DATED APRIL
13, 2006
PROSPECTUS
$862,500,000
5.875% Convertible Senior Notes due 2009
___________________________________
356,404,924
Shares of Class A Common Stock Issuable Upon
Conversion
of the 5.875% Convertible Senior Notes due 2009
___________________________________
This
prospectus relates to $862,500,000 aggregate principal amount of 5.875%
Convertible Senior Notes due 2009 of Charter Communications, Inc., and
356,404,924 shares of Class A common stock of Charter Communications, Inc.,
which are initially issuable upon conversion of the notes, plus an indeterminate
number of shares as may become issuable upon conversion as a result of
adjustments to the conversion rate.
The
convertible senior notes were originally issued and sold by Charter
Communications, Inc. to certain initial purchasers in a private placement.
The
convertible senior notes and shares offered by this prospectus are to be sold
for the account of the holders. Holders of the convertible senior notes may
convert the convertible senior notes into shares of Charter Communications,
Inc.’s Class A common stock at any time before their maturity or their prior
redemption or repurchase by Charter Communications, Inc.
The
convertible senior notes are issued only in denominations of $1,000 and integral
multiples of $1,000. The convertible senior notes are currently designated
for
trading in the Private Offerings, Resale and Trading through Automated Linkages
(PORTAL) Market of the National Association of Securities Dealers, Inc. Charter
Communications, Inc.’s Class A common stock is quoted on the Nasdaq National
Market under the symbol "CHTR." The last reported sale price of our Class A
common stock on the Nasdaq National Market on March 15, 2006 was $0.95 per
share.
__________________________________
The
principal terms of the convertible senior notes include the following:
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Interest
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Accrues
from November 22, 2004 at the rate of 5.875% per year, payable
semi-annually on each May 16 and November 16, commencing on
May 16, 2005.
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Maturity
Date
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November 16,
2009
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Conversion
Rate
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413.2231
shares of Class A common stock per each $1,000 principal amount of
notes, subject to adjustment. This is equivalent to an initial conversion
price of approximately $2.42 per share. Upon conversion, we will
have the
right to deliver, in lieu of our Class A common stock, cash or a
combination of cash and Class A common stock.
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Ranking
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Rank
equally with any of Charter Communications, Inc.’s existing and future
senior unsecured indebtedness, but are effectively subordinated to
our
secured indebtedness and structurally subordinated to all existing
and
future indebtedness and other liabilities of our
subsidiaries.
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Redemption
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Following
the earlier of (1) the sale of the notes pursuant to an effective
registration statement or (2) November 22, 2006, we may redeem
the notes in whole or in part at any time at a redemption price equal
to
100% of the accreted principal amount of the notes plus any accrued
and
unpaid interest and liquidated damages, if any, on the notes to but
not
including the redemption date, if the closing price of our Class A
common stock has exceeded a specified percentage of the conversion
price
for at least 20 trading days in any consecutive 30 trading day
period.
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Make
Whole Provisions
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If
you convert your notes at any time prior to November 16, 2007, you
will receive, in addition to shares of our Class A common stock, or
cash in lieu thereof, the remaining portion of a portfolio of
U.S. government securities pledged as security in respect of the
notes you converted, subject to certain limitations. If you convert
notes
that have been called for redemption, you will receive an additional
redemption make whole amount. In addition, if certain corporate
transactions that constitute a change of control occur on or prior
to
November 16, 2009, we will increase the conversion rate in certain
circumstances, unless such transaction constitutes a public acquirer
change of control and we elect to modify the conversion into public
acquirer common stock, as described in this
prospectus.
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The
convertible senior notes and the shares of Class A common stock offered by
this
prospectus may be offered in negotiated transactions, ordinary brokerage
transactions or otherwise, at negotiated prices or at the market prices
prevailing at the time of sale.
See
"Risk Factors" incorporated by reference herein and beginning on page 8 of
this prospectus to read about important factors you should consider before
buying the convertible senior notes or shares of our Class A common
stock.
THESE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
distribution of this prospectus and the offering and sale of the convertible
senior notes or Class A common stock in certain jurisdictions may be restricted
by law. Charter Communications, Inc. requires persons into whose possession
this
prospectus comes to inform themselves about and to observe any such
restrictions. This prospectus does not constitute an offer of, or an invitation
to purchase, any of the convertible senior notes or shares of Class A common
stock in any jurisdiction in which such offer or invitation would be
unlawful.
Neither
Charter Communications, Inc. nor any of its representatives is making any
representation to any offeree or purchaser of the convertible senior notes
or
shares of Class A common stock regarding the legality of an investment by such
offeree or purchaser under appropriate legal investment or similar laws. Each
purchaser should consult with his own advisors as to legal, tax, business,
financial and related aspects of a purchase of the notes or shares of Class
A
common stock.
Prospectus
dated April 13, 2006.
You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with information that is different from that
contained in this prospectus. We are offering to sell the notes and shares
offered hereby only in jurisdictions where offers and sales are permitted.
The
information in this prospectus is complete and accurate only as of the date
of
this prospectus, regardless of the time of delivery of this prospectus or of
any
sale of securities.
TABLE
OF CONTENTS
i
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act,
regarding, among other things, our plans, strategies and prospects, both
business and financial. Although we believe that our plans, intentions and
expectations reflected in or suggested by these forward-looking statements
are
reasonable, we cannot assure you that we will achieve or realize these plans,
intentions or expectations. Forward-looking statements are inherently subject
to
risks, uncertainties and assumptions. Many of the forward-looking statements
contained in this prospectus may be identified by the use of forward-looking
words such as "believe," "expect," "anticipate," "should," "planned," "will,"
"may," "intend," "estimated" and
"potential," among others. Important factors that could cause actual results
to
differ materially from the forward-looking statements we make in this prospectus
are set forth in this prospectus and in other reports or documents
that we file from time to time with the Securities and Exchange Commission,
or
SEC, and include, but are not limited to:
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·
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the
availability, in general, of funds to meet interest payment obligations
under our debt and to fund our operations and necessary capital
expenditures, either through cash flows from operating activities,
further
borrowings or other sources and, in particular, our ability to be
able to
provide under the applicable debt instruments such funds (by dividend,
investment or otherwise) to the applicable obligor of such
debt;
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·
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our
ability to comply with all covenants in our indentures, bridge loan
and
credit facilities, any violation of which would result in a violation
of
the applicable facility or indenture and could trigger a default
of other
obligations under cross-default provisions;
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·
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our
ability to pay or refinance debt prior to or when it becomes due
and/or to
take advantage of market opportunities and market windows to refinance
that debt through new issuances, exchange offers or otherwise, including
restructuring our balance sheet and leverage
position;
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·
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our
ability to sustain and grow revenues and cash flows from operating
activities by offering video, high-speed Internet, telephone and
other
services and to maintain and grow a stable customer base, particularly
in
the face of increasingly aggressive competition from other service
providers;
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·
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our
ability to obtain programming at reasonable prices or to pass programming
cost increases on to our customers;
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general
business conditions, economic uncertainty or slowdown;
and
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·
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the
effects of governmental regulation, including but not limited to
local
franchise authorities, on our business.
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All
forward-looking statements attributable to us or any person acting on our behalf
are expressly qualified in their entirety by this cautionary
statement.
ii
WHERE
YOU CAN FIND MORE INFORMATION
We
are
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and in accordance therewith file reports,
proxy statements and other information with the SEC. These reports, proxy
statements and other information may be inspected and copied at the Public
Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. Reports, proxy and information statements
and
other information, including the registration statement of which this prospectus
is a part, filed electronically with the SEC, are available at the SEC’s website
at http://www.sec.gov.
The
information in this prospectus may not contain all the information that may
be
important to you. You should read the entire prospectus, as well as the
documents incorporated by reference in the prospectus, and the registration
statement of which this prospectus is a part, including the exhibits thereto,
before making an investment decision.
iii
SUMMARY
This
summary contains a general discussion of our business, and summary
financial
information. It does not contain all the information that you should consider
before making an investment decision regarding the notes or our Class A
common stock. For a more complete understanding of an investment in the
notes or
our Class A common stock, you should read this entire prospectus. Unless
otherwise noted, all business data in this summary is as of December 31,
2005.
Unless
otherwise stated, the discussion in this prospectus of our business and
operations includes the business and operations of Charter Communications,
Inc.
and its subsidiaries. Unless the context otherwise requires, the terms
"we,"
"us" and "our" refer to Charter Communications, Inc. and its direct and
indirect
subsidiaries on a consolidated basis. The term "Charter" refers to the
issuer,
Charter Communications, Inc.
Our
Business
We
are a
broadband communications company operating in the United States, with
approximately 6.16 million customers at December 31, 2005. Through our
broadband network of coaxial and fiber optic cable, we offer our customers
traditional cable video programming (analog and digital, which we refer
to as
"video" service), high-speed Internet access, advanced broadband cable
services
(such as video on demand ("VOD"), high definition television service,
and
interactive television) and, in some of our markets, telephone
service.
At
December 31, 2005, we served approximately 5.88 million analog video
customers, of which approximately 2.80 million were also digital video
customers. We also served approximately 2.20 million high-speed Internet
customers (including approximately 253,400 who received only high-speed
Internet
services). We also provided telephone service to approximately 121,500
customers
(including approximately 19,300 who received telephone service only.)
Our
principal executive offices are located at Charter Plaza, 12405 Powerscourt
Drive, St. Louis, Missouri 63131. Our telephone number is
(314) 965-0555 and we have a website accessible at www.charter.com. The
information posted or linked on our website is not part of this prospectus
and
you should rely solely on the information contained in this prospectus
and the
related documents to which we refer herein when deciding to make an investment
in the notes or our Class A common stock.
Strategy
Our
strategy is to leverage the capacity and the capabilities of our broadband
network to become the premier provider of in-home entertainment and
communications services in the communities we serve. By offering excellent
value
and variety to our customers through creative product bundles, strategic
pricing
and packaging of all our products and services, our goal is to increase
profitable revenues that will enable us to maximize return on our invested
capital.
Building
on the foundation established throughout 2005, in 2006, we will strive
toward:
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improving
the end-to-end customer experience and increasing customer
loyalty;
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growing
sales and retention for all our products and services;
and
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driving
operating and capital
effectiveness.
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The
Customer Experience
Providing
superior customer service is an essential element of our fundamental
business
strategy. We strive to continually improve the end-to-end customer experience
and increase customer loyalty by effectively managing our customer care
contact
centers in alignment with technical operations. We are seeking to instill
a
customer-service-oriented culture throughout the organization and will
continue
to focus on excellence by pursuing further improvements in customer service,
technical operations, sales and marketing.
1
We
are
dedicated to fostering strong relationships and making not only financial
investments, but the investment of time and effort to strengthen the communities
we serve. We have developed programs and initiatives that provide valuable
television time to groups and organizations over our cable
networks.
Sales
and Retention
Providing
desirable products and services and investing in profitable marketing programs
are major components of our sales strategy. Bundling services, combining
two or
more Charter services for one discounted price, is fundamental to our marketing
strategy. We believe that combining our products into bundled offerings provides
value to our customers that distinguishes us from the competition. We believe
bundled offerings increase penetration of all our products and services and
improves customer retention and perception. Through targeted marketing of
bundled services, we will pursue growth in our customer base and improvements
in
customer satisfaction. Targeted marketing also promotes the appropriate matching
of services with customer needs leading to improved retention of existing
customers and lower bad debt expense.
Expanding
telephone service to additional markets and achieving increased telephone
service penetration will be a high priority in 2006 and will be important
to
revenue growth. We plan to add enhancements to our high-speed Internet service
to provide customers the best possible Internet experience. Our digital video
platform enables us to provide customers advanced video products and services
such as VOD, high-definition television and digital video recorder ("DVR")
service. We will also continue to explore additional product and service
offerings to complement and enhance our existing offerings and generate
profitable revenue growth.
In
addition to the focus on our primary residential customer base, we will strive
to expand the marketing of our video and high-speed Internet services to
the
business community and introduce telephone service, which we believe has
growth
potential.
Operating
and Capital Effectiveness
We
plan
to further capitalize on initiatives launched during 2005 to continue to
drive
operating and capital effectiveness. Specifically, additional improvements
in
work force management will enhance the efficient operation of our customer
care
centers and technical operations functions. We will continue to place the
highest priority for capital spending on revenue-generating initiatives such
as
telephone deployment.
With
over
92% of our homes passed having bandwidth of 550 megahertz or higher, we believe
our broadband network provides the infrastructure to deliver the products
and
services today’s consumer desires. In 2005 we invested in programs and
initiatives to improve all aspects of operations, and going forward we will
seek
to capitalize on that solid foundation. We plan to leverage both our broadband
network and prior investments in operational efficiencies to generate profitable
revenue growth.
Through
our targeted marketing strategy, we plan to meet the needs of our current
customers and potential customers with desirable, value-based offerings.
We will
seek to capitalize on the capabilities of our broadband network in order
to
bring innovative products and services to the marketplace. Our employees
are dedicated to Charter’s customer-first philosophy, and we will strive to
support their continued professional growth and development, providing the
right
tools and training necessary to accomplish our goals. We believe our strategy
differentiates us from the competition and plan to enhance our ability to
continue to grow our broadband operations in the communities we serve.
Certain
Developments in 2005 and 2006
Financing
Transactions
We
continue to pursue opportunities to improve our liquidity. Our
efforts in this regard have resulted in the completion of a number of financing
transactions in 2005 and 2006, as follows:
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the
January 2006 sale by our subsidiaries, CCH II, LLC ("CCH II") and
CCH II
Capital Corp., of an additional $450 million principal amount of
their
10.250% senior notes due 2010;
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2
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·
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the
October 2005 entry by our subsidiaries, CCO Holdings, LLC ("CCO
Holdings")
and CCO Holdings Capital Corp., as guarantor thereunder, into
a $600
million senior bridge loan agreement with various lenders (which
was
reduced to $435 million as a result of the issuance of CCH II
notes);
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the
September 2005 exchange by Charter Holdings, CCH I, LLC ("CCH
I") and CCH
I Holdings, LLC ("CIH") of approximately $6.8 billion in total
principal
amount of outstanding debt securities of Charter Holdings in
a private
placement for new debt securities;
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the
August 2005 sale by our subsidiaries, CCO Holdings and CCO Holdings
Capital Corp., of $300 million of 8 ¾% senior notes due
2013;
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the
March and June 2005 issuance of $333 million of Charter Communications
Operating, LLC ("Charter Operating") notes in exchange for $346
million of
Charter Holdings notes;
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the
repurchase during 2005 of $136 million of Charter’s 4.75% convertible
senior notes due 2006 leaving $20 million in principal amount
outstanding;
and
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the
March 2005 redemption of all of CC V Holdings, LLC’s outstanding 11.875%
senior discount notes due 2008 at a total cost of $122
million.
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Asset
Sales
On
February 28, 2006, Charter announced the signing of two separate definitive
agreements to sell certain cable television systems serving a total of
approximately 316,000 analog video customers, including 142,000 digital
video
customers and 91,000 high-speed Internet customers in West Virginia,
Virginia,
Illinois and Kentucky for a total of approximately $896 million. These
transactions are expected to close in the third quarter of 2006. Under
the terms
of the bridge loan, bridge availability will be reduced by the proceeds
of asset
sales. We expect to use the net proceeds from the asset sales to repay
(but not
reduce permanently) amounts outstanding under our revolving credit facility
and
that the asset sale proceeds, along with other existing sources of funds,
will
provide additional liquidty supplementing our cash availability in 2006
and
beyond.
Consummation
of Share Borrow Transactions
At
the
time we originally issued the convertible senior notes, we entered into
a share
lending agreement pursuant to which we agreed to loan up to 150 million
shares
of Class A common stock to Citigroup Global Markets Limited ("CGML"). The
issuance of shares pursuant to the share lending agreement was designed
to
facilitate transactions by which investors in the convertible senior notes
could
hedge their investments in the convertible senior notes. To date, 116.9
million
shares have been sold in three share borrow transactions. Because less
than the
full 150 million shares covered by the share lending agreement were sold
in the
prior share borrow transactions, we remain obligated to issue, at CGML’s
request, up to an additional 33.1 million shares in up to two additional
subsequent registered public offerings pursuant to the share lending
agreement.
Charter
did not receive any of the proceeds from the sale of shares in the share
borrow
transactions. However, under the share lending agreement, Charter received
a
loan fee of $.001 for each share that it lent to CGML.
