Charter 2002 Annual Report Download - page 51

‚ The indentures also restrict the ability of Charter Holdings and its restricted subsidiaries to enter into
certain transactions with aÇliates involving consideration in excess of $15 million without a determina-
tion by the board of directors that the transaction is on terms no less favorable than arms-length, or
transactions with aÇliates involving over $50 million without receiving an independent opinion as to
the fairness of the transaction to the holders of the notes.
Summary of Restrictive Covenants under CC V Notes. The limitations on incurrence of debt contained
in the indenture governing the CC V notes permit the CC V issuers and their restricted subsidiaries to incur
additional debt or issue shares of preferred stock, so long as we are not in default under the CC V indenture:
‚ if, after giving pro forma eÅect to the incurrence, the CC V issuers could meet a leverage ratio (ratio of
consolidated debt to four times consolidated cash Öow from the most recent quarter) of 6.5 to 1.0, and,
regardless of whether the leverage ratio could be met,
‚ up to approximately $346 million of debt under a credit facility,
‚ up to $10 million of debt incurred to Ñnance the purchase of new assets,
‚ up to $15 million of additional debt, and
‚ other items of indebtedness for speciÑc purposes such as intercompany debt, reÑnancing of existing
debt and interest rate swaps to provide protection against Öuctuation in interest rates.
The indenture governing the CC V notes permits the CC V issuers to incur debt under one of the
categories above, and reclassify the debt into a diÅerent category. The CC VIII credit agreement generally
imposes more restrictive limitations on incurring new debt, so CC VIII Operating and its subsidiaries are not
permitted to utilize the full debt incurrence capability provided by the indenture covenants provided for the
CC V notes.
‚ Under the indenture governing the CC V notes, the CC V issuers and their restricted subsidiaries are
permitted to pay dividends on equity interests, repurchase interests, make restricted investments, or
make other speciÑed restricted payments only if CC V could, after giving pro forma eÅect thereto,
incur $1.00 of additional debt under the leverage ratio test, which would require that the CC V issuers
meet the 6.5 to 1.0 leverage ratio of the indebtedness covenant and no default would exist or result as a
consequence thereof.
‚ If those conditions are met, the CC V issuers and their restricted subsidiaries are permitted to make
restricted payments in an aggregate amount not to exceed the result of 100% of the CC V issuers'
consolidated cash Öow, minus 1.4 times their consolidated interest expense, plus 100% of new equity
proceeds received by the CC V issuers, plus returns on certain investments, all cumulatively from
January 1, 1999. The CC V issuers and their restricted subsidiaries may make permitted investments
up to $10 million and other speciÑed permitted investments, restricted payments up to $5 million, and
other speciÑed restricted payments without meeting the foregoing test.
‚ The CC V issuers and their restricted subsidiaries are not permitted to grant liens on their assets other
than speciÑed permitted liens. Permitted liens include liens securing debt permitted by the covenant
limiting incurrence of debt, liens securing amounts up to the greater of $15 million or 5% of total assets,
certain existing liens and speciÑed liens incurred in the ordinary course of business.
‚ The CC V issuers are generally not permitted to sell or otherwise dispose of all or substantially all of
their assets or merge with or into other companies unless the CC V issuers and their subsidiaries could
incur 1.00 of additional debt under the leverage ratio test described above, after giving eÅect to the
transaction.
‚ The CC V issuers and their subsidiaries may generally not otherwise sell assets or, in the case of
restricted subsidiaries, equity interests, unless they receive consideration at least equal to the fair
market value of the assets or equity interests, with at least 75% of the consideration for such sale
consisting of a controlling interest in a permitted business or assets useful in a permitted business or
cash, assumption of liabilities or securities promptly converted into cash. The CC V issuers and their
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