Charter 2003 Annual Report Download - page 75

The restricted subsidiaries of CCH II are generally not permitted to issue debt securities contractually
subordinated to other debt of the issuing subsidiary or preferred stock, in either case in any public or
Rule 144A oÅering.
The CCH II indenture permits CCH II and its restricted subsidiaries to incur debt under one category,
and later reclassify that debt into another category. Our subsidiaries' credit agreements generally impose more
restrictive limitations on incurring new debt than the CCH II indenture, so our subsidiaries that are subject to
credit agreements are not permitted to utilize the full debt incurrence that would otherwise be available under
the CCH II indenture covenants.
Generally, under the CCH II indenture, CCH II and its restricted subsidiaries are permitted to pay
dividends on equity interests, repurchase interests, or make other speciÑed restricted payments only if CCH II
can incur $1.00 of new debt under the leverage ratio test, which requires that CCH II meet a 5.5 to 1.0
leverage ratio after giving eÅect to the transaction, and if no default exists or would exist as a consequence of
such incurrence. If those conditions are met, restricted payments in a total amount of up to 100% of CCH II's
consolidated EBITDA, as deÑned, minus 1.3 times its consolidated interest expense, plus 100% of new cash
and non-cash equity proceeds received by CCH II and not allocated to the debt incurrence covenant, all
cumulatively from the Ñscal quarter commenced July 1, 2003, plus $100 million.
In addition, CCH II may make distributions or restricted payments, so long as no default exists or would
be caused by transactions:
‚ to repurchase management equity interests in amounts not to exceed $10 million per Ñscal year,
‚ regardless of the existence of any default, to pay pass-through tax liabilities in respect of ownership of
equity interests in CCH II or its restricted subsidiaries,
‚ regardless of the existence of any default, to pay interest when due on Charter Holdings notes, to pay,
so long as there is no default, interest on the convertible senior notes (including the Notes) of Charter,
to purchase, redeem or reÑnance, so long as CCH II could incur $1.00 of indebtedness under the 5.5 to
1.0 leverage ratio test referred to above and there is no default, Charter Holdings notes, Charter notes,
and other direct or indirect parent company notes (including the CCH II notes),
‚ to make distributions in connection with the private exchanges pursuant to which the CCH II notes
were issued, and
‚ other speciÑed restricted payments including merger fees up to 1.25% of the transaction value,
repurchases using concurrent new issuances, and certain dividends on existing subsidiary preferred
equity interests.
The indenture governing the CCH II notes restricts CCH II and its restricted subsidiaries from making
investments, except speciÑed permitted investments, or creating new unrestricted subsidiaries, if there is a
default under the indenture or if CCH II could not incur $1.00 of new debt under the 5.5 to 1.0 leverage ratio
test described above after giving eÅect to the transaction.
Permitted investments include:
‚ investments by CCH II and its restricted subsidiaries in CCH II and in other restricted subsidiaries, or
entities that become restricted subsidiaries as a result of the investment,
‚ investments aggregating up to 100% of new cash equity proceeds received by CCH II since
September 23, 2003 to the extent the proceeds have not been allocated to the restricted payments
covenant described above,
‚ investments resulting from the private exchanges pursuant to which the CCH II notes were issued,
‚ other investments up to $750 million outstanding at any time, and
‚ certain speciÑed additional investments, such as investments in customers and suppliers in the ordinary
course of business and investments received in connection with permitted asset sales.
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