3
Organizational
Structure
The
chart
below sets forth the organizational structure of Charter and its principal
direct and indirect subsidiaries. The chart does not include all of our
affiliates and subsidiaries and, in some cases, we have combined separate
entities for presentation purposes. The equity ownership, voting percentages
and
indebtedness amounts shown below are approximates as of December 31, 2005
giving
effect to the issuance and sale of $450 million principal amount of 10.25%
CCH
II notes in January 2006 and the use of such proceeds to pay down credit
facilities and the issuance of 22.0 million shares pursuant to the share
lending
agreement on February 6, 2006 and do not give effect to any exercise, conversion
or exchange of then outstanding options, preferred stock, convertible notes
and
other convertible or exchangeable securities, including the convertible
senior
notes.
4
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(1)
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Charter
acts as the sole manager of Charter Communications Holding Company,
LLC
("Charter Holdco") and its direct and indirect limited liability
company
subsidiaries. Charter’s certificate of incorporation requires that its
principal assets be securities of Charter Holdco, the terms of
which
mirror the terms of securities issued by Charter. See "Description
of
Capital Stock and Membership Units."
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(2)
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These
membership units are held by Charter Investment, Inc. and Vulcan
Cable III Inc., each of which is 100% owned by Paul G. Allen, our
Chairman and controlling shareholder. They are exchangeable at
any time on
a one-for-one basis for shares of Charter Class A common stock.
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(3)
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The
percentages shown in this table reflect the issuance of the
116.9 million shares of Class A common stock issued in 2005 and
February 2006 pursuant to the share lending agreement and the
corresponding issuance of an equal number of mirror membership
units by
Charter Holdco to Charter. However, for accounting purposes,
Charter’s
common equity interest in Charter Holdco is 48%, and Paul G. Allen’s
ownership of Charter Holdco is 52%. These percentages exclude
the
116.9 million mirror membership units issued to Charter due to the
required return of the issued mirror units upon return of the
shares
offered pursuant to the share lending
agreement.
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(4)
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Represents
preferred membership interests in CC VIII a subsidiary of CC V
Holdings, LLC and an exchangeable inated accreting note issued
by CCHC
related to the settlement of the CC VIII
dispute.
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5
The
Notes
| Issuer | Charter Communications, Inc. ("Charter") | |
| Notes Offered | $862,500,000 original principal amount of 5.875% Convertible Senior Notes due 2009. | |
| Maturity Date | November 16, 2009. | |
| Interest |
5.875% per
annum on the accreted principal amount, payable semi-annually
in arrears
on May 16 and November 16 of each year, commencing May 16,
2005. If we elect to accrete the principal amount of the notes
to pay any
liquidated damages we owe, we will be entitled to defer any
interest,
which we refer to as the deferred interest, that accrues with
respect to
the excess of the accreted principal amount over the original
principal
amount until May 16, 2008, or any earlier repurchase, redemption or
acceleration of the notes. We will not pay any interest on
such deferred
interest.
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| Security |
Our
subsidiary, Charter Holdco has purchased and pledged to us
as security for
an intercompany note, and we have repledged to the trustee
under the
indenture as security for the benefit of the holders of the
notes,
approximately $144 million of U.S. government securities, which
we refer to as the Pledged Securities. We believe that the
total amount of
the Pledged Securities will be sufficient, upon receipt of
scheduled
payments thereon, to provide for the payment in full of the
first six
scheduled interest payments due on the original principal amount
of the
notes, but not any liquidated damages we may owe or any deferred
interest
in respect of the accretion of the principal amount of the
notes. The
notes will not otherwise be secured. See "Description of the
Notes —
Security." Holders who convert their notes prior to November 16, 2007
will receive the cash proceeds from the liquidation of a portion
of the
Pledged Securities, as described below in "— Interest Make Whole Upon
Conversion."
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Ranking |
The notes will be unsecured (except to the extent described above under "Security") and unsubordinated obligations and will rank, in right of payment, the same as all of Charter’s existing and future senior unsecured indebtedness. The notes will rank senior in right of payment to all of Charter’s subordinated indebtedness and will be effectively subordinated to any of Charter’s secured indebtedness and structurally subordinated to indebtedness and other liabilities of our subsidiaries. As of December 31, 2005, Charter had no secured indebtedness and our subsidiaries had total indebtedness and other liabilities of $20.2 billion, excluding intercompany obligations. | |
| Conversion Rights |
Holders
may convert their notes at the conversion rate at any time
prior to the
close of business on the business day prior to the maturity
date.
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The
initial conversion rate will be 413.2231 shares of our Class A
common stock, par value $.001 per share, per $1,000 original
principal amount of notes. This represents an initial conversion
price of
approximately $2.42 per share of our Class A common stock. We
will increase the conversion rate in the same proportion that
the
principal amount of the notes increases if we elect to accrete
the
principal amount of the notes to pay certain liquidated damages
instead of
paying them in cash. In addition, if certain corporate transactions
that
constitute a change of control occur on or prior to the maturity
date, we
will increase the conversion rate in certain circumstances,
unless such
transaction constitutes a public acquirer change of control
and we elect
to satisfy our conversion obligation with public acquirer common
stock.
See “Description of Notes — Conversion Rights — Make Whole
Amount and Public Acquirer Change of
Control.”
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6
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Notwithstanding
the foregoing, no holder of notes will be entitled to receive
shares of
our Class A common stock upon conversion to the extent, but only to
the extent, that such receipt would cause such holder to become,
directly
or indirectly, a beneficial owner of more than the specified
percentage of
the shares of Class A common stock outstanding at such time. With
respect to any conversion prior to November 16, 2008, the specified
percentage will be 4.9%, and with respect to any conversion thereafter,
the specified percentage will be 9.9%. See “Description of Notes —
Conversion Rights — Limitation on Beneficial
Ownership.”
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Upon
conversion, we will have the right to deliver, in lieu of shares
of our
Class A common stock, cash or a combination of cash and our
Class A common stock. If we elect to pay holders cash upon
conversion, such payment will be based on the average of the
sale prices
of our Class A common stock over the 20 trading day period beginning
on the third trading day immediately following the conversion
date of the
notes, which we refer to as the average price.
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As
described in this prospectus, the conversion rate may be adjusted
upon the
occurrence of certain events, including for any cash dividend
on our
Class A common stock, but will not be adjusted for accrued and unpaid
interest. By delivering to the holder shares of our Class A common
stock, and in certain circumstances cash, we will satisfy our
obligations
with respect to the notes subject to the conversion, subject
to our
obligations described under “Description of Notes — Conversion
Rights — Interest Make Whole Upon Conversion” below. Except to the
extent we are required to pay any Early Conversion Make Whole
Amount or
Redemption Make Whole Amount, upon conversion of a note, accrued
and
unpaid interest will be paid or deemed to be paid in full, rather
than
canceled, extinguished or forfeited.
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The
notes called for redemption may be surrendered for conversion
prior to the
close of business on the business day immediately preceding the
redemption
date.
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| Interest
Make Whole Upon
Conversion
|
Holders
who convert their notes prior to November 16, 2007 will receive, in
addition to a number of shares of our Class A common stock calculated
at the conversion rate for the accreted principal amount of notes,
or cash
in lieu thereof, the cash proceeds of the sale by the trustee
of the
Pledged Securities remaining with respect to the notes being
converted,
which we refer to as the Early Conversion Make Whole Amount,
subject to
the limitation described under “Description of Notes — Conversion
Rights — Interest Make Whole Upon Conversion”. The percentage of the
remaining Pledged Securities to be sold will be determined based
on the
aggregate original principal amount of notes being converted
as a
percentage of the total original principal amount of notes then
outstanding. The trustee will liquidate the Pledged Securities
to be
released, rounded down to the nearest whole multiple of the minimum
denomination of such Pledged Securities, and deliver the cash
value
thereof to the converting holder. The Early Conversion Make Whole
Amount
will not compensate a converting holder for interest such holder
would
have earned in respect of any increase in the principal amount
of the
notes if we elect to accrete such principal amount to pay any
liquidated
damages we may owe.
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7
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Holders
who convert notes that have been called for redemption will
receive, in
addition to the Early Conversion Make Whole Amount, the amount
of any
deferred interest and the present value of the interest on
the notes
converted that would have been payable for the period from
and including
November 16, 2007, or if later, the redemption date, to but excluding
November 16, 2009, which we refer to as the Redemption Make Whole
Amount. The Redemption Make Whole Amount will be calculated
by discounting
the amount of such interest on a semi-annual basis using a
discount rate
equal to 3.0% plus the published U.S. Treasury rate for the
maturity most
closely approximating the period from and including the redemption
date to
but excluding November 16, 2009. We may pay the Redemption Make Whole
Amount in cash or in shares of our Class A common stock, with the
number of such shares determined based on the average of the
sale prices
of our Class A common stock over the 10 trading days immediately
preceding the applicable conversion date. If we elect to pay
the
Redemption Make Whole Amount in shares of our Class A common stock,
the number of shares we deliver, together with the shares deliverable
upon
conversion, will not exceed 462 per $1,000 original principal
amount of
notes, subject to the anti-dilution adjustments, and we must
deliver cash
with respect to the remainder of the Redemption Make Whole
Amount, if
any.
|
|
| Exchange in Lieu of Conversion |
Unless
we have called the relevant notes for redemption, we may, in
lieu of
delivering shares of our Class A common stock, or cash in lieu
thereof, upon conversion, direct the conversion agent to surrender
notes a
holder has tendered for conversion to a financial institution
designated
by us for exchange in lieu of conversion. In order to accept
any such
notes, the designated institution must agree to deliver, in
exchange for
such notes, a number of shares of our Class A common stock calculated
using the applicable conversion rate for the accreted principal
amount of
the notes, plus cash for any fractional shares, or, at its
option, cash or
a combination of cash and shares of our Class A common stock in lieu
thereof, calculated based on the average price. If the designated
institution accepts any such notes, it will deliver the appropriate
number
of shares of our Class A common stock (and cash, if any), or cash in
lieu thereof, to the conversion agent and the conversion agent
will
deliver those shares or cash to the holder. Such designated
institution
will also deliver cash equal to any Early Conversion Make Whole
Amount we
would owe such holder if we had paid it the conversion value
of its notes.
Any notes exchanged by the designated institution will remain
outstanding.
If the designated institution agrees to accept any notes for
exchange but
does not timely deliver the related consideration, we will,
as promptly as
practical thereafter, but not later than the third business
day following
(1) the conversion date or (2) if the designated institution
elects to deliver cash or a combination of cash and shares
of our
Class A common stock, the determination of the average price, convert
the notes and deliver shares of our Class A common stock, as
described under “Description of Notes — Conversion Rights —
General,” or, at our option cash in lieu thereof based on the average
price, along with any applicable Early Conversion Make Whole
Amount. See
“Description of Notes — Exchange in Lieu of
Conversion.”
|
|
| Fundamental Change |
Upon
a fundamental change, each holder of the notes may require
us to
repurchase some or all of its notes at a purchase price equal
to 100% of
the accreted principal amount of the notes, plus any accrued
and unpaid
interest, including any liquidated damages and deferred interest.
See
“Description of Notes — Fundamental Change Requires Us to Repurchase
Notes at the Option of the Holder.”
|
|
8
| Make Whole Amount and Public Acquirer Change of Control |
If
certain transactions that constitute a change of control occur
on or prior
to the maturity date, under certain circumstances, we will
increase the
conversion rate by a number of additional shares for any conversion
of
notes in connection with such transactions, as described under
“Description of Notes — Conversion Rights — Make Whole Amount
and Public Acquirer Change of Control.” The number of additional shares
will be determined based on the date such transaction becomes
effective
and the price paid per share of our Class A common stock in such
transaction. However, if such transaction constitutes a public
acquirer
change of control, in lieu of increasing the conversion rate,
we may elect
to adjust our conversion obligation such that upon conversion
of the
notes, we will deliver acquirer common stock or cash in lieu
thereof as
described under “Description of Notes — Conversion Rights — Make
Whole Amount and Public Acquirer Change of Control.”
|
|
| Redemption |
Following
the earlier of (1) the sale of any notes pursuant to an effective
registration statement or (2) November 22, 2006, we may redeem
the notes (or, in the case of clause (1) above, any such notes that
have been sold pursuant to an effective registration statement)
in whole
or in part for cash at any time at a redemption price equal
to 100% of the
accreted principal amount of the notes plus any accrued and
unpaid
interest, deferred interest and liquidated damages, if any,
on the notes
to but not including the redemption date, if the closing price
of our
Class A common stock has exceeded, for at least 20 trading days in
any consecutive 30 trading day period, 180% of the conversion
price if
such 30 day trading period is prior to November 16, 2007 and
150% if such 30 trading day period begins thereafter. The “conversion
price” as of any day will equal the accreted principal amount of $1,000
original principal amount of notes divided by the conversion
rate in
effect on such day.
|
|
| Sinking Fund | None. | |
|
Registered
Borrow Facility
|
At
the time we originally issued the convertible senior notes,
we entered
into a share lending agreement pursuant to which we agreed
to loan up to
150 million shares of Class A common stock to CGML. The issuance
of shares
pursuant to the share lending agreement was designed to facilitate
transactions by which investors in the convertible senior
notes could
hedge their investments in the convertible senior notes.
To date, 116.9
million shares have been sold in three share borrow transactions.
Because
less than the full 150 million shares covered by the share
lending
agreement were sold in the prior share borrow transactions,
we remain
obligated to issue, at CGML’s request, up to an additional 33.1 million
shares in up to two additional subsequent registered public
offerings
pursuant to the share lending agreement.
Charter
did not receive any of the proceeds from the sale of shares
in the share
borrow transactions. However, under the share lending agreement,
Charter
received a loan fee of $.001 for each share that it lent to
CGML.
|
|
9
| United States Federal Income Tax Considerations |
Under
the indenture governing the notes, we have agreed, and by acceptance
of a
beneficial interest in the notes each holder of a note is deemed
to have
agreed, to treat the notes for United States federal income
tax purposes
as debt instruments that are subject to the U.S. Treasury regulations
governing contingent payment debt instruments. For United States
federal
income tax purposes, interest will accrue from the issue date
of the notes
at a constant rate of 15% per year (subject to certain adjustments),
compounded semi-annually, which represents the yield on our
comparable
nonconvertible, fixed-rate debt instruments with terms and
conditions
otherwise similar to the notes. U.S. Holders (as defined herein) will
be required to include interest in income as it accrues regardless
of
their method of tax accounting. The rate at which interest
accrues for
United States federal income tax purposes generally will exceed
the cash
payments of interest.
U.S. Holders
will recognize gain or loss on the sale, exchange, conversion,
redemption
or repurchase of a note in an amount equal to the difference
between the
amount realized, including the fair market value of any common
stock
received upon conversion, and their adjusted tax basis in the
note. Any
gain recognized by a U.S. Holder on the sale, exchange, conversion,
redemption or repurchase of a note generally will be ordinary
interest
income; any loss will be ordinary loss to the extent of the
interest
previously included in income, and, thereafter, capital loss.
See “United
States Federal Income Tax Considerations.”
|
|
| Use of Proceeds | We will not receive any proceeds from the sales of notes or shares offered hereby by the selling security holders. | |
| Events of Default |
Customary
events of default, including a default caused by the failure
to pay
interest or principal at maturity and the acceleration of indebtedness
for
borrowed money aggregating $100 million or more.
|
|
| Trading |
The
notes are designated as eligible for trading in the PORTAL
Market. Our
Class A common stock is quoted on the Nasdaq National Market under
the symbol “CHTR.”
|
|
10
RISK
FACTORS
Risks
Related to this Offering, the Notes and the Class A Common
Stock.
The
notes do not restrict our ability to incur additional debt, repurchase our
securities or to take other actions that could negatively impact holders of
the
notes.
We
are
not restricted under the terms of the notes from incurring additional debt,
including secured debt, or from repurchasing our securities. In addition, the
limited covenants applicable to the notes do not require us to achieve or
maintain any minimum financial results relating to our financial position or
results of operations. Our ability to recapitalize, incur additional debt and
take other actions that are not limited by the terms of the notes could have
the
effect of diminishing our ability to make payments on the notes when due.
Certain of our other debt instruments may, however, restrict these and other
actions.
The
trading prices for the notes will be directly affected by the trading prices
for
our Class A common stock, which may be volatile, which could cause the
value of your investment to decline.
We
expect
that the trading price of the notes in the secondary market will be
significantly affected by the trading price of our Class A common stock,
the general level of interest rates and our credit quality. This may result
in
greater volatility in the trading prices of the notes than would be expected
for
nonconvertible debt securities.
It
is
impossible to predict whether the price of our Class A common stock or
interest rates will rise or fall. Trading prices of our Class A common
stock will be influenced by our operating results and prospects and by economic,
financial, regulatory and other factors. In addition, general market conditions,
including the level of, and fluctuations in, the trading prices of stocks
generally, and sales of substantial amounts of our Class A common stock by
us in the market after the offering of the notes, or the perception that such
sales may occur, could affect the price of our Class A common stock.
