SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): October 31,
2005
Charter
Communications Holdings, LLC
Charter
Communications Holdings Capital Corporation
(Exact
name of registrants as specified in their charter)
Delaware
Delaware
(State
or Other Jurisdiction of Incorporation or Organization)
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333-77499
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43-1843179
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333-77499-01
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43-1843177
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(Commission
File Number)
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(I.R.S.
Employer Identification
Number)
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12405
Powerscourt Drive
St.
Louis, Missouri 63131
(Address
of principal executive offices including zip code)
(314)
965-0555
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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Written
communications pursuant to Rule 425 under the Securities Act
(17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
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ITEM
1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
As
part
of the acquisition of the cable systems owned by Bresnan Communications
Company
Limited Partnership in February 2000, CC VIII, LLC ("CC VIII"), an
indirect
limited liability company subsidiary of Charter Communications Holdings,
LLC
("Charter Holdings") and Charter Communications Holdings Capital Corporation,
issued, after adjustments, 24,273,943 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 affiliated
with
AT&T Broadband, subsequently owned by Comcast Corporation (the "Comcast
sellers"). Charter Communications, Inc. ("Charter ") and Charter
Communications Holding Company, LLC ("Charter Holdco") are our
direct
parent companies . While held by the Comcast sellers, the CC
VIII interest
was entitled to a 2% priority return on its initial capital account
and such
priority return was entitled to preferential distributions from available
cash
and upon liquidation of CC VIII. While held by the Comcast sellers,
the CC VIII
interest generally did not share in the profits and losses of CC VIII.
Mr. Allen
granted the Comcast sellers the right to sell to him the CC VIII interest
for
approximately $630 million plus 4.5% interest annually from February
2000 (the
"Comcast put right"). In April 2002, the Comcast sellers exercised
the Comcast
put right in full, and this transaction was consummated on June 6,
2003.
Accordingly, Mr. Allen, indirectly through a company controlled by
him, Charter
Investment, Inc. ("CII"), became the holder of the CC VIII interest.
Consequently, subject to the matters referenced in the next paragraph,
Mr. Allen
generally thereafter has been allocated his pro rata share (based on
number of
membership interests outstanding) of profits or losses of CC VIII.
In the event
of a liquidation of CC VIII, Mr. Allen would be entitled to a priority
distribution with respect to the 2% priority return (which will continue
to
accrete). Any remaining distributions in liquidation would be distributed
to CC
V Holdings, LLC, an indirect subsidiary of us ("CC V"), and Mr. Allen
in
proportion to CC V's capital account and Mr. Allen's capital account
(which will
equal the initial capital account of the Comcast sellers of approximately
$630
million, increased or decreased by Mr. Allen's pro rata share of CC VIII's
profits or losses (as computed for capital account purposes) after
June 6,
2003). The limited liability company agreement of CC VIII does
not provide
for a mandatory redemption of the CC VIII interest.
An
issue
arose as to whether the documentation for the Bresnan transaction was
correct
and complete with regard to the ultimate ownership of the CC VIII interest
following consummation of the Comcast put right. Specifically, under
the terms
of the Bresnan transaction documents that were entered into in June
1999, the
Comcast sellers originally would have received, after adjustments,
24,273,943
Charter Holdco membership units, but due to an FCC regulatory issue
raised by
the Comcast sellers shortly before closing, the Bresnan transaction
was modified
to provide that the Comcast sellers instead would receive the preferred
equity
interests in CC VIII represented by the CC VIII interest. As part of
the
last-minute changes to the Bresnan transaction documents, a draft amended
version of the Charter Holdco limited liability company agreement was
prepared,
and contract provisions were drafted for that agreement that would
have required
an automatic exchange of the CC VIII interest for 24,273,943 Charter
Holdco
membership units if the Comcast sellers exercised the Comcast put right
and sold
the CC VIII interest to Mr. Allen or his affiliates. However, the provisions
that would have required this automatic exchange did not appear in
the final
version of the Charter Holdco limited liability company agreement that
was
delivered and executed at the closing of the Bresnan transaction. The
law firm
that prepared the documents for the Bresnan transaction brought this
matter to
the attention of Charter and representatives of Mr. Allen in 2002.
Thereafter,
the board of directors of Charter formed a Special Committee (currently
comprised of Messrs. Merritt, Tory and Wangberg) to investigate the
matter and
take any other appropriate action on behalf of Charter with respect
to this
matter. After conducting an investigation of the relevant facts and
circumstances, the Special Committee determined that a "scrivener's
error" had
occurred in February 2000 in connection with the preparation of the
last-minute
revisions to the Bresnan transaction documents and that, as a result,
Charter
should seek reformation of the Charter Holdco limited liability company
agreement, or alternative relief, in order to restore and ensure the
obligation
that the CC VIII interest be automatically exchanged for Charter Holdco
units.
