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
CCO
Holdings, LLC
CCO
Holdings Capital Corp.
(Exact
name of registrants as specified in their charter) Delaware
Delaware
(State
or Other Jurisdiction of Incorporation or Organization)
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333-112593
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86-1067239
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333-112593-01
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20-0257904
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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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o
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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 ("CCC VIII"),
an indirect limited liability company subsidiary of
CCO Holdings, LLC and
CCO Holdings Capital Corp, 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"), Charter
Communications Holding Company, LLC ("Charter Holdco")
and Charter
Communications Holdings, LLC ("Charter Holdings") are
our indirect
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,
CCO
Holdings, LLC and CCO Holdings Capital Corp. have duly
caused this Current Report to be signed on their behalf by the undersigned
hereunto duly authorized.
CCO
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 |
CCO
HOLDINGS CAPITAL CORP.
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.