The
price
of our Class A common stock also could be affected by any sales of our
Class A common stock by investors who view the notes as a more attractive
means of equity participation in our company and by hedging or arbitrage trading
activity that we expect to develop involving our Class A common stock as a
result of the issuance of the notes. The hedging or arbitrage trading activity
that has developed and could further develop with respect to our Class A
common stock as a result of the issuance of the notes could cause a decline
or
retard any increase in the trading price of our Class A common stock or the
notes since investors in the notes may sell short our Class A common stock
in order to establish initial hedge positions, and may increase those positions,
particularly as the trading price of our Class A common stock increases, in
order to hedge their notes. See "Registered Borrow Facility."
Conversion
of the notes will dilute the ownership interests of existing
stockholders.
If
and to
the extent we deliver shares of our Class A common stock upon conversion of
the notes, the conversion of some or all of the notes will dilute the ownership
interest of existing stockholders. Any sales in the public market of the
Class A common stock issuable upon such conversion could adversely affect
prevailing market prices of our Class A common stock.
The
effect of the issuance of our shares of Class A common stock pursuant to
the share lending agreement and upon conversion of the notes, including sales
of
our Class A common stock in short sale transactions by holders of the
notes, may have a negative effect on the market price of our Class A common
stock.
We
agreed
pursuant to a share lending agreement to lend to CGML up to 150 million
shares of our Class A common stock. To date, 116.9 million shares have been
sold in three share borrow transactions. All such loaned shares must be returned
by November 16, 2009. See "Registered Borrow Facility." Because less than
the full 150 million shares covered by the share lending agreement were sold
in
the prior share borrow transactions, we remain obligated to issue, at CGML's
request, up to an additional 33.1 million shares in up to two additional
subsequent registered public offers pursuant to the share lending agreement.
We
have been advised by CGML that it has
11
facilitated
the establishment by the note holders of hedged positions in the notes. While
issuance of shares upon the conversion of the convertible notes may result
in a
reduction of an equal number in the outstanding borrowed shares under the share
lending agreement, the increase in the number of shares of our Class A
common stock issued or issuable pursuant to the share lending agreement or
upon
conversion of the notes could have a negative effect on the market price of
our Class A common
stock. Since there will be more shares sold or available for sale, the market
price of our Class A common stock may decline or not increase as much as it
might have without the availability of such shares. The market price of our
Class A common stock also could decline as a result of other short sales of
our Class A common stock by the holders of the notes to hedge their
investment in the notes. We understand that many investors in the notes have
already hedged their investment by selling additional shares of our Class A
common stock short in order to establish initial hedge positions. The offering
of our Class A common stock pursuant to the share lending agreement may
result in establishment of hedged positions by other holders or in replacement
of existing hedged position by those holders who are already hedged. We expect
that all such hedged parties may increase those positions as the market price
of
the Class A common stock increases, since such price increases will
increase the likelihood that such holders will convert their notes and receive
Class A common stock. Therefore, such short sales could retard any increase
in the market price of our Class A common stock or cause a decline. See
"Registered Borrow Facility."
The
market price of our Class A common stock and therefore the price of the
notes could be adversely affected by the large number of additional shares
of
Class A common stock eligible for issuance in the future that are unrelated
to the convertible senior notes and share lending
agreement.
As
of
December 31, 2005, 416,204,671 shares of Class A common stock
were issued and outstanding, and 50,000 shares of Class B common stock
were issued and outstanding. This includes 94,911,300 shares of
Class A common stock that were issued in the two share borrow transactions
conducted during the year 2005. An additional 339,132,031 shares of
Class A common stock are issuable upon conversion of outstanding units of
Charter Holdco and an additional 24,662,333 shares are issuable as of
December 31, 2005 if Mr. Allen were to exchange the CCHC exchangeable
accreting note that he holds as a result of the settlement of the CC VIII
dispute, into Charter Holdco units and exchange Charter Holdco units into Class
A shares. Also 29,126,744 shares were issuable upon the exercise of
outstanding options under our option plans. All of the 363,794,364 shares
of Class A common stock issuable upon exchange of Charter Holdco membership
units and all shares of the Class A common stock issuable upon conversion
of shares of our Class B common stock will have "demand" and/or "piggyback"
registration rights attached to them. All of the 356 million shares
issuable upon conversion of the 5.875% convertible senior notes are
eligible for resale pursuant to a shelf registration statement. Citigroup has
the right under the share lending agreement to borrow an additional 33.1 million
shares in the future, and a registration rights agreement will obligate Charter
to file, at Citigroup’s request, up to two additional registration statements
with respect to these unsold shares until November 16, 2006. The sale of a
substantial number of shares of Class A common stock or the perception that
such sales could occur could adversely affect the market price for the
Class A common stock because the sale could cause the amount of the
Class A common stock available for sale in the market to exceed the demand
for the Class A common stock and could also make it more difficult for us
to sell equity securities or equity-related securities in the future at a time
and price that we deem appropriate. This could adversely affect our ability
to
fund our current and future obligations.
The
make whole premium payable on notes converted in connection with certain
fundamental changes may not adequately compensate you for the lost option time
value of your notes as a result of such fundamental
change.
If
certain transactions that constitute a change of control occur prior to the
maturity date of the notes, under certain circumstances, we will increase the
conversion rate by a number of additional shares for any conversions of notes
in
connection with such transaction. The amount of the additional shares will
be
determined based on the date on which the transaction becomes effective and
the
price paid per share of our Class A common stock in such transaction as
described below under "Description of Notes — Conversion Rights — Make
Whole Amount and Public Acquirer Change of Control." While the number of
additional shares is designed to compensate you for the lost option time value
of your notes as a result of such transaction, the amount of the make whole
premium is only an approximation of such lost option time value and may not
adequately compensate you for such loss. In addition, if the price paid per
share of our Class A common stock in the transaction is less than $2.16 or
greater than $5.00, the conversion rate will not be increased. In no event
will
the number of shares issuable upon conversion of a note
12
exceed
462 per $1,000 original principal amount of notes, subject to anti-dilution
adjustments, regardless of when the transaction becomes effective or of the
price paid per share of our Class A common stock in the transaction.
Your
right to convert your notes will be limited if, upon conversion of your notes,
you would have beneficial ownership of more than a specified percentage of
our
Class A common stock.
Holders
of notes will not be entitled to receive shares of our Class A common stock
upon conversion to the extent (but only to the extent) that such receipt would
cause such converting holder to become, directly or indirectly, a "beneficial
owner" (within the meaning of Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) of more than the specified
percentage of the shares of Class A common stock outstanding at such time.
With respect to any conversion prior to November 16, 2008, the specified
percentage will be 4.9%, and with respect to any conversion thereafter, the
specified percentage will be 9.9%. If any delivery of shares of our Class A
common stock owed to a holder upon conversion of notes is not made, in whole
or
in part, as a result of this limitation, our obligation to make such delivery
shall not be extinguished and we shall deliver such shares as promptly as
practicable after, but in no event later than two trading days after, any such
converting holder gives notice to us that such delivery would not result in
it
being the beneficial owner of more than the specified percentage of the shares
of Class A common stock outstanding at such time. Although we have the
right to deliver cash in lieu of delivering shares of our Class A common
stock upon conversion of the notes, we have no obligation to do so, even if
by
doing so we would enable you to avoid these limitations on your right to convert
the notes.
The
conversion rate of the notes may not be adjusted for all dilutive
events.
The
conversion rate of the notes is subject to adjustment for certain events
including, but not limited to, dividends on our Class A common stock, the
issuance of certain rights or warrants, subdivisions or combinations of our
Class A common stock, certain distributions of assets, debt securities,
capital stock or cash to holders of our Class A common stock and certain
tender or exchange offers as described under "Description of Notes —
Conversion Rights — Conversion Rate Adjustments." The conversion rate will
not be adjusted for other events, such as an issuance of Class A common
stock for cash, that may adversely affect the trading price of the notes or
the
Class A common stock. There can be no assurance that an event that
adversely affects the value of the notes, but does not result in an adjustment
to the conversion rate, will not occur.
We
may be unable to purchase the notes for cash following a fundamental
change.
Holders
of the notes have the right to require us to repurchase the notes in cash upon
the occurrence of a fundamental change prior to maturity. Any of our future
debt
agreements may contain a similar provision. We may not have sufficient funds
to
make the required purchase in cash at such time or the ability to arrange
necessary financing on acceptable terms. In addition, our ability to purchase
the notes may be limited by law or the terms of other agreements relating to
our
debt outstanding at the time. However, if we fail to purchase the notes as
required by the indenture, that would constitute an event of default under
the
indenture governing the notes which, in turn, may constitute an event of
default, and result in the acceleration of the maturity of our then existing
indebtedness.
Although
the Pledged Securities will secure both principal and interest on the notes,
the
ability of holders of notes to enforce their security interest in the Pledged
Securities will be delayed if we become the subject of a case under the
U.S. Bankruptcy Code.
Although
the Pledged Securities are primarily intended to secure the first six
installments of interest on the notes, if the principal amount of the notes
becomes due and payable prior to November 16, 2007, any Pledged Securities
then held by the trustee would also secure the accreted principal amount of
the
notes then due. If we become the subject of a case under the
U.S. Bankruptcy Code, however, the ability of holders of notes to enforce
their security interest in the Pledged Securities and receive payment in respect
of the Pledged Securities, or any other payment of principal on the notes,
would
be delayed by the imposition of the automatic stay under Section 362 of the
Bankruptcy Code. Any such delay could be for a substantial period of time.
There
is currently no public market for the notes, and an active trading market may
not develop for the notes. The failure of a market to develop for the notes
could adversely affect the liquidity and value of the
notes.
13
The
liquidity of the trading market, if any, and future trading prices of the notes
will depend on many factors, including, among other things, the market price
of
our Class A common stock, our ability to register the sale of common stock
loaned to an affiliate of CGML as described in "Registered Borrow Facility,"
prevailing interest rates, our operating results, financial performance and
prospects, the market for similar securities and the overall securities market,
and may be adversely affected by unfavorable changes in these factors.
Historically, the market for convertible debt has been subject to disruptions
that have caused volatility in prices. The market for the notes may be subject
to disruptions that could have a negative effect on the holders of the notes,
regardless of our operating results, financial performance or prospects.
If
you hold notes, you will not be entitled to any rights with respect to our
Class A common stock, but you will be subject to all changes made with
respect to our Class A common stock.
If
you
hold notes, you will not be entitled to any rights with respect to our
Class A common stock (including, without limitation, voting rights and
rights to receive any dividends or other distributions on our Class A
common stock), but you will be subject to all changes affecting the Class A
common stock. You will only be entitled to rights on the Class A common
stock if and when we deliver shares of our Class A common stock to you upon
conversion of your notes. For example, in the event that an amendment is
proposed to our charter or bylaws requiring shareholder approval and the record
date for determining the shareholders of record entitled to vote on the
amendment occurs prior to your conversion of notes, you will not be entitled
to
vote on the amendment, although you will nevertheless be subject to any changes
in the powers, preferences or special rights of our Class A common stock or
other classes of capital stock.
The
failure to maintain a minimum share price of $1.00 per share of
Class A common stock could result in delisting of our shares on the Nasdaq
National Market, which would harm the market price of our Class A common
stock.
In
order
to retain our listing on the Nasdaq National Market we are required to maintain
a minimum bid price of $1.00 per share. As of March 15, 2006, the trading
price of our Class A common stock was $0.95 per share. If the bid
price remains below the $1.00 minimum for more than 30 consecutive
trading days, we will have 180 days to satisfy the $1.00 minimum bid
price for a period of at least 10 trading days. If we are unable to take
action to increase the bid price per share (either by reverse stock split or
otherwise), we could be subject to delisting from the Nasdaq National Market.
The
failure to maintain our listing on the Nasdaq National Market would harm the
liquidity of our Class A common stock and would have an adverse effect on
the market price of our common stock. If the stock were to trade it would likely
trade on the OTC "pink sheets," which provide significantly less liquidity
than does Nasdaq. As a result, the liquidity of our common stock would be
impaired, not only in the number of shares which could be bought and sold,
but
also through delays in the timing of transactions, reduction in security
analysts’ and news media’s coverage and lower prices for our common stock than
might otherwise be attained. In addition, our common stock would become subject
to the low-priced security or so-called "penny stock" rules that impose
additional sales practice requirements on broker-dealers who sell such
securities.
You
may have to pay taxes with respect to some distributions on our Class A common
stock that result in adjustments to the conversion
rate.
The
conversion rate of the notes is subject to adjustment for certain events arising
from stock splits and combinations, stock dividends, certain cash dividends
and
certain other actions by us that modify our capital structure. See "Description
of Notes — Conversion Rights — Conversion Rate Adjustments." If the
conversion rate is adjusted as a result of a distribution that is taxable to
our
Class A common stock holders, such as a cash dividend, you may be required
to include an amount in income for federal income tax purposes, notwithstanding
the fact that you do not actually receive such distribution. The amount that
you
would have to include in income would generally be equal to the amount of the
distribution that you would have received if you had converted your notes into
our Class A common stock. In addition, Non-U.S. Holders (as defined
herein) of the notes may, in certain circumstances, be deemed to have received
a
distribution subject to U.S. federal withholding tax requirements. See
"United States Federal Income Tax Considerations."
14
You
should consider the United States federal income tax consequences of owning
the
notes.
Under
the
indenture governing the notes, we have agreed, and, by acceptance of a
beneficial interest in a note, each holder is deemed to have agreed, to treat
the notes for U.S. federal income tax purposes as indebtedness that is
subject to the U.S. Treasury regulations governing contingent payment debt
instruments.
Consequently,
despite some uncertainty as to the proper application of such regulations,
you
will generally be required to accrue interest income at a constant rate of
15% per year (subject to certain adjustments), compounded semi-annually,
which represents the estimated yield on our comparable non-convertible, fixed
rate debt instruments with terms and conditions otherwise similar to the notes.
The amount of interest required to be included by you in income for each year
generally will be in excess of the stated coupon on the notes for that year.
You
will
recognize gain or loss on the sale, exchange, conversion, redemption or
repurchase of a note in an amount equal to the difference between the amount
realized, including the fair market value of any of our common stock received,
and your adjusted tax basis in the note. Any gain recognized by you on the
sale,
exchange, conversion, redemption or repurchase of a note will be treated as
ordinary interest income; any loss will be ordinary loss to the extent of
interest previously included in income, and thereafter will be treated as
capital loss.
A
discussion of the material United States federal income tax consequences of
ownership of the notes is contained in this prospectus under the heading "United
States Federal Income Tax Considerations." You are strongly urged to consult
your tax advisor as to the federal, state, local or other tax consequences
of
acquiring, owning, and disposing of the notes.
USE
OF PROCEEDS
We
will
not receive any of the proceeds from the sale by the selling security holders
of
the notes or shares of Class A common stock offered hereby.
DESCRIPTION
OF NOTES
The
5.875% convertible senior notes due 2009 offered hereby (the "Notes") were
issued under an indenture dated as of November 22, 2004 between us and
Wells Fargo Bank, N.A., as trustee. Copies of the indenture, the pledge
agreement, the resale registration rights agreement and the borrow facility
registration rights agreement are included as exhibits to the registration
statement of which this prospectus forms a part and will be made available
upon
request. We have summarized portions of these documents below. This summary
is
not complete. We urge you to read the indenture, the pledge agreement, the
resale registration rights agreement and the borrow facility registration rights
agreement because these documents define your rights as a holder of the Notes.
In this section, "Charter Communications, Inc.," "we," "our" and "us" each
refers only to Charter Communications, Inc. and not to any existing or future
subsidiary.
General
The
Notes
are senior unsecured obligations of Charter Communications, Inc. and are
convertible into our Class A common stock as described under
"— Conversion Rights" below. The Notes were issued in an aggregate original
principal amount of $862,500,000 and will mature on November 16, 2009.
The
Notes
bear interest at the rate of 5.875% per year on the accreted principal
amount from November 22, 2004, the date of original issuance of the Notes,
or from the most recent date to which interest had been paid or provided for.
Interest is payable semi-annually in arrears on May 16 and November 16
of each year, commencing May 16, 2005, to holders of record at the close of
business on the preceding May 1 and November 1, respectively. Interest
is computed on the basis of a 360-day year comprised of twelve 30-day months.
In
the event of the maturity, conversion, purchase by us at the option of the
holder or redemption of a Note, interest will cease to accrue on the Note under
the terms of and subject to the conditions of the indenture.
15
Principal
is payable, and Notes may be presented for conversion, registration of transfer
and exchange, without service charge, at our office or agency in New York,
New
York, which is initially the office or agency of the trustee in New York, New
York. See "— Form, Denomination and Registration."
