terms of the settlement for no additional redemption in cash on July 30, 2009. On August 31, 2005, 40%
monetary consideration. Charter Holdco contributed the 62.6% of the preferred membership interest was put to Mr. Allen. The
interest to CCHC. remaining 60% of the preferred interest in Charter Helicon, LLC
As part of the Settlement, CC VIII issued approximately remained subject to the put to Mr. Allen. Such preferred interest
49 million additional Class B units to CC V in consideration for was recorded in other long-term liabilities. On October 6, 2005,
prior capital contributions to CC VIII by CC V, with respect to Charter Helicon, LLC redeemed all of the preferred member-
transactions that were unrelated to the dispute in connection ship interest for the redemption price of $25 million plus
with CII’s membership units in CC VIII. As a result, Mr. Allen’s accrued interest.
pro rata share of the profits and losses of CC VIII attributable to Certain related parties, including members of the board of
the Remaining Interests is approximately 5.6%. directors and officers, hold interests in the Company’s senior
The Note is exchangeable, at CII’s option, at any time, for convertible debt and senior notes and discount notes of the
Charter Holdco Class A Common units at a rate equal to the Company’s subsidiary of approximately $60 million of face value
then accreted value, divided by $2.00 (the ‘‘Exchange Rate’’). at December 31, 2005.
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