The Special Committee further determined that, as part of such contract
reformation or alternative relief, Mr. Allen should be required to
contribute
the CC VIII interest to Charter Holdco in exchange for 24,273,943 Charter
Holdco
membership units. The Special Committee also recommended to the board
of
directors of Charter that, to the extent contract reformation were
achieved, the
board of directors should consider whether the CC VIII interest should
ultimately be held by Charter Holdco or Charter Holdings or another
entity owned
directly or indirectly by them.
Mr.
Allen
disagreed with the Special Committee's determinations described above
and so
notified the Special Committee. Mr. Allen contended that the transaction
was
accurately reflected in the transaction documentation and contemporaneous
and
subsequent company public disclosures.
The
parties engaged in a process of non-binding mediation to seek to resolve
this
matter, without success. The Special Committee evaluated what further
actions or
processes to undertake to resolve this dispute. To accommodate further
deliberation, each party agreed to refrain from initiating legal proceedings
over this matter until it had given at least ten days' prior notice
to the
other. In addition, the Special Committee and Mr. Allen determined
to utilize
the Delaware Court of Chancery's program for mediation of complex business
disputes in an effort to resolve the CC VIII interest dispute.
As
of
October 31, 2005, Mr. Allen, the Special Committee, Charter, Charter
Holdco and
certain of their affiliates, having investigated the facts and circumstances
relating to the dispute involving the CC VIII interest, after
consultation
with counsel and other advisors, and as a result of the Delaware Chancery
Court's non-binding mediation program, agreed to settle the dispute,
and execute
certain permanent and irrevocable releases pursuant to the Settlement
Agreement
and Mutual Release agreement dated October 31, 2005 (the
"Settlement").
Pursuant
to the Settlement, CII has retained 30% of its CC VIII interest (the
"Remaining
Interests"). The Remaining Interests are subject to certain
drag along,
tag along and transfer restrictions as detailed in the revised CC VIII
Limited
Liability Company Agreement. CII transferred the other 70%
of the CC VIII
interest directly and indirectly, through Charter Holdco, to a newly
formed
entity, CCHC, LLC (a direct subsidiary of Charter Holdco and the direct
parent
of Charter Holdings, "CCHC"). Of that other 70% of the CC VIII
preferred
interests, 7.4% has been transferred by CII for a subordinated
exchangeable
note of CCHC with an initial accreted value of $48.2 million, accreting
at 14%,
compounded quarterly, with a 15-year maturity (the "Note").
The remaining
62.6% has been transferred for no consideration.
As
part
of the Settlement, CC VIII issued approximately 49 million additional
Class
B units to CC V in consideration for prior capital contributions to
CC VIII by
CC V, with respect to transactions that were unrelated to the dispute
in
connection with CII's membership units in CC VIII. As a result, Mr.
Allen's pro
rata share of the profits and losses of CC VIII attributable to the
Remaining
Interests is approximately 5.6%.
The
Note
is exchangeable, at CII's option, at any time, for Charter Holdco Class
A Common
units at a rate equal to then accreted value, divided by $2.00 (the
"Exchange
Rate"). Customary anti-dilution protections have been provided that
could cause
future changes to the Exchange Rate. Additionally, the Charter Holdco
Class A
Common units received will be exchangeable by the holder into Charter
common
stock in accordance with existing agreements between CII, Charter and
certain
other parties signatory thereto. Beginning three years and four months
after the
closing of the Settlement, if the closing price of Charter common stock
is at or
above the Exchange Rate for a certain period of time as specified in
the
Exchange Agreement, Charter Holdco may require the exchange of the
Note for
Charter Holdco Class A Common units at the Exchange Rate.
CCHC
has
the right to redeem the Note under certain circumstances, for cash
in an amount
equal to the then accreted value. CCHC must redeem the Note at its
maturity for
cash in an amount equal to the initial stated value plus the accreted
return
through maturity.
The
Board
of Directors has determined that the transferred CC VIII interests
remain at
CCHC.
On
November 3, 2005, the parties revised the Note to clarify certain
provisions. The revised Note is filed herewith as Exhibit 10.3.
ITEM
2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER
AN
OFF-BALANCE SHEET ARRANGEMENT OR A REGISTRANT.
The
information in Item 1.01 of this Form 8-K is hereby incorporated
by
reference to this Item 2.03.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS.