The
principal amount of the Notes will increase if we elect to accrete the principal
amount to pay liquidated damages we may owe in connection with the registered
borrow facility. See "Registered Borrow Facility." We will be entitled to defer
any interest, which we refer to as the deferred interest, that accrues with
respect to the excess of the accreted principal amount over the original
principal amount until May 16, 2008, or any earlier purchase by us at the
option of the holder, redemption or acceleration of the Notes. We will pay
any
accrued deferred interest on May 16, 2008 to the record holders of the
Notes as of the close of business on May 1, 2008 unless paid earlier. We
may elect to pay any accrued deferred interest on any interest payment date
prior to May 16, 2008 if we notify the trustee and the record holders of
Notes at least 10 days prior to the record date for such interest payment
date. We will not pay any additional interest on such accrued deferred interest.
The
indenture does not contain any financial covenants or any restrictions on the
payment of dividends, the incurrence of senior debt or other indebtedness,
or
the issuance or repurchase of securities by us. The indenture will contain
no
covenants or other provisions to protect holders of the Notes in the event
of a
highly leveraged transaction or a fundamental change, except to the extent
described under "— Fundamental Change Requires Us to Repurchase Notes at
the Option of the Holder" below.
Ranking
The
Notes
are our unsecured, except with respect to the Pledged Securities as described
below, and unsubordinated obligations. The Notes rank, in right of payment,
the
same as all of our existing and future unsecured and unsubordinated
indebtedness, except with respect to the Pledged Securities as described below.
The Notes rank senior in right of payment to all of our subordinated
indebtedness and will be effectively subordinated to any secured indebtedness,
except with respect to the Pledged Securities as described below, and
structurally subordinated to indebtedness and other liabilities of our
subsidiaries.
As
of
December 31, 2005, Charter Communications, Inc. had no secured
indebtedness and our subsidiaries had total indebtedness and other liabilities
of $20.2 billion, excluding intercompany obligations.
Security
Our
subsidiary, Charter Holdco, has purchased and pledged to us as security for
an
intercompany note, and pursuant to a pledge agreement we repledged to the
trustee as security for the benefit of the holders of the Notes (and not for
the
benefit of our other creditors), U.S. government securities, which we refer
to as the Pledged Securities, in such amount as will be sufficient upon receipt
of scheduled payments with respect to such Pledged Securities to provide for
payment in full of the first six scheduled interest payments due on the Notes,
without regard to any liquidated damages we may owe or any deferred interest
in
respect of accretion of the principal amount of the Notes. Charter Holdco used
approximately $144 million of the net proceeds from the offering to acquire
such Pledged Securities.
The
Pledged Securities were repledged by us to the trustee for the exclusive benefit
of the holders of the Notes and are held by the trustee in a pledge account.
Immediately prior to each of the first six interest payment dates, the trustee
will release from the pledge account cash generated by Pledged Securities then
maturing sufficient to pay the interest then due on the original principal
amount of the Notes. A failure to pay interest on the original principal amount
of the Notes when due through the first six scheduled interest payment dates
will constitute an immediate event of default under the indenture, with no
grace
period (unless the failure to make such payment results from the failure by
the
trustee to release such proceeds from the pledge account, provided such failure
is not caused by any act or omission by us). Upon any conversion of Notes prior
to November 16, 2007, the trustee will liquidate a portion of the Pledged
Securities and release from the pledge account proceeds sufficient to pay the
Early Conversion Make Whole Amount described under "— Conversion
Rights — Interest Make Whole Upon Conversion." If any Early Conversion Make
Whole Amount is limited by the formula described therein, the portion of the
proceeds of the liquidation of the Pledged Securities not paid to the converting
holder as a result of such limitation will be released to Charter Holdco from
the pledge account.
16
If
prior
to November 16, 2007
· an
event
of default under the Notes occurs and is continuing, and
· the
trustee or the holders of 25% in aggregate original principal amount of the
Notes accelerate the Notes by declaring the accreted principal amount of the
Notes to be immediately due and payable (by written consent, at a meeting of
Note holders or otherwise), except for the occurrence of an event of default
relating to our bankruptcy, insolvency or reorganization, upon which the Notes
will be accelerated automatically,
then
the
proceeds from the liquidation of the Pledged Securities will be promptly
released to Note holders, subject to the automatic stay provisions of bankruptcy
law, if applicable. Distributions from the pledge account will be applied:
· first,
to
any accrued and unpaid interest on the Notes, and
· second,
to the extent available, to the repayment of a portion of the principal amount
of the Notes.
However,
if any event of default is cured or waived prior to the acceleration of the
Notes by the trustee or holders of the Notes referred to above, the trustee
and
the holders of the Notes will not be able to accelerate the Notes as a result
of
that event of default.
For
example, if the first two interest payments were made when due but the third
interest payment was not made when due and the Note holders promptly exercised
their right to declare the accreted principal amount of the Notes to be
immediately due and payable then, assuming automatic stay provisions of
bankruptcy law are inapplicable and the proceeds of the Pledged Securities
are
promptly distributed from the pledge account,
· an
amount
equal to the interest payment due with respect to the third interest payment
would be distributed from the pledge account as accrued
interest, and
· the
balance of the proceeds of the pledge account would be distributed as a portion
of the principal amount of the Notes.
In
addition, Note holders would have an unsecured claim against us for the
remainder of the accreted principal amount of their Notes.
Once
we
make the first six scheduled interest payments on the Notes, all of the
remaining Pledged Securities, if any, will be released to Charter Holdco from
the pledge account and thereafter the Notes will be unsecured.
Conversion
Rights
General
Holders
may convert their Notes into shares of our Class A common stock at an
initial conversion rate of 413.2231 shares of our Class A common
stock, par value $.001 per share, per $1,000 original principal amount of
Notes, unless previously redeemed or purchased. This is equivalent to an initial
conversion price of approximately $2.42 per share.
The
conversion rate and the equivalent conversion price in effect at any given
time
are referred to as the "applicable conversion rate" and the "applicable
conversion price," respectively, and will be subject to adjustment as set forth
in "— Conversion Rate Adjustments" below. In addition, if we elect to
accrete the principal amount of the Notes to pay any liquidated damages, we
will
increase the conversion rate at the same rate as the accretion rate and over
the
same period of time. A holder may convert fewer than all of such holder’s Notes
so long as the Notes converted are a multiple of $1,000 original principal
amount.
17
Upon
conversion of a Note, a holder will not receive any cash payment of interest
(unless such conversion occurs between a regular record date and the interest
payment date to which it relates), subject to our obligations described under
"— Interest Make Whole Upon Conversion" below, and we will not adjust the
conversion rate to account for accrued and unpaid interest. Our delivery to
the
holder of cash and shares, if any, of our Class A common stock into which
the Note is convertible will be deemed to satisfy our obligation with respect
to
such Note, subject to our obligations described under "— Interest Make
Whole Upon Conversion" below. Except to the extent we are required to make
payments in respect of such obligations, any accrued but unpaid interest will
be
deemed to be paid in full upon conversion, rather than cancelled, extinguished
or forfeited.
Holders
of Notes at the close of business on a regular record date will receive payment
of interest payable on the corresponding interest payment date notwithstanding
the conversion of such Notes at any time after the close of business on the
applicable regular record date. Notes surrendered for conversion by a holder
after the close of business on any regular record date but prior to the next
interest payment date must be accompanied by payment of an amount equal to
the
interest that the holder is to receive on the Notes; provided,
however,
that no
such payment need be made (1) if the conversion date is prior to
November 16, 2007, (2) we have specified a redemption date that is
after a record date and on or prior to the next interest payment date,
(3) if we have specified a purchase date following a fundamental change
that is after a record date and on or prior to the next interest payment date
or
(4) only to the extent of overdue interest, if any overdue interest exists
at the time of conversion with respect to such Note.
If
a
holder converts Notes, we will pay any documentary, stamp or similar issue
or
transfer tax due on the issue of shares of our Class A common stock upon
the conversion, if any, unless the tax is due because the
holder requests the shares to be issued or delivered to a person other than
the
holder, in which case the holder will pay that tax.
If
a
holder wishes to exercise its conversion right, such holder must deliver an
irrevocable duly completed conversion notice, together, if the Notes are in
certificated form, with the certificated security, to the conversion agent
along
with appropriate endorsements and transfer documents, if required, and pay
any
transfer or similar tax, if required. The date a holder makes such required
deliveries is the conversion date for the Notes converted. The conversion agent
will, on the holder’s behalf, convert the Notes into shares of our Class A
common stock, subject to our right to deliver cash or a combination of cash
and
shares. Holders may obtain copies of the required form of the conversion notice
from the conversion agent. A certificate, or a book-entry transfer through
The
Depository Trust Company, New York, New York, or DTC, for the number of full
shares of our Class A common stock into which any Notes are converted,
together with a cash payment for any fractional shares, and cash or shares,
if
applicable, with respect to any Early Conversion Make Whole Amount or Redemption
Make Whole Amount as described under "— Interest Make Whole Upon
Conversion" below, will be delivered through the conversion agent on the
"conversion settlement date," which will be as soon as practicable, but no
later
than the fifth business day, following the conversion date, unless we elect
cash
settlement as described under "— Cash Settlement Option" below. The trustee
will initially act as the conversion agent.
Notes
called for redemption may be surrendered for conversion at any time prior to
the
close of business on the business day immediately preceding the redemption
date.
If a holder has already delivered a purchase notice as described under
"— Fundamental Change Requires Us to Repurchase Notes at the Option of the
Holder" with respect to a Note, however, the holder may not surrender that
Note
for conversion until the holder has withdrawn the purchase notice in accordance
with the indenture.
Cash
Settlement Option
Upon
conversion, we will have the right to deliver, in lieu of shares of our
Class A common stock, cash or a combination of cash and Class A common
stock. We will inform converting holders through the trustee no later than
two
business days following the conversion date if we elect to pay cash in lieu
of
delivering shares and will specify in such notice the percentage of the shares
otherwise deliverable for which we will pay cash, unless we have already
informed holders of our election in a notice of redemption for the Notes, as
described under "— Redemption" below. If we elect to pay holders cash upon
conversion, such payment will be based on the average price of our Class A
common stock. If we elect cash settlement, the "conversion settlement date"
on
which we deliver the cash and shares of our Class A common stock, if any,
together with the cash or shares, if applicable, with
18
respect
to any Early Conversion Make Whole Amount or Redemption Make Whole Amount,
to
converting holders will be the third business day following the determination
of
the average price. We will deliver cash in lieu of any fractional shares
of our
Class A common stock issuable in connection with any conversion of Notes
based upon the average price.
The
"average price" of our Class A common stock means, with respect to any
conversion of Notes, the average of the sale prices of our Class A common
stock over the 20 trading day period beginning on the third trading day
immediately following the applicable conversion date.
The
"sale
price" of our Class A common stock on any date means the closing sale price
per share (or if no closing sale price is reported, the average of the bid
and
asked prices or, if more than one in either case, the average of the average
bid
and the average asked prices) on that date as reported in transactions for
the
principal U.S. securities exchange on which our common stock is traded or,
if our common stock is not listed on a U.S. national or regional securities
exchange, as reported by the Nasdaq National Market. The sale price will be
determined without reference to after-hours or extended market trading.
If
our
Class A common stock is not listed for trading on a U.S. national or
regional securities exchange and not reported by the Nasdaq National Market
on
the relevant date, the "sale price" will be the last quoted bid price for our
common stock on the Nasdaq Small Cap Market or in the over-the-counter market
on
the relevant date as reported by Pink Sheets LLC or any similar organization.
If
our
Class A common stock is not so quoted, the "sale price" will be the average
of the mid-point of the last bid and asked prices for our common stock on the
relevant date from each of at least three nationally recognized independent
investment banking firms selected by us for this purpose.
"Trading
day" means a day during which trading in securities generally occurs on the
principal U.S. national or regional securities exchange on which our
Class A common stock is then listed or, if our Class A common stock is
not then listed on a national or regional securities exchange, on the Nasdaq
National Market or, if our Class A common stock is not then quoted on
Nasdaq National Market, on the principal other market on which our Class A
common stock is then traded.
Limitation
on Beneficial Ownership
Notwithstanding
the foregoing, no holder of Notes will be entitled to receive shares of our
Class A common stock upon conversion to the extent (but only to the extent)
that such receipt would cause such converting holder to become, directly or
indirectly, a "beneficial owner" (within the meaning of Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder) of more
than the specified percentage of the shares of Class A common stock
outstanding at such time. With respect to any conversion prior to
November 16, 2008, the specified percentage will be 4.9%, and with respect
to any conversion thereafter until the maturity of the Notes, the specified
percentage will be 9.9%. Any purported delivery of shares of our Class A
common stock upon conversion of Notes shall be void and have no effect to the
extent (but only to the extent) that such delivery would result in the
converting holder becoming the beneficial owner of more than the specified
percentage of the shares of Class A common stock outstanding at such time.
If any delivery of shares of our Class A common stock owed to a holder upon
conversion of Notes is not made, in whole or in part, as a result of this
limitation, our obligation to make such delivery shall not be extinguished
and
we shall deliver such shares as promptly as practicable after, but in no event
later than two trading days after, any such converting holder gives notice
to us
that such delivery would not result in it being the beneficial owner of more
than the specified percentage of the shares of Class A common stock
outstanding at such time.
Interest
Make Whole Upon Conversion
Early
Conversion Make Whole Amount
Holders
who convert their Notes prior to November 16, 2007 will receive, in
addition to a number of shares of our Class A common stock equal to the
conversion rate, or cash in lieu thereof, the cash proceeds, subject to the
limitation described below, of the sale by the trustee of the Pledged Securities
remaining with respect to the Notes
19
being
converted, which we refer to as the Early Conversion Make Whole Amount;
provided
that if
a holder converts Notes after the close of business on any regular record
date
but prior to the next interest payment date, the Pledged Securities with
respect
to the Notes being converted that will mature immediately prior to the
applicable interest payment date shall be excluded from such sale and from
the
Early Conversion Make Whole Amount since the proceeds thereof will be paid
to
such holder on such interest payment date. The Early Conversion Make Whole
Amount will not compensate a converting holder for any deferred interest
in
respect of accretion of the principal amount of the Notes if we elect to
accrete
such principal amount to pay any liquidated damages we may owe.
Upon
receipt by the conversion agent of a conversion notice, the trustee will
liquidate a portion of the Pledged Securities, excluding, in the case of any
conversion after the close of business on any regular record date but prior
to
the next interest payment date, Pledged Securities that will mature immediately
prior to the applicable interest payment date, rounded down to the nearest
whole
multiple of the minimum denomination of such Pledged Securities, and release
the
cash proceeds thereof to the converting holder. The percentage of the remaining
Pledged Securities to be sold will be determined based on the aggregate original
principal amount of Notes being converted as a percentage of the total original
principal amount of Notes then outstanding.
If
a
holder converts Notes prior to the earlier of (1) the sale of such Notes
pursuant to an effective registration statement (including under this
prospectus) or (2) November 22, 2006, the Early Conversion Make Whole
Amount such holder will receive upon conversion of each $1,000 original
principal amount of Notes will not exceed $18.18, which is the amount determined
pursuant to the following formula:
1000 - 1.1(CR
* OP)
Where
CR
is 413.2231, the initial conversion rate for the Notes and OP is $2.16, the
last
reported sale price of our Class A common stock on the date we priced this
offering of Notes. The portion of the Early Conversion Make Whole Amount not
paid to the holder upon conversion of its Notes because of the limitation
described above will be paid to Charter Holdco promptly following the sale
of
the relevant Pledged Securities.
Notwithstanding
the foregoing paragraph, the cash proceeds received upon conversion by any
holders who convert Notes that have been called for redemption will not be
limited by the formula described above.
Redemption
Make Whole Amount
Any
holders who convert Notes that have been called for redemption shall receive,
in
addition to the Early Conversion Make Whole Amount, if applicable, the present
value of the interest on the Notes converted that would have been payable for
the period from and including November 16, 2007, or if later, the
redemption date, to but excluding November 16, 2009, plus any accrued and
unpaid deferred interest, which we refer to as the Redemption Make Whole Amount.
The Redemption Make Whole Amount shall be calculated by discounting the amount
of such interest, other than any deferred interest, on a semi-annual basis
using
a discount rate equal to 3.0% plus the arithmetic mean of the yields under
the
respective headings "This Week" and "Last Week" published in the Statistical
Release under the caption "Treasury Constant Maturities" for the maturity
(rounded to the nearest month) corresponding to the period from and including
the redemption date to but excluding November 16, 2009. If no maturity
exactly corresponds to such maturity, yields for the two published maturities
most closely corresponding to such maturity shall be calculated pursuant to
the
immediately preceding sentence and the applicable rate shall be interpolated
or
extrapolated from such yields on a straight-line basis, rounding in each of
such
relevant periods to the nearest month. For the purpose of calculating the
applicable rate, the most recent Statistical Release published prior to the
date
of determination of the Redemption Make Whole Amount shall be used.
The
term
"Statistical Release" shall mean the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded U.S. government
securities adjusted to constant maturities or, if such statistical release
is
not published at the time of any determination under the indenture, then such
other reasonably comparable index that we will designate.
We
may
pay the Redemption Make Whole Amount in cash or in shares of our Class A
common stock, with the number of such shares determined based on the average
of
the sale prices of our Class A common stock over the ten trading days
immediately preceding the applicable conversion date. If we elect to pay the
Redemption Make
20
Whole
Amount in shares of our Class A common stock, the number of shares we
deliver, together with the shares deliverable upon conversion, shall not
exceed
462 per $1,000 original principal amount of Notes, subject to adjustment
in the
same manner as the conversion rate as set forth under "— Conversion Rate
Adjustments," and we must deliver cash with respect to the remainder of the
Redemption Make Whole Amount, if any.
Make
Whole Amount and Public Acquirer Change of Control
If
a
transaction described in clause (2) of the definition of change of control
(as set forth under "— Fundamental Change Requires Us to Repurchase Notes
at the Option of the Holder") occurs on or prior to November 16, 2009, we
must give notice to all record holders of Notes and the trustee at least ten
trading days prior to the anticipated effective date of such change of control
transaction. We must also give notice to all record holders of Notes and the
trustee that such a transaction has occurred within 15 days after the
actual effective date of such change of control transaction. If a holder elects
to convert its Notes at any time following the date we give notice of the
anticipated effective date of such change of control transaction we will
increase the applicable conversion rate for the Notes surrendered for conversion
by a number of additional shares of Class A common stock (the "additional
shares"), as described below.
The
number of additional shares will be determined by reference to the table below
and is based on the date on which such change of control transaction becomes
effective (the "effective date") and the price (the "stock price") paid per
share of our Class A common stock in such transaction. If the holders of
our Class A common stock receive only cash in the change of control
transaction, the stock price shall be the cash amount paid per share. Otherwise
the stock price shall be the average of the sale prices of our Class A
common stock on the 10 trading days up to but not including the effective
date.
The
additional shares will be delivered to holders who elect to convert their Notes
during the period described above on the later of (1) five business days
following the effective date and (2) the conversion settlement date for
those Notes.
The
stock
prices set forth in the first row of the table (i.e., the column headers) will
be adjusted as of any date on which the conversion rate of the Notes is
adjusted. The adjusted stock prices will equal the stock prices applicable
immediately prior to such adjustment multiplied by a fraction, the numerator
of
which is the conversion rate immediately prior to the adjustment giving rise
to
the stock price adjustment and the denominator of which is the conversion rate
as so adjusted. Our obligation to deliver the additional shares will be subject
to adjustment in the same manner as the conversion rate as set forth under
"— Conversion Rate Adjustments."
The
following table sets forth the hypothetical stock price and number of additional
shares to be received per $1,000 original principal amount of Notes.
|
Stock
Price
|
||||||||||||||||||||||||||||||||
|
Effective
Date
|
$2.16
|
$2.25
|
$2.50
|
$3.00
|
$3.50
|
$4.00
|
$4.50
|
$5.00
|
||||||||||||||||||||||||
|
November 16,
2004
|
|
|
37.5
|
32.2
|
20.2
|
4.9
|
0.0
|
0.0
|
0.0
|
0.0
|
|
|||||||||||||||||||||
|
November 16,
2005
|
|
|
54.7
|
48.2
|
33.6
|
14.6
|
3.5
|
0.0
|
0.0
|
0.0
|
|
|||||||||||||||||||||
|
November 16,
2006
|
|
|
74.2
|
66.2
|
48.5
|
25.4
|
12.1
|
4.1
|
0.0
|
0.0
|
|
|||||||||||||||||||||
|
November 16,
2007
|
|
|
95.1
|
85.5
|
64.0
|
36.5
|
20.9
|
11.7
|
6.3
|
3.0
|
|
|||||||||||||||||||||
|
November 16,
2008
|
|
|
85.6
|
75.0
|
52.0
|
24.5
|
10.7
|
3.8
|
0.8
|
0.0
|
|
|||||||||||||||||||||
|
November 16,
2009
|
|
|
49.7
|
31.2
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
|
|||||||||||||||||||||
The
exact
stock price and effective dates may not be set forth on the table, in which
case:
|
1.
|
if
the stock price is between two stock price amounts on the table or
the
effective date is between two dates on the table, the additional
premium
will be determined by straight-line interpolation between the number
of
additional shares set forth for the higher and lower stock price
amounts
and the two dates, as applicable, based on a 365 day
year;
|
21
|
2.
|
if
the stock price is in excess of $5.00 per share (subject to
adjustment), no additional shares will be issued upon
conversion; and
|
|
3.
|
if
the stock price is less than $2.16 per share (the last reported sale
price of our Class A common stock on the date the Notes were priced)
(subject to adjustment), no additional shares will be issued upon
conversion.
|
Notwithstanding
the foregoing, in no event will the total number of shares of Class A
common stock issuable upon conversion exceed 462 per $1,000 original
principal amount of Notes, subject to adjustment in the same manner as the
conversion rate as set forth under "— Conversion Rate Adjustments."
Our
obligation to deliver the additional shares could be considered a penalty,
in
which case the enforceability thereof would be subject to general principles
of
reasonableness of economic remedies.
Notwithstanding
the foregoing, and in lieu of adjusting the conversion rate as set forth above,
in the case of a "public acquirer change of control" (as defined below) we
may
elect that, from and after the effective date of such public acquirer change
of
control, the right to convert a Note will be changed into a right to convert
a
Note into a number of shares of "acquirer common stock" (as defined below).
The
conversion rate following the effective date of such transaction will be a
number of shares of acquirer common stock equal to the product of:
· the
conversion rate in effect immediately prior to the effective date of such change
of control, times
· the
average of the quotients obtained, for each trading day in the 10 consecutive
trading day period commencing on the trading day next succeeding the effective
date of such public acquirer change of control (the "valuation period"),
of:
|
(i)
|
the
"acquisition value" of our Class A common stock on each such trading
day in the valuation period, divided
by
|
|
(ii)
|
the
closing sale price of the acquirer common stock on each such trading
day
in the valuation period.
|
The "acquisition value" of our Class A common stock means, for each trading day in the valuation period, the value of the consideration paid per share of our Class A common stock in connection with such public acquirer change of control, as follows:
· for
any
cash, 100% of the face amount of such cash,
· for
any
acquirer common stock or any other securities that are traded on a
U.S. national securities exchange or approved for quotation on the Nasdaq
National Market, 100% of the closing sale price of such acquirer common stock
or
other traded securities on each such trading day; and
· for
any
other securities, assets or property, 102% of the fair market value of such
security, asset or property on each such trading day, as determined by two
independent nationally recognized investment banks selected by the trustee
for
this purpose.
After
the
adjustment of the conversion rate in connection with a public acquirer change
of
control, the conversion rate will be subject to further similar adjustments
in
the event that any of the events described above occur thereafter.
A
"public
acquirer change of control" is any transaction described in clause (2) of
the definition of change control below where the acquirer, or any entity that
is
a direct or indirect "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 50% of the total voting power of all shares of such
acquirer’s capital stock that are entitled to vote generally in the election of
directors has a class of common stock traded on a national
22
securities
exchange or quoted on the Nasdaq National Market or which will be so traded
or
quoted when issued or exchanged in connection with such change of control.
We
refer to such acquirer’s or other entity’s class of common stock traded on a
national securities exchange or quoted on the Nasdaq National Market or which
will be so traded or quoted when issued or exchanged in connection with such
fundamental change as the "acquirer common stock."
Conversion
Rate Adjustments
The
initial conversion rate will be adjusted for certain events, including:
|
(1)
|
the
issuance of our Class A common stock as a dividend or distribution on
our Class A common stock, or certain subdivisions and combinations of
our Class A common stock, in which event the conversion rate will be
adjusted based on the following
formula:
|
|
CR1
= CR
0
×
|
OS1
|
| OS 0 |
where,
CR
0 = the
conversion rate in effect at the close of business on the record
date
CR
1 = the
conversion rate in effect immediately after the record date
OS 0 = the
number of shares of our Class A common stock outstanding at the close of
business on the record date
OS 1 = the
number of shares of our Class A common stock outstanding that would be
outstanding immediately after such event
|
(2)
|
the
issuance to all holders of our Class A common stock of certain rights
or warrants to purchase our Class A common stock (or securities
convertible into our Class A common stock) for a period expiring
45 days or less from the date of issuance of such rights or warrants
at less than (or having a conversion price per share less than) the
current market price of our Class A common stock; provided
that
the conversion rate will be readjusted to the extent that such rights
or
warrants are not exercised prior to the expiration, in which event
the
conversion rate will be adjusted based on the following
formula:
|
|
CR1
= CR
0
×
|
OS
0
+ X
|
| OS 0 + Y |
where,
CR
0 = the
conversion rate in effect at the close of business on the record
date
CR
1 = the
conversion rate in effect immediately after the record date
OS 0 = the
number of shares of our Class A common stock outstanding at the close of
business on the record date
X = the
total
number of shares of our Class A common stock issuable pursuant to such
rights
Y = the
number of shares of our Class A common stock equal to the aggregate price
payable to exercise such rights divided by the average of the sale prices of
our
Class A
common
stock for the ten consecutive trading days prior to the business day immediately
preceding the announcement of the issuance of such
rights
|
(3)
|
the
dividend or other distribution to all holders of our Class A common
stock of shares of our capital stock (other than Class A common
stock) or evidences of our indebtedness or our assets (excluding
(A) any
dividend, distribution or issuance covered by clause (1) or
(2) above and (B) any dividend or distribution paid exclusively
in cash), in which event the conversion rate will be adjusted based
on the
following formula:
|
|
CR1
= CR
0
×
|
SP
0
|
| SP 0 - FMV |
23
where,
CR
0 = the
conversion rate in effect at the close of business on the record
date
CR
1 = the
conversion rate in effect immediately after the record date
SP
0 = the
current market price
FMV = the
fair
market value (as determined by our board of directors) of the shares of capital
stock, evidences of indebtedness, assets or property distributed with respect
to
each outstanding share of our Class A common stock on the record date
for such distribution
With
respect to an adjustment pursuant to this clause (3) where there has been a
payment of a dividend or other distribution on our Class A common stock or
shares of capital stock of, or similar equity interests in, a subsidiary or
other business unit of ours, in which event the conversion rate will be adjusted
based on the following formula:
|
CR1
= CR
0
×
|
FMV
0 + MP
0
|
| MP 0 |
where,
CR
0 = the
conversion rate in effect at the close of business on the record
date
CR
1 = the
conversion rate in effect immediately after the record date
FMV 0 = the
average of the sale prices of the capital stock or similar equity interest
distributed to holders of our Class A common stock applicable to one share
of our Class A
common stock over the 10 trading days commencing on and including the fifth
trading day after the date on which "ex-distribution trading" commences for
such
dividend or distribution on the Nasdaq National Market or such other national
or
regional exchange or market on which the securities are then listed or
quoted
MP 0 = the
average of the sale prices of our Class A common stock over the
10 trading days commencing on and including the fifth trading day after the
date on which "ex-
distribution trading" commences for such dividend or distribution on the
Nasdaq
National Market or such other national or regional exchange or market on
which
the
securities are then listed or quoted
|
(4)
|
dividends
or other distributions consisting exclusively of cash to all holders
of
our Class A common stock, in which event the conversion rate will be
adjusted based on the following
formula:
|
|
CR1
= CR
0
×
|
SP0
|
| SP 0 - C |
where,
CR
0 = the
conversion rate in effect at the close of business on the record
date
CR
1 = the
conversion rate in effect immediately after the record date
SP
0 = the
current market price
C = the
amount in cash per share we distribute to holders of our Class A common
stock
|
(5)
|
we
or one or more of our subsidiaries make purchases of our Class A
common stock pursuant to a tender offer or exchange offer by us or
one of
our subsidiaries for our Class A common stock to the extent that the
cash and value of any other consideration included in the payment
per
share of our Class A common stock exceeds the current market price
per share of our Class A common stock on the trading day next
succeeding the last date on which tenders or exchanges may be made
pursuant to such tender or exchange offer (the "expiration date"),
in
which event the conversion rate will be adjusted based on the following
formula:
|
|
CR1
= CR
0
×
|
FMV + (SP1
×
OS1)
|
| OS 0 × SP1 |
24
where,
CR
0 = the
conversion rate in effect on the expiration date
CR
1 = the
conversion rate in effect immediately after the expiration date
FMV = the
fair
market value (as determined by our board of directors) of the aggregate value
of
all cash and any other consideration paid or payable for shares validly tendered
or exchanged and not withdrawn as of the expiration date (the "purchased
shares")
OS 1 = the
number of shares of our Class A common stock outstanding immediately after
the expiration date less any purchased shares
OS 0 = the
number of shares of our Class A common stock outstanding immediately after
the expiration date, including any purchased shares
SP 1 = the
sale
price of our Class A common stock on the trading day next succeeding the
expiration date
|
(6)
|
someone
other than us or one of our subsidiaries makes a payment in respect
of a
tender offer or exchange offer in which, as of the expiration date,
our
board of directors is not recommending rejection of the offer, in
which
event the conversion rate will be adjusted based on the following
formula:
|
|
CR1 = CR
0
|
×FMV + (SP1
×
OS1)
|
|||
| OS 0 × SP1 | ||||
where,
CR
0 = the
conversion rate in effect on the expiration date
CR
1 = the
conversion rate in effect immediately after the expiration date
FMV = the
fair
market value (as determined by our board of directors) of the aggregate
consideration payable to our shareholders based on the acceptance (up to
any
maximum
specified in the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the expiration
date
OS 1 = the
number of shares of
our
Class A common stock outstanding immediately after the expiration date less
any purchased shares
OS 0 = the
number of shares of our Class A common stock outstanding immediately after
the expiration date, including any purchased shares
SP 1 = the
sale
price of our Class A common stock on the trading day next succeeding the
expiration date
The
adjustment referred to in this clause (6) will only be made
if:
· the
tender offer or exchange offer is for an amount that increases the offeror’s
ownership of Class A common stock to more than 25% of the total shares of
Class A common stock outstanding; and
· the
cash
and value of any other consideration included in the payment per share of
Class A common stock exceeds the sale price of our Class A common
stock on the trading day next succeeding the last date on which tenders or
exchanges may be made pursuant to the tender or exchange offer.
However,
the adjustment referred to in this clause (6) will generally not be made if
as of the closing of the offer, the offering documents disclose a plan or an
intention to cause us to engage in a consolidation or merger or a sale of the
consolidated assets of us and our subsidiaries substantially as an
entirety.
"Current
market price" of our Class A common stock on any day means the average of
the sale price of our Class A common stock for each of the 10 consecutive
trading days ending on the earlier of the day in question and the day before
the
"ex-date" with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, "ex-date" means the first date
on
which the shares of our Class A common stock trade on the
25
applicable
exchange or in the applicable market, regular way, without the right to receive
such issuance or distribution.
"Record
date" means, for purpose of this section, with respect to any dividend,
distribution or other transaction or event in which the holders of our
Class A common stock have the right to receive any cash, securities or
other property or in which our Class A common stock (or other applicable
security) is exchanged for or converted into any combination of cash, securities
or other property, the date fixed for determination of holders of our
Class A common stock entitled to receive such cash, securities or other
property (whether such date is fixed by our board of directors or by statute,
contract or otherwise).
To
the
extent that we have a rights plan in effect upon conversion of the Notes into
Class A common stock, you will receive, in addition to the Class A
common stock, the rights under the rights plan, unless prior to any conversion,
the rights have separated from the Class A common stock, in which case the
conversion rate will be adjusted at the time of separation as if we distributed,
to all holders of our Class A common stock, shares of our capital stock,
evidences of indebtedness or assets as described above, subject to readjustment
in the event of the expiration, termination or redemption of such rights.
Except
as
stated above, the conversion rate will not be adjusted for the issuance of
our
Class A common stock or any securities convertible into or exchangeable for
our Class A common stock or carrying the right to purchase any of the
foregoing.
In
the
case of any recapitalization, reclassification or change of our Class A
common stock (other than changes resulting from a subdivision or combination),
a
consolidation, merger or combination involving us, a sale, lease or other
transfer to another corporation of the consolidated assets of ours and our
subsidiaries substantially as an entirety, or any statutory share exchange,
in
each case as a result of which holders of our Class A common stock are
entitled to receive stock, other securities, other property or assets (including
cash or any combination thereof) with respect to or in exchange for our
Class A common stock, the holders of the Notes then outstanding will be
entitled thereafter to convert those Notes into the kind and amount of shares
of
stock, other securities or other property or assets (including cash or any
combination thereof) that they would have owned or been entitled to receive
upon
such recapitalization, reclassification, change, consolidation, merger,
combination, sale, lease, transfer or statutory share exchange had such Notes
been converted into our Class A common stock immediately prior to such
transaction. We will agree in the indenture not to become a party to any such
transaction unless its terms are consistent with the foregoing.
