CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following sets forth certain transactions in which we and our
directors, executive officers and affiliates, including the directors and
executive officers of Charter Communications, Inc., Charter Holdings, Charter
Capital and Charter Investment, Inc., are involved. We believe that each of the
transactions described below was on terms no less favorable to us than could
have been obtained from independent third parties.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
MERGER WITH MARCUS
On April 23, 1998, Mr. Allen acquired approximately 99% of the non-voting
economic interests in Marcus Cable, and agreed to acquire the remaining
interests in Marcus Cable. The aggregate purchase price was approximately $1.4
billion, excluding $1.8 billion in debt assumed. On February 22, 1999, Marcus
Holdings was formed, and all of Mr. Allen's interests in Marcus Cable were
transferred to Marcus Holdings on March 15, 1999. On March 31, 1999, Mr. Allen
completed the acquisition of all remaining interests in Marcus Cable.
On December 23, 1998, Mr. Allen acquired approximately 94% of the equity of
Charter Investment, Inc. for an aggregate purchase price of approximately $2.2
billion, excluding $2.0 billion in debt assumed. On February 9, 1999, Charter
Holdings was formed as a wholly owned subsidiary of Charter Investment, Inc. On
February 10, 1999, Charter Operating was formed as a wholly owned subsidiary of
Charter Holdings. In April 1999, Mr. Allen merged Marcus Holdings into Charter
Holdings, and the operating subsidiaries of Marcus Holdings and all of the cable
systems they owned came under the ownership of Charter Holdings, and, in turn,
Charter Operating. On May 25, 1999, Charter Communications Holding Company was
formed as a wholly owned subsidiary of Charter Investment, Inc. All of Charter
Investment, Inc.'s equity interests in Charter Holdings were transferred to
Charter Communications Holding Company.
In March 1999, we paid $20 million to Vulcan Northwest, an affiliate of Mr.
Allen, for reimbursement of direct costs incurred in connection with Mr. Allen's
acquisition of Marcus Cable. Such costs were principally comprised of financial,
advisory, legal and accounting fees.
On April 7, 1999, Mr. Allen merged Marcus Holdings into Charter Holdings.
Charter Holdings survived the merger, and the operating subsidiaries of Marcus
Holdings became subsidiaries of Charter Holdings.
At the time Charter Holdings issued $3.6 billion in principal amount of
notes in March 1999, this merger had not yet occurred. Consequently, Marcus
Holdings was a party to the indentures governing the March 1999 Charter Holdings
notes as a guarantor of Charter Holdings' obligations. Charter Holdings loaned
some of the proceeds from the sale of the March 1999 Charter Holdings notes to
Marcus Holdings, which amounts were used to complete the cash tender offers for
then-outstanding notes of subsidiaries of Marcus Holdings. Marcus Holdings
issued a promissory note in favor of Charter Holdings. The promissory note was
in the amount of $1.7 billion, with an interest rate of 9.92% and a maturity
date of April 1, 2007. Marcus Holdings guaranteed its obligations under the
promissory note by entering into a pledge agreement in favor of Charter Holdings
pursuant to which Marcus Holdings pledged all of its equity interests in Marcus
Cable as collateral for the payment and performance of the promissory note.
Charter Holdings pledged this promissory note to the trustee under the
indentures for the March 1999 Charter Holdings notes as collateral for the equal
and ratable benefit of the holders of the March 1999 Charter Holdings notes.
Upon the closing of the merger, and in accordance with the terms of the March
1999 Charter Holdings notes and the indentures for the March 1999 Charter
- the guarantee issued by Marcus Holdings was automatically terminated;