The
following exhibit is filed pursuant to Item 1.01:
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Exhibit
Number
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Description
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10.1†
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Settlement
Agreement and Mutual Releases, dated as of October
31, 2005, by and among
Charter Communications, Inc., Special Committee of
the Board of Directors
of Charter Communications, Inc., Charter Communications
Holding Company,
LLC, CCHC, LLC, CC VIII, LLC, CC V, LLC, Charter Investment,
Inc., Vulcan
Cable III LLC and Paul G. Allen (incorporated by reference
to
Exhibit 10.17 to the quarterly report on Form 10-Q
of Charter
Communications, Inc. filed on November 2, 2005 (File
No. 000-27927)).
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10.2
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Exchange
Agreement, dated as of October 31, 2005, by and among
Charter
Communications Holding Company, LLC, Charter Investment,
Inc. and Paul G.
Allen (incorporated by reference to Exhibit 10.18
to the quarterly
report on Form 10-Q of Charter Communications,
Inc. filed on November
2, 2005 (File No. 000-27927)).
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10.3
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CCHC,
LLC Subordinated and Accreting Note, dated as of October
31, 2005.
(revised) (incorporated by reference to Exhibit 10.3
to the current report
on Form 8-K of Charter Communications, Inc. filed on
November 4, 2005
(File No. 000-27927)).
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10.4
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Third
Amended and Restated Limited Liability Company Agreement
for CC VIII, LLC,
dated as of October 31, 2005 (incorporated by reference
to
Exhibit 10.20 to the quarterly report on Form 10-Q
of Charter
Communications, Inc. filed on November 2, 2005 (File
No. 000-27927)).
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10.5
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Second
Amended and Restated Limited Liability Company Agreement
for Charter
Communications Holdings, LLC, dated as of October 31,
2005 (incorporated
by reference to Exhibit 10.21 to the quarterly
report on
Form 10-Q of Charter Communications, Inc. filed
on November 2, 2005
(File No. 000-27927)).
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†
Portions of this document have been omitted pursuant to a request
for
confidential treatment. The omitted portions of this
document have been
filed with the Securities and Exchange Commission.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934,
Charter
Communications Holdings, LLC and Charter Communications Holdings Capital
Corporation have duly caused this Current Report to be signed on their
behalf by the undersigned hereunto duly authorized.
CHARTER
COMMUNICATIONS HOLDINGS, LLC
Registrant
By:
CHARTER COMMUNICATIONS, INC., Sole Manager
Dated: November
4, 2005
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By:/s/
Kevin D. Howard
Name:
Kevin D. Howard
Title:
Vice
President of Financial Reporting and
Analysis
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CHARTER
COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
Registrant
Dated:
November 4, 2005
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By:/s/
Kevin D. Howard
Name:
Kevin D. Howard
Title:
Vice
President of Financial Reporting and
Analysis
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EXHIBIT
INDEX
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Exhibit
Number
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Description
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10.1†
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Settlement
Agreement and Mutual Releases, dated as of October 31, 2005,
by and among
Charter Communications, Inc., Special Committee of the Board
of Directors
of Charter Communications, Inc., Charter Communications Holding
Company,
LLC, CCHC, LLC, CC VIII, LLC, CC V, LLC, Charter Investment,
Inc., Vulcan
Cable III LLC and Paul G. Allen (incorporated by reference
to
Exhibit 10.17 to the quarterly report on Form 10-Q
of Charter
Communications, Inc. filed on November 2, 2005 (File
No. 000-27927)).
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10.2
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Exchange
Agreement, dated as of October 31, 2005, by and among Charter
Communications Holding Company, LLC, Charter Investment,
Inc. and Paul G.
Allen (incorporated by reference to Exhibit 10.18
to the quarterly
report on Form 10-Q of Charter Communications, Inc.
filed on November
2, 2005 (File No. 000-27927)).
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10.3
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CCHC,
LLC Subordinated and Accreting Note, dated as of October
31, 2005.
(revised) (incorporated by reference to Exhibit 10.3 to the
current report
on Form 8-K of Charter Communications, Inc. filed on November
4, 2005
(File No. 000-27927))
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10.4
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Third
Amended and Restated Limited Liability Company Agreement
for CC VIII, LLC,
dated as of October 31, 2005 (incorporated by reference to
Exhibit 10.20 to the quarterly report on Form 10-Q
of Charter
Communications, Inc. filed on November 2, 2005 (File
No. 000-27927)).
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10.5
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Second
Amended and Restated Limited Liability Company Agreement
for Charter
Communications Holdings, LLC, dated as of October 31, 2005
(incorporated
by reference to Exhibit 10.21 to the quarterly report
on
Form 10-Q of Charter Communications, Inc. filed on
November 2, 2005
(File No. 000-27927)).
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†
Portions of this document have been omitted pursuant to a request for
confidential treatment. The omitted portions of this document
have been
filed with the Securities and Exchange Commission.