We
may
from time to time, to the extent permitted by law and subject to applicable
rules of The Nasdaq Stock Market, increase the conversion rate of the Notes
by
any amount for any period of at least 20 days. In that case we will give at
least 15 days notice of such increase. We may make such increases in the
conversion rate, to the extent permitted by law and subject to applicable rules
of The Nasdaq Stock Market, in addition to those set forth above, as our board
of directors deems advisable to avoid or diminish any income tax to holders
of
our Class A common stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes.
As
a
result of any adjustment of the conversion rate, the holders of Notes may,
in
certain circumstances, be deemed to have received a distribution subject to
U.S. income tax as a dividend. In certain other circumstances, the absence
of an adjustment may result in a taxable dividend to the holders of Class A
common stock. In addition, non-U.S. holders of Notes in certain
circumstances may be deemed to have received a distribution subject to
U.S. federal withholding tax requirements.
Exchange
in Lieu of Conversion
Unless
we
have called the relevant Notes for redemption, when a holder surrenders Notes
for conversion, we may direct the conversion agent to surrender, on or prior
to
the date two business days following the conversion date, such Notes to a
financial institution designated by us for exchange in lieu of conversion.
In
order to accept any such Notes, the designated institution must agree to
deliver, in exchange for such Notes, a number of shares of
26
our
common stock equal to the applicable conversion rate, or at its option, cash
or
a combination of cash and shares of our common stock in lieu thereof, calculated
based on the average price, plus cash for any fractional shares and any Early
Conversion Make Whole Amount.
If
the
designated institution accepts any such Notes, it will deliver the appropriate
number of shares of our common stock (and cash, if any), or cash in lieu
thereof, to the conversion agent and the conversion agent will deliver those
shares or cash to the holder. Such designated institution will also deliver
cash
equal to any Early Conversion Make Whole Amount we would owe such holder if
we
had converted its Notes. Any Notes exchanged by the designated institution
will
remain outstanding. If the designated institution agrees to accept any Notes
for
exchange but does not timely deliver the related consideration, we will, as
promptly as practical thereafter, but not later than the third business day
following (1) the conversion date, or (2) if the designated
institution elects to deliver cash or a combination of cash and shares of our
common stock, the determination of the average price, convert the Notes and
deliver shares of our common stock, as described under "— Conversion
Rights — General," or, at our option cash in lieu thereof based on the
average price, along with any applicable Early Conversion Make Whole Amount.
Our
designation of an institution to which the Notes may be submitted for exchange
does not require the institution to accept any Notes. If the designated
institution declines to accept any Notes surrendered for exchange, we will
convert those Notes into shares of our Class A common stock, or cash in
lieu thereof, as described under "— Conversion Rights" above. We will not
pay any consideration to, or otherwise enter into any arrangement with, the
designated institution for or with respect to such designation.
Redemption
Following
the earlier of (1) the sale of any Notes pursuant to the registration
statement of which this prospectus forms a part or (2) November 22,
2006, we may redeem for cash the Notes (or, in the case of clause (1)
above, any such Notes that have been sold pursuant to an effective registration
statement) in whole or in part, at a price equal to 100% of the accreted
principal amount of such Notes plus accrued and unpaid interest, deferred
interest and liquidated damages, if any, on the Notes to, but excluding, the
redemption date, if the closing price of our Class A common stock has
exceeded, for at least 20 trading days in any consecutive 30 trading day period,
180% of the conversion price if such 30 trading day period begins prior to
November 16, 2007 and 150% if such 30 trading day period begins thereafter.
The "conversion price" as of any day will equal the accreted principal amount
of
$1,000 original principal amount of Notes divided by the conversion rate in
effect on such day. We are required to give notice of redemption to the trustee
and all registered holders not less than 30 nor more than 60 days prior to
the redemption date. We must specify in such notice (1) whether we will
deliver shares of our Class A common stock, or cash in lieu thereof, upon
conversion of any Notes called for redemption, (2) if we elect to deliver
cash, the percentage of the shares otherwise deliverable for which we will
pay
cash and (3) whether we will deliver cash or shares of our Class A
common stock upon conversion with respect to the Redemption Make Whole Amount.
Notes
or
portions of Notes called for redemption will be convertible by the holder until
the close of business on the business day prior to the redemption date.
If
we
decide to redeem fewer than all of the outstanding Notes, the trustee will
select the Notes to be redeemed (in original principal amounts of $1,000 or
integral multiples thereof) by lot, on a pro rata basis or by another method
the
trustee considers fair and appropriate.
If
any
Notes are to be redeemed in part only, we will issue a new Note or Notes with
a
principal amount equal to the unredeemed principal portion thereof. If the
trustee selects a portion of your Note for partial redemption and you convert
a
portion of the same Note, the converted portion will be deemed to be from the
portion selected for redemption. In the event of any redemption in part, we
will
not be required to issue, register the transfer of or exchange any certificated
Note during a period of 15 days before the mailing of the redemption
notice.
Fundamental
Change Requires Us to Repurchase Notes at the Option of the Holder
If
a
fundamental change occurs, each holder of Notes will have the right to require
us to purchase some or all of that holder’s Notes for cash on a repurchase date
that is not less than 20 nor more than 35 business days after the date of our
notice of the fundamental change. We will purchase such Notes at a purchase
price equal to 100% of
27
the
accreted principal amount of the Notes to be purchased, plus any accrued
and
unpaid interest (including deferred interest and liquated damages, if any)
to
but excluding the fundamental change repurchase date, unless such fundamental
change repurchase date falls after a record date and on or prior to the
corresponding interest payment date, in which case we will pay the full amount
of accrued and unpaid interest (including liquated damages, if any, but
excluding any deferred interest) payable on such interest payment date to
the
holder of record at the close of business on the corresponding record date.
Within
20 days after the occurrence of a fundamental change, we are required to
give notice to all holders of Notes, as provided in the indenture, of the
occurrence of the fundamental change and of their resulting repurchase right
and
the fundamental change repurchase date. We must also deliver a copy of our
notice to the trustee. To exercise the repurchase right, a holder of Notes
must
deliver, on or before the fundamental change repurchase date specified in our
notice, written notice to the trustee of the holder’s exercise of its repurchase
right, together with the Notes with respect to which the right is being
exercised. We will promptly pay the repurchase price for Notes surrendered
for
repurchase following the fundamental change repurchase date.
You
may
withdraw any written repurchase notice by delivering a written notice of
withdrawal to the paying agent prior to the close of business on the repurchase
date. The withdrawal notice must state:
· the
original principal amount of the withdrawn Notes;
· if
certificated Notes have been issued, the certificate number of the withdrawn
Notes (or, if your Notes are not certificated, your withdrawal notice must
comply with appropriate DTC procedures); and
· the
original principal amount, if any, that remains subject to the repurchase
notice.
Payment
of the repurchase price for a Note for which a repurchase notice has been
delivered and not withdrawn is conditioned upon book-entry transfer or delivery
of the Note, together with necessary endorsements, to the paying agent at its
corporate trust office in the Borough of Manhattan, The City of New York, or
any
other office of the paying agent, at any time after delivery of the repurchase
notice. Payment of the repurchase price for the Note will be made promptly
following the later of the fundamental change repurchase date and the time
of
book-entry transfer or delivery of the Note. If the paying agent holds money
sufficient to pay the repurchase price of the Note, on the repurchase date,
then, on and after the business day following the repurchase date:
· the
Note
will cease to be outstanding;
· interest
will cease to accrue; and
· all
other
rights of the holder will terminate, other than the right to receive the
repurchase price upon delivery of the Note.
This
will
be the case whether or not book-entry transfer of the Note has been made or
the
Note has been delivered to the paying agent.
A
"fundamental change" will be deemed to have occurred upon a change of control
or
a termination of trading.
A
"termination of trading" will be deemed to have occurred if our Class A
common stock (or other common stock into which the Notes are then convertible)
is neither listed for trading on a U.S. national securities exchange nor
approved for trading on the Nasdaq National Market; provided
that
a
termination of trading will not occur so long as our Class A common stock
is listed for trading on the Nasdaq Small Cap market or quoted bid prices for
our Class A common stock in the over-the-counter market are reported by
Pink Sheets LLC or any similar organization.
A
"change
of control" will be deemed to have occurred at such time after the original
issuance of the Notes when the following has occurred:
|
(1)
|
the
consummation of any transaction (including, without limitation, any
merger
or consolidation), the result of which is that any "person" or "group"
within the meaning of
|
28
|
|
Section 13(d)
of the Exchange Act other than Paul G. Allen and Related Parties,
becomes
the direct or indirect "beneficial owner" as defined in Rule 13d-3
under the Exchange Act of more than 35% of the Voting Stock of
Charter
Communications, Inc., measured by voting power rather than number
of
shares, unless Mr. Allen and the Related Parties, collectively,
beneficially own, directly or indirectly, a greater percentage
of Voting
Stock of Charter Communications, Inc., measured by voting power
rather
than number of shares, than such
person;
|
|
(2)
|
the
consummation of any transaction or event (whether by means of a
liquidation, share exchange, tender offer, consolidation,
recapitalization, reclassification, merger of us or any sale, lease
or
other transfer of the consolidated assets of ours and our subsidiaries)
or
a series of related transactions or events pursuant to which our
common
stock is exchanged for, converted into or constitutes solely the
right to
receive cash, securities or other property more than 10% of the fair
market value of which consists of cash, securities or other property
that
are not, or upon issuance will not be, traded on any U.S. national
securities exchange or quoted on the Nasdaq National
Market;
|
|
(3)
|
the
sale, transfer, conveyance, lease or other disposition (including
by way
of liquidation or dissolution, but excluding by way of merger or
consolidation), in one or a series of related transactions, of all
or
substantially all of the assets of Charter Communications, Inc. and
its
subsidiaries, taken as a whole, to any "person" or "group" as defined
above;
|
|
(4)
|
the
purchase by Mr. Allen or any Allen Affiliates in any transaction or
series of transactions, of shares of our Class A common stock, which
results in the aggregate number of shares of Class A common stock
held by Mr. Allen and any Allen Affiliates exceeding 70% of the total
number of shares of Class A common stock issued and outstanding
(including any shares borrowed pursuant to the share lending agreement)
at
such time to the extent that the closing price per share of the
Class A common stock for any five trading days within the period of
the ten consecutive trading days immediately after the later of the
last
date of such purchases or the public announcement of such purchases
is
less than 100% of the applicable conversion price of the Notes in
effect
on each of those trading days; provided
that
the calculation of the number of shares of Class A common stock held
by Mr. Allen and any Allen Affiliates will not include any share of
our Class A common stock acquired by Mr. Allen or any Allen
Affiliates as a result of the exchange or conversion of membership
units
of Charter Holdco or shares of our Class B common stock or any
securities exchangeable or convertible into shares of Class A common
stock or issued in exchange (by merger or otherwise) for shares of
a
Person that holds units of Charter
Holdco.
|
|
(5)
|
the
adoption of a plan relating to the liquidation or dissolution of
Charter
Holdco; or
|
|
(6)
|
continuing
directors (as defined below in this section) cease to constitute
at least
a majority of our board of
directors.
|
As
used
in connection with the definition of change of control, the following terms
will
have the meaning described below:
"Allen
Affiliate" means any person in which Mr. Allen, directly or indirectly,
owns at least a 50.1% equity interest, provided that Charter Communications,
Inc., Charter Holdco or any of its subsidiaries will not be included in such
definition.
"Continuing
director" means a director who either was a member of our board of directors
on
November 16, 2004 or who becomes a member of our board of directors
subsequent to that date and whose appointment, election or nomination for
election by our shareholders is duly approved by a majority of the continuing
directors on our board of directors at the time of such approval, either by
a
specific vote or by approval
29
of
the
proxy statement issued by us on behalf of the board of directors in which
such
individual is named as nominee for director.
"Related
Party" means:
(i) the
spouse or an immediate family member, estate or heir of the
Mr. Allen; or
(ii) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or persons beneficially holding an 80% or more
controlling
interest of which consist of Mr. Allen and/or such other persons referred
to in the immediately preceding clause (i) or this
clause (ii).
"Voting
Stock" of any person as of any date means the capital stock of such person
that
is at the time entitled to vote in the election of the board of directors of
such person.
The
beneficial owner shall be determined in accordance with Rule 13d-3
promulgated by the SEC under the Exchange Act. The term "person" includes any
syndicate or group which would be deemed to be a "person" under
Section 13(d)(3) of the Exchange Act.
The
definition of change of control includes a phrase relating to the conveyance,
transfer, sale, lease or disposition of our consolidated assets "substantially
as an entirety." There is no precise, established definition of the phrase
"substantially as an entirety." under applicable law. Accordingly, your ability
to require us to repurchase your Notes as a result of a conveyance, transfer,
sale, lease or other disposition of less than all our assets may be uncertain.
Rule 13e-4
under the Exchange Act, as amended, requires the dissemination of certain
information to security holders if an issuer tender offer occurs and may apply
if the repurchase option becomes available to holders of the Notes. We will
comply with this rule to the extent applicable at that time.
We
may,
to the extent permitted by applicable law, at any time purchase the Notes in
the
open market or by tender at any price or by private agreement. Any Note so
purchased by us may, to the extent permitted by applicable law, be reissued
or
resold or may be surrendered to the trustee for cancellation. Any Notes
surrendered to the trustee may not be reissued or resold and will be canceled
promptly.
The
foregoing provisions would not necessarily protect holders of the Notes if
highly leveraged or other transactions involving us occur that may adversely
affect holders.
Our
ability to repurchase Notes upon the occurrence of a fundamental change is
subject to important limitations. Our subsidiaries’ existing credit agreements
and indentures contain and any future credit agreements or other agreements
relating to our indebtedness may also contain provisions prohibiting repurchase
of the Notes under certain circumstances, or expressly prohibit our repurchase
of the Notes upon a fundamental change or may provide that a fundamental change
constitutes an event of default under that agreement. If a fundamental change
occurs at a time when we are prohibited from repurchasing Notes, we could seek
the consent of our or our subsidiaries’ lenders and noteholders to repurchase
the Notes or attempt to refinance this debt. If we do not obtain consent, we
would not be permitted to repurchase the Notes. Our failure to repurchase
tendered Notes would constitute an event of default under the indenture, which
might constitute a default under the terms of our other indebtedness.
No
Notes
may be purchased by us at the option of the holders upon a fundamental change
if
the accreted principal amount of the Notes has been accelerated, and such
acceleration has not been rescinded, on or prior to such date.
The
fundamental change purchase feature of the Notes may in certain circumstances
make more difficult or discourage a takeover of our company. The fundamental
change repurchase feature, however, is not the result of our knowledge of any
specific effort to accumulate shares of our Class A common stock, to obtain
control of us by means of a merger, tender offer solicitation or otherwise,
or
by management to adopt a series of anti-takeover provisions. Instead, the
fundamental change repurchase feature is a standard term contained in securities
similar to the Notes.
30
Consolidation,
Merger and Sale of Assets
We
may,
without the consent of the holders of Notes, consolidate with, merge into or
sell, lease or otherwise transfer in one transaction or a series of related
transactions the consolidated assets of ours and our subsidiaries substantially
as an entirety to any corporation, limited liability company, partnership or
trust organized under the laws of the United States or any of its political
subdivisions provided that:
· the
surviving entity assumes all our obligations under the indenture and the
Notes;
· if
as a
result of such transaction the Notes become convertible into common stock or
other securities issued by a third party that is not the successor under the
Notes and the indenture, such third party fully and unconditionally guarantees
all obligations of Charter Communications, Inc. or such successor under the
Notes and the indenture;
· at
the
time of such transaction, no event of default, and no event which, after notice
or lapse of time, would become an event of default, shall have happened and
be
continuing; and
· an
officers’ certificate and an opinion of counsel, each stating that the
consolidation, merger or transfer complies with the provisions of the indenture,
have been delivered to the trustee.
Information
Requirement
We
will
agree that for a period of two years after closing, during any period in which
we are not subject to the reporting requirements of the Exchange Act, to make
available to holders of the Notes, or beneficial owners of interests therein,
or
any prospective purchaser of the Notes, the information required by
Rule 144A(d)(4) to be made available in connection with the sale of Notes
or beneficial interests in the Notes.
Covenant
We
agreed
in the indenture that we will redeem our outstanding 5.75% convertible
senior notes due 2005 to the extent of the proceeds from the sale of the Notes,
net of the purchase price of Pledged Securities and expenses of the offering,
and that we will issue the related notice of redemption no later than the close
of business on the business day immediately following the closing of the sale
of
the Notes. We consummated the redemption on December 23, 2004.
Events
of Default
Each
of
the following will constitute an event of default under the indenture:
· our
failure to pay when due the principal on any of the Notes at maturity, upon
redemption or exercise of a repurchase right or otherwise;
· our
failure to pay an installment of interest (including liquidated damages, if
any)
other than any deferred interest on any of the Notes for 30 days after the
date when due; provided
that
a
failure to make any of the first six scheduled interest payments on the original
principal amount of the Notes on the applicable interest payment date will
constitute an event of default with no grace or cure period (unless the failure
to make such payment results from the failure by the trustee to release the
relevant cash amount from the pledge account, provided that such failure is
not
caused by any act or omission by us);
· our
failure to deliver shares of our Class A common stock, or cash in lieu
thereof, when due upon conversion of Notes, together with cash in respect of
any
fractional shares and any Early Conversion
Make Whole Amount and any Redemption Make Whole Amount, upon conversion of
a
Note, and that failure continues for 10 days;
· our
failure to comply with our obligations described under "— Covenant" when
required and such failure continues for five days;
· our
failure for 30 days after written notice thereof has been given to us by
the trustee or to us and the trustee by the holders of at least 25% in aggregate
original principal amount of the Notes then outstanding to comply with any
of
the other covenants or agreements in the indenture;
31
· our
failure to make any payment under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by us or any of our significant subsidiaries
(or
the payment of which is guaranteed by us or any of our significant subsidiaries)
whether such indebtedness or guarantee now exists, or is created after the
issue
date, if that default:
(i)
is
caused
by a failure to pay at final stated maturity the principal amount on such
indebtedness prior to the expiration of the grace period provided in such
indebtedness
on the date of such default (a "Payment Default"); or
(ii)
results
in the acceleration of such indebtedness prior to its express maturity, and,
in
each case, the principal amount of any such indebtedness, together with the
principal
amount of any other such indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates
$100 million
or more;
· our
failure to give timely notice of a fundamental change or of the anticipated
effective date of a change of control transaction as described under
"— Conversion Rights — Make Whole Amount and Public Acquirer Change of
Control"; and
· certain
events of our bankruptcy, insolvency or reorganization or any significant
subsidiary of ours.
"Significant
subsidiary" has the meaning set forth in clauses (1) and (2) of the
definition thereof in Regulation S-X under the Securities Act.
If
an
event of default specified in the eighth bullet point above occurs and is
continuing, then the principal of all the Notes and the interest thereon shall
automatically become immediately due and payable. If an event of default shall
occur and be continuing, other than an event of default specified in the eighth
bullet point above, the trustee or the holders of at least 25% in aggregate
original principal amount of the Notes then outstanding may declare the Notes
due and payable at their accreted principal amount together with accrued and
unpaid interest (including deferred interest and liquidated damages, if any),
and thereupon the trustee may, at its discretion, proceed to protect and enforce
the rights of the holders of Notes by appropriate judicial proceedings. Such
declaration may be rescinded and annulled with the written consent of the
holders of a majority in aggregate original principal amount of the Notes then
outstanding, subject to the provisions of the indenture.
The
holders of a majority in aggregate original principal amount of Notes at the
time outstanding through their written consent, or the holders of a majority
in
aggregate original principal amount of Notes then outstanding represented at
a
meeting at which a quorum is present by a written resolution, may waive any
existing default or event of default and its consequences except any default
or
event of default:
· in
any
payment on the Notes;
· in
respect of the failure to convert the Notes; or
· in
respect of the covenants or provisions in the indenture that may not be modified
or amended without the consent of the holder of each Note affected as described
in "—
Modification,
Waiver and Meetings" below.
Holders
of a majority in aggregate original principal amount of the Notes then
outstanding through their written consent, or the holders of a majority in
aggregate original principal amount of the Notes then outstanding represented
at
a meeting at which a quorum is present by a written resolution, may direct
the
time, method and place of conducting any proceeding for any remedy available
to
the trustee or exercising any trust or power conferred upon the trustee, subject
to the provisions of the indenture. The indenture contains a provision entitling
the trustee, subject to the duty of the trustee during a default to act with
the
required standard of care, to be indemnified by the holders of Notes before
proceeding to exercise any right or power under the indenture at the request
of
such holders. The rights of holders of the Notes to pursue remedies with respect
to the indenture and the Notes are subject to a number of additional
requirements set forth in the indenture.
32
The
indenture provides that the trustee shall, within 90 days of the occurrence
of a default, give to the registered holders of the Notes notice of all uncured
defaults known to it, but the trustee shall be protected in withholding such
notice if it, in good faith, determines that the withholding of such notice
is
in the best interest of such registered holders, except in the case of a default
in the payment of the principal of, or premium, if any, or interest on, any
of
the Notes when due or in the payment of any conversion, redemption or repurchase
obligation.
We
are
required to furnish annually to the trustee a statement as to the fulfillment
of
our obligations under the indenture. In addition, we are required to file with
the trustee a written notice of the occurrence of any default or event of
default within five business days of our becoming aware of the occurrence of
any
default or event of default.
Modification,
Waiver and Meetings
The
indenture contains provisions for convening meetings of the holders of Notes
to
consider matters affecting their interests.
The
indenture (including the terms and conditions of the Notes) may be modified
or
amended by us and the trustee, without the consent of the holder of any Note,
for the purposes of, among other things:
· adding
to
our covenants for the benefit of the holders of Notes;
· adding
additional dates on which holders may require us to repurchase their
Notes;
· surrendering
any right or power conferred upon us;
· providing
for conversion rights of holders of Notes if any reclassification or change
of
our Class A common stock or any consolidation, merger or sale of the
consolidated assets of us and our subsidiaries substantially as an entirety
occurs;
· providing
for the assumption of our obligations to the holders of Notes in the case of
a
merger, consolidation, conveyance, sale, transfer or lease;
· increasing
the conversion rate in the manner described in the indenture, provided that
the
increase will not adversely affect the interests of holders of Notes in any
material respect;
· complying
with the requirements of the SEC in order to effect or maintain the
qualification of the indenture under the Trust Indenture Act of 1939, as
amended;
· making
any changes or modifications to the indenture necessary in connection with
the
registration of the Notes under the Securities Act, as contemplated by the
registration rights agreement, provided that this action does not adversely
affect the interests of the holders of the Notes in any material
respect;
· curing
any ambiguity or correcting or supplementing any defective provision contained
in the indenture; provided
that
such
modification or amendment does not, in the good faith opinion of our board
of
directors, adversely affect the interests of the holders of Notes in any
material respect; provided
further that
any
amendment made solely to conform the provisions of the indenture to
the description
of the Notes in this prospectus will not be deemed to adversely affect the
interests of the holders of the Notes; or
· adding
or
modifying any other provisions which we and the trustee may deem necessary
or
desirable and which will not adversely affect the interests of the holders
of
Notes.
Modifications
and amendments to the indenture or to the terms and conditions of the Notes
may
also be made, and noncompliance by us with any provision of the indenture or
the
Notes may be waived, either:
· with
the
written consent of the holders of at least a majority in aggregate original
principal amount of the Notes at the time outstanding; or
· by
the
adoption of a resolution at a meeting of holders at which a quorum is present
by
at least a majority in aggregate original principal amount of the Notes
represented at
such
meeting.
However,
no such modification, amendment or waiver may, without the written consent
or
the affirmative vote of the holder of each Note affected:
33
· change
the maturity of the principal of or any installment of interest on any Note
(including any payment of liquidated damages);
· reduce
the principal amount of, or any premium, if any, on any Note;
· reduce
the interest rate or amount of interest (including any liquidated damages)
on
any Note;
· reduce
the Early Conversion Make Whole Amount or the Redemption Make Whole Amount
or
otherwise modify the provisions of the indenture related thereto in a manner
adverse
to the holders of the Notes;
· modify
the provisions of the indenture relating to the Pledged Securities as described
above under "— Security" in a manner adverse to the holders of the
Notes;
· other
than as contemplated by the terms of the indenture, change the currency of
payment of principal of, premium, if any, or interest on any Note;
· impair
the right to institute suit for the enforcement of any payment on or with
respect to, or the conversion of, any Note;
· except
as
otherwise permitted or contemplated by provisions of the indenture concerning
specified reclassifications or corporate reorganizations, impair or adversely
affect the
conversion rights of holders of the Notes;
· adversely
affect any repurchase option of holders;
· modify
the redemption provisions of the indenture in a manner adverse to the holders
of
Notes;
· reduce
the percentage in aggregate original principal amount of Notes outstanding
necessary to modify or amend the indenture or to waive any past
default; or
· reduce
the percentage in aggregate original principal amount of Notes outstanding
required for any other waiver under the indenture.
The
quorum at any meeting called to adopt a resolution will be persons holding
or
representing a majority in aggregate original principal amount of the Notes
at
the time outstanding.
Form,
Denomination and Registration
The
Notes
were issued in fully registered form, without coupons, in denominations of
$1,000 original principal amount and whole multiples of $1,000.
Global
Notes: Book-Entry Form
The
Notes
are evidenced by one or more global Notes deposited with the trustee as
custodian for DTC, and registered in the name of Cede & Co., as DTC’s
nominee. Record ownership of the global Notes may be transferred, in whole
or in
part, only to another nominee of DTC or to a successor of DTC or its nominee,
except as set forth below.
Ownership
of beneficial interests in a global Note will be limited to persons that have
accounts with DTC or its nominee ("participants") or persons that may hold
interests through participants. Transfers between direct DTC participants will
be effected in the ordinary way in accordance with DTC’s rules and will be
settled in same-day funds. Holders may also beneficially own interests in the
global Notes held by DTC through certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a direct DTC participant, either directly or indirectly.
So
long
as Cede & Co., as nominee of DTC, is the registered owner of the global
Notes, Cede & Co. for all purposes will be considered the sole holder
of the global Notes. Except as provided below, owners of beneficial interests
in
the global Notes will not be entitled to have certificates registered in their
names, will not receive or be entitled to receive physical delivery of
certificates in definitive form, and will not be considered holders thereof.
The
laws of some states require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer a
beneficial interest in the global Notes to such persons may be limited.
We
will
wire, through the facilities of the trustee, principal, premium, if any, and
interest payments on the global Notes to Cede & Co., the nominee for
DTC, as the registered owner of the global Notes. We, the trustee and
34
any
paying agent will have no responsibility or liability for paying amounts
due on
the global Notes to owners of beneficial interests in the global Notes.
It
is
DTC’s current practice, upon receipt of any payment of principal of and premium,
if any, and interest on the global Notes, to credit participants’ accounts on
the payment date in amounts proportionate to their respective beneficial
interests in the Notes represented by the global Notes, as shown on the records
of DTC, unless DTC believes that it will not receive payment on the payment
date. Payments by DTC participants to owners of beneficial interests in Notes
represented by the global Notes held through DTC participants will be the
responsibility of DTC participants, as is now the case with securities held
for
the accounts of customers registered in "street name."
If
a holder would like to convert
Notes into Class A common stock pursuant to the terms of the Notes, the
holder should contact the holder’s broker or other direct or indirect DTC
participant to obtain information on procedures, including proper forms and
cut-off times, for submitting those requests.
Because
DTC can only act on behalf of DTC participants, who in turn act on behalf of
indirect DTC participants and other banks, a holder’s ability to pledge the
holder’s interest in the Notes represented by global Notes to persons or
entities that do not participate in the DTC system, or otherwise take actions
in
respect of such interest, may be affected by the lack of a physical certificate.
Neither
we nor the trustee (nor any registrar, paying agent or conversion agent under
the indenture) will have any responsibility for the performance by DTC or direct
or indirect DTC participants of their obligations under the rules and procedures
governing their operations. DTC has advised us that it will take any action
permitted to be taken by a holder of Notes, including, without limitation,
the
presentation of Notes for conversion as described below, only at the direction
of one or more direct DTC participants to whose account with DTC interests
in
the global Notes are credited and only for the principal amount of the Notes
for
which directions have been given.
DTC
has
advised us as follows: DTC is a limited purpose trust company organized under
the laws of the State of New York, a member of the Federal Reserve System,
a
"clearing corporation" within the meaning of the Uniform Commercial Code and
a
"clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. DTC was created to hold securities for DTC participants and
to
facilitate the clearance and settlement of securities transactions between
DTC
participants through electronic book-entry changes to the accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations
such as the initial purchasers of the Notes. Certain DTC participants or their
representatives, together with other entities, own DTC. Indirect access to
the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through, or maintain a custodial relationship with, a
participant, either directly or indirectly.
Although
DTC has agreed to the foregoing procedures in order to facilitate transfers
of
interests in the global Notes among DTC participants, it is under no obligation
to perform or continue to perform such procedures, and such procedures may
be
discontinued at any time. If DTC is at any time unwilling or unable to continue
as depositary and a successor depositary is not appointed by us within
90 days, we will cause Notes to be issued in definitive registered form in
exchange for the global Notes. None of us, the trustee or any of their
respective agents will have any responsibility for the performance by DTC,
direct or indirect DTC participants of their obligations under the rules and
procedures governing their operations, including maintaining, supervising or
reviewing the records relating to, or payments made on account of, beneficial
ownership interests in global Notes.
According
to DTC, the foregoing information with respect to DTC has been provided to
its
participants and other members of the financial community for informational
purposes only and is not intended to serve as a representation, warranty or
contract modification of any kind.
Certificated
Notes
We
will
issue the Notes in definitive certificated form if DTC notifies us that it
is
unwilling or unable to continue as depositary or DTC ceases to be a clearing
agency registered under the U.S. Securities Exchange Act of 1934, as
amended and a successor depositary is not appointed by us within 90 days.
In addition, beneficial interests in a global Note may be exchanged for
definitive certificated Notes upon request by or on behalf of DTC in
35
accordance
with customary procedures. The indenture permits us to determine at any time
and
in our sole discretion that Notes shall no longer be represented by global
Notes. DTC has advised us that, under its current practices, it would notify
its
participants of our request, but will only withdraw beneficial interests
from
the global Notes at the request of each DTC participant. We would issue
definitive certificates in exchange for any such beneficial interests withdrawn.
Any
Note
that is exchangeable pursuant to the preceding sentence is exchangeable for
Notes registered in the names which DTC will instruct the trustee. It is
expected that DTC’s instructions may be based upon directions received by DTC
from its participants with respect to ownership of beneficial interests in
that
global Note. Subject to the foregoing, a global Note is not exchangeable except
for a global Note or global Notes of the same aggregate denominations to be
registered in the name of DTC or its nominee.
Notices
Except
as
otherwise provided in the indenture, notices to holders of Notes will be given
by mail to the addresses of holders of the Notes as they appear in the Note
register.
Governing
Law
The
indenture, the Notes and the registration rights agreement are governed by,
and
construed in accordance with, the law of the State of New York.
Information
Regarding the Trustee
Wells
Fargo Bank, N.A., as trustee under the indenture, has been appointed by us
as
paying agent, collateral agent, conversion agent, registrar and custodian with
regard to the Notes. The trustee or its affiliates may from time to time in
the
future provide banking and other services to us in the ordinary course of their
business.
Resale
Registration Rights
We
have
agreed to file with the SEC, at our expense, the shelf registration statement
of
which this prospectus forms a part covering resales by holders of all Notes
and
the Class A common stock issuable upon
conversion of the Notes. Under the terms of the registration rights agreement,
we agreed to use our reasonable best efforts to:
· file
such
shelf registration statement with the SEC within 30 days after the earliest
date of original issuance of any of the Notes;
· cause
such registration statement to become effective as promptly as is practicable,
but in no event later than 150 days after the earliest date of original
issuance of any of the Notes; and
· keep
the
registration statement effective for a period (the "registration period") from
the date such registration statement is declared effective by the SEC until
such
date that is the earlier of (1) the date as of which all the Notes or the
Class A common stock issuable upon conversion of the Notes have been sold
either under Rule 144 under the Securities Act (or any similar provision
then in force) or pursuant to the shelf registration statement; (2) the
date as of which all the Notes or the Class A common stock issuable upon
conversion of the Notes held by non-affiliates are eligible to be sold to the
public pursuant to Rule 144(k) under the Securities Act or any successor
provision; and (3) the date on which there are no outstanding registrable
securities.
This
prospectus forms a part of the registration statement that we agreed to file,
cause to become effective and keep effective, as described above.
We
also
agreed to provide to each registered holder copies of this prospectus, notify
each registered holder when the shelf registration statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Notes and the Class A common stock issuable upon conversion
of the Notes. A holder who sells those securities pursuant to the shelf
registration statement generally will be required to be named as a
36
selling
securityholder in this prospectus and to deliver a prospectus to purchasers
and
will be bound by the provisions of the registration rights agreement, which
are
applicable to that holder (including certain indemnification provisions).
If a
shelf registration statement covering the Notes and Class A common stock is
not effective, they may not be sold or otherwise transferred except pursuant
to
an exemption from registration under the Securities Act and any other applicable
securities laws or in a transaction not subject to those laws.
We
may
suspend the holder’s use of the prospectus for a maximum of 45 days in any
90-day period, and not to exceed an aggregate of 90 days in any 12-month
period, if (i) we, in our reasonable judgment, believe we may possess
material non-public information the disclosure of which would have a material
adverse effect on us and our subsidiaries taken as a whole or (ii) the
prospectus would, in our judgment, contain a material misstatement or omission
as a result of an event that has occurred or is continuing. However, if the
disclosure relates to a proposed or pending material business transaction,
the
disclosure of which we determine in good faith would be reasonably likely to
impede our ability to consummate such transaction, or would otherwise have
a
material adverse effect on us and our subsidiaries taken as a whole, we may
extend the suspension period from 45 days to 60 days. We will not
specify the nature of the event giving rise to a suspension in any notice to
holders of the Notes of the existence of such a suspension.
If,
· on
the
30th day following the earliest date of original issuance of any of the Notes,
the shelf registration statement had not been filed with the
SEC; or
· on
the
150th day following the earliest date of original issuance of any of the Notes,
the shelf registration statement was not declared
effective; or
· prior
to
or on the 45th, 60th or 90th day, as the case may be, of any period that the
prospectus has been suspended as described in the preceding paragraph (in
each case except as the result of filing of a post-effective amendment solely
to
add additional selling securityholders), such suspension has not been
terminated.
(each,
a
"registration default"), liquidated damages will accrue on the Notes, from
and
including the day following the registration default to but excluding the
earlier of (i) the day after the end of the registration period and
(ii) the day on which the registration default has been cured. Liquidated
damages will be paid semi-annually in arrears, with the first semi-annual
payment due on the first interest payment date, as applicable, following the
date on which such liquidated damages begin to accrue, and will accrue at a
rate
equal to:
· 0.25% per
annum of the accreted principal amount for the first 90 days following such
registration default; and
· 0.50% per
annum of the accreted principal amount after the first 90 days following
such registration default.
Because
the registration statement of which this prospectus forms a part was not
declared effective on or prior to April 21, 2005 (i.e., the 150th
day
following the original issuance of the Notes), we incurred liquidated damages
as
described above from April 22, 2005 through the effective date.
In
no
event will liquidated damages relating to the resale registration statement
accrue at a rate per year exceeding 0.50%. Liquidated damages will be computed
on the basis of a 360-day year composed of twelve 30-day months. If a holder
has
converted some or all of its Notes into Class A common stock, the holder
will be entitled to receive equivalent amounts based on the accreted principal
amount of the Notes converted. A holder’s right to liquidated damages shall be
its sole remedy in the event of a registration default.
37
REGISTERED
BORROW FACILITY
We
understand that, when we sold the Notes, and for some time thereafter, it was
difficult for investors in the Notes to borrow shares of our Class A common
stock for the purpose of shorting such stock to hedge their investment in the
Notes. We also understand that many investors in convertible securities seek
to
hedge their exposure to the issuer’s common stock by selling the stock short to
establish an initial hedge position that partially offsets the long position
represented by the convertible securities. Such investors then dynamically
adjust their hedge position over time as the market price of the underlying
stock and the time to maturity of the convertible securities changes. As the
stock price increases, investors will generally increase their hedge position
by
borrowing and shorting more shares, and as the stock price decreases, investors
will generally decrease their hedge position by buying shares in the market
and
closing out their stock loans.
Because
we believed there were not sufficient shares of our Class A common stock
available for investors to borrow when we offered the Notes, and because
we
understood that the shares that were available were relatively expensive
to
borrow, we were concerned that, in order to sell the Notes, we would be forced
to offer terms that would have been unfavorable to us. To address this concern,
and to make it possible or less expensive for prospective investors in the
Notes
to hedge their investment, we entered into a share lending agreement, dated
November 22, 2004, with Citigroup Global Markets Inc. ("Citigroup"), as
agent for Citigroup Global Markets Limited ("CGML"), as borrower. Under this
agreement, we agreed to loan to CGML up to 150,000,000 shares of our
Class A common stock on one or more occasions prior to November 16,
2006 or, if earlier, the date as of which all of the Notes cease to be
outstanding as the result of conversion, repurchase, redemption or otherwise.
To
date,
116.9 million shares have been sold in three share borrow transactions. Because
less than the full 150 million shares covered by the share lending agreement
were sold in the prior share borrow transactions, we remain obligated to
issue,
at CGML’s request, up to an additional 33.1 million shares in up to two
additional subsequent registered public offerings pursuant to the share lending
agreement. We
will
receive a loan fee of $.001 per share for each share that we loan to CGML,
payable at the time such share is borrowed. Citigroup Global Markets Holdings
Inc. guaranteed the obligations of CGML under the share lending agreement.
Notwithstanding
the difficulties that we believe holders faced in establishing hedge positions
at time we initially sold the Notes and for some time thereafter, we now
understand that many investors in the Notes have since been able to borrow
shares of our Class A common stock for the purpose of shorting such stock
to hedge their investment in the Notes in addition to the borrow provided by
the
prior share borrow transaction. However, we are nonetheless required under
the
registration rights agreement described below to register the shares offered
hereby. As noted below, we have been advised by CGML that it or its affiliates
intend to use the short sales of our Class A common stock pursuant to this
prospectus to facilitate, through the transactions discussed below, the
establishment by the holders of the Notes of hedged positions with respect
to
the Notes. These holders may include holders who have not yet established hedge
positions and may also include other holders who have already established hedge
positions but wish to establish new hedge positions through CGML because these
new hedge positions will be less expensive to maintain than their pre-existing
hedge positions. We understand that such holders who are already hedged will
likely seek to close out their existing hedge positions by obtaining shares
in
the open market.
Under
the
agreement, CGML agreed that it will not transfer or dispose of the borrowed
shares except for the purpose of directly or indirectly facilitating the hedging
of the Notes by holders. Any shares of our Class A common stock that
Citigroup returns to us to reduce its stock loan after such shares have been
sold into the public market pursuant to a registration statement cannot be
reborrowed.
Share
loans under the agreement will terminate and the borrowed shares must be
returned to us:
· if
and
when CGML in its discretion terminates all or any portion of a loan at any
time;
· if
and
when we terminate any or all of the outstanding loans upon a default by CGML
under the share lending agreement, including a breach by CGML of any of its
representations and warranties, covenants or agreements under such agreement
or
the bankruptcy of CGML; or
· on
November 16, 2009, the termination date for the share lending agreement or,
sooner, if and when all of the Notes have been converted, repaid, redeemed
or
are otherwise no longer outstanding. We will not otherwise have the right to
terminate any loan of borrowed shares.
38
Any
shares that we loan to CGML will be issued and outstanding for corporate law
purposes, and accordingly, the purchasers of the borrowed shares and their
transferees will have all of the rights of a holder of our outstanding shares
of
Class A common stock, including the right to vote the shares on all matters
submitted to a vote of our stockholders and the right to receive any dividends
or other distributions that we may pay or make on our outstanding shares of
Class A common stock. However, under the share lending agreement, CGML has
agreed:
· to
pay to
us an amount equal to any cash dividends that we pay on the borrowed
shares, and
· to
pay or
deliver to us any other distribution, in liquidation or otherwise, that we
make
on the borrowed shares.
CGML
has
also agreed under the share lending agreement that it will not vote any borrowed
shares of which it is the record owner, and it will not transfer or dispose
of
any borrowed shares except pursuant to a registration statement that is
effective under the Securities Act of 1933, as amended. However, investors
that
purchase the shares from CGML (and any subsequent transferees of such
purchasers) will be entitled to the same voting rights with respect to those
shares as any other holder of our Class A common stock.
If
the
credit ratings of Citigroup Global Markets Holdings Inc., the guarantor of
CGML’s obligations under the share lending agreement, decline below a specified
level, CGML has agreed under the share lending agreement to post and maintain
with Citigroup, as collateral agent on our behalf, collateral in the form of
cash, government securities, certificates of deposit, high grade commercial
paper of U.S. issuers or money market shares with a market value at least
equal to 100% of the market value of the borrowed shares as security for the
obligation of CGML to return the borrowed shares to us when required.
In
view
of the contractual undertakings of CGML in the share lending agreement, which
have the effect of substantially eliminating the economic dilution that would
otherwise result from the issuance of the borrowed shares, we believe that
under
U.S. generally accepted accounting principles currently in effect, the
borrowed shares will not be considered outstanding for the purpose of computing
and reporting our earnings per share.
Our
issuance of loaned shares of our Class A common stock offered pursuant to
the share lending agreement is essentially analogous to a sale of shares coupled
with a forward contract for the reacquisition of the shares at a future date.
An
instrument that requires physical settlement by repurchase of a fixed number
of
shares in exchange for cash is considered a forward purchase instrument. While
the share lending agreement does not require a cash payment upon return of
the
shares, physical settlement is required (i.e., the loaned shares must be
returned at the end of the arrangement). The fair value of the common stock
lent
in the three share borrow transactions is approximately $111 million.
However, the net effect on shareholders’ deficit of the share lending agreement
(exclusive of the adjustment for the fair value of the stock borrow facility
discussed below) which includes our requirement to lend the shares and the
counterparties’ requirement to return the shares, is to increase equity by
$117,000, which represents the cash received upon lending of the shares and
is
equal to the par value of the common stock to be issued.
The
shares issued are required to be returned, in accordance with the contractual
arrangement, and are treated in basic and diluted earnings per share as if
they
were already returned and retired. Consequently, there is no impact of
the 116.9 million shares of common stock issued subject to the share
lending agreement in the earnings per share calculation. However, the
shares are nonetheless issued and outstanding and are eligible for trading
in
the Nasdaq National Market. Accordingly, the increase in supply of shares may
have an adverse impact on the trading price of our Class A common stock.
Accordingly, the existence of the share lending agreement and the short
positions established in connection with facilitating the hedging of the Notes
could have the effect of causing the market price of our Class A common
stock to be lower over the term of the share lending agreement than it would
have been had we not entered into the agreement, but we believe that entering
into the share lending agreement was in our best interests and the best
interests of our shareholders as it facilitated the sale of the convertible
notes on terms more favorable to us than we could have otherwise obtained.
The
share
lending agreement was entered into to facilitate the ability of the purchasers
of the Notes to improve or enhance their yield on the notes and as such was
a
cost of the 5.875% notes issuance transaction. We determined that the fair
value of the stock borrow facility was approximately $13 million on the
date of issuance of these notes. Therefore, we recorded such value at issuance
as an increase to deferred financing fees and additional
39
paid
in
capital in our consolidated financial statements. We are amortizing the value
of
the stock borrow facility to interest expense over the 5-year term of these
notes.
We
agreed
to use our reasonable best efforts to cause a registration statement covering
the shares of Class A common stock to be lent pursuant to the share lending
agreement to become effective on or before April 1, 2005. Such registration
statement was not declared effective by that date, and we therefore have
incurred liquidated damages as defined in the related indenture from
April 2, 2005 and incurred such damages through July 17, 2005, the day
prior to the effective date of the registration statement. These liquidated
damages were paid in cash at a rate of 0.25% per month of the accreted principal
amount of the convertible notes for the first 60 days of the default, and
0.50% per month of the accreted principal amount of the convertible notes
thereafter.
Since
less than 150 million shares have been sold by CGML, it has the right to request
that we file up to two additional registration statements with respect to these
unsold shares until November 16, 2006.
40
DESCRIPTION
OF CAPITAL STOCK AND MEMBERSHIP UNITS
General
Our
capital stock and the provisions of our restated certificate of incorporation
and bylaws are as described below. These summaries are qualified by reference
to
the restated certificate of incorporation and the bylaws, copies of which have
been filed with the Securities and Exchange Commission.
Our
authorized capital stock consists of 1.750 billion shares of Class A
common stock, par value $.001 per share, 750 million shares of
Class B common stock, par value $.001 per share, and 250 million
shares of preferred stock, par value $.001 per share.
Our
restated certificate of incorporation and Charter Holdco’s amended and restated
limited liability company agreement contain provisions that are designed to
cause the number of shares of our common stock that are outstanding to equal
the
number of common membership units of Charter Holdco owned by Charter and to
cause the value of a share of common stock to be equal to the value of a common
membership unit. These provisions are meant to allow a holder of our common
stock to easily understand the economic interest that such holder’s common
shares represent of Charter Holdco’s business.
In
particular, provisions in our restated certificate of incorporation provide
that:
|
(1)
|
at
all times the number of shares of our common stock outstanding
will be
equal to the number of Charter Holdco common membership units owned
by
Charter.
|
|
(2)
|
Charter
will not hold any assets other than, among other allowable
assets:
|
· working
capital and cash held for the payment of current obligations and receivables
from Charter Holdco;
· common
membership units of Charter Holdco; and
· obligations
and equity interests of Charter Holdco that correspond to obligations and equity
interests issued by Charter;
|
(3)
|
Charter
will not borrow any money or enter into any capital lease unless
Charter
Communications Holdco enters into the same arrangements with Charter
so
that Charter’s liability flows through to Charter
Holdco.
|
Provisions
in Charter Holdco’s amended and restated limited liability company agreement
provide that, upon the contribution by Charter of assets acquired through the
issuance of common stock by Charter, Charter Holdco will issue to Charter that
number of common membership units as equals the number of shares of common
stock
issued by Charter. In the event of the contribution by Charter of assets
acquired through the issuance of indebtedness or preferred interests of Charter,
Charter Holdco will issue to Charter a corresponding obligation or interest,
respectively to allow Charter to pass through to Charter Holdco these
liabilities or preferred interests. Such liabilities or preferred interest
of
Charter Holdco will be assets of Charter, in addition to the Class B common
units of Charter Holdco that are held by Charter.
Common
Stock
As
of
December 31, 2005, there were 416,204,671 shares of Class A common
stock issued and outstanding and 50,000 shares of Class B common stock
issued and outstanding. If, as described below, all shares of Class B
common stock convert to shares of Class A common stock as a result of
dispositions by Mr. Allen and his affiliates, the holders of Class A
common stock will be entitled to elect all members of the board of directors,
other than any members elected separately by the holders of any preferred shares
with the right to vote, of which there are currently none outstanding.
Voting
Rights.
The
holders of Class A common stock and Class B common stock generally
have identical rights, except:
41
· each
Class A common shareholder is entitled to one vote per share;
and
· each
Class B common shareholder is entitled to a number of votes based on the
number of outstanding Class B common stock and Charter Holdco membership
units exchangeable for Class B common stock. For example, Mr. Allen is
entitled to ten votes for each share of Class B common stock held by him or
his affiliates and ten votes for each membership unit held by him or his
affiliates; and
· the
Class B common shareholders have the sole power to vote to amend or repeal
the provisions of our restated certificate of incorporation relating
to:
(1) the
activities in which Charter may engage;
(2) the
required ratio of outstanding shares of common stock to outstanding membership
units owned by Charter; and
(3) the
restrictions on the assets and liabilities that Charter may hold.
The
effect of the provisions described in the final bullet point is that holders
of
Class A common stock have no right to vote on these matters. These
provisions allow Mr. Allen, for example, to amend the restated certificate
of incorporation to permit Charter to engage in currently prohibited business
activities without having to seek the approval of holders of Class A common
stock.
The
voting rights relating to the election of Charter’s board of directors are as
follows:
· The
Class B common shareholders, voting separately as a class, are entitled to
elect all but one member of our board of directors.
· Class A
and Class B common shareholders, voting together as one class, are entitled
to elect the remaining member of our board of directors who is not elected
by
the Class B common shareholders.
· Class A
common shareholders and Class B common shareholders are not entitled to
cumulate their votes in the election of directors.
· In
addition, Charter may issue one or more series of preferred stock that entitle
the holders of such preferred stock to elect directors.
Other
than the election of directors and any matters where Delaware law or Charter’s
restated certificate of incorporation or bylaws requires otherwise, all matters
to be voted on by shareholders must be approved by a majority of the votes
cast
by the holders of shares of Class A common stock and Class B common
stock present in person or represented by proxy, voting together as a single
class, subject to any voting rights granted to holders of any preferred stock.
Amendments
to Charter’s restated certificate of incorporation that would adversely alter or
change the powers, preferences or special rights of the Class A common
stock or the Class B common stock must be approved by a majority of the
votes entitled to be cast by the holders of the outstanding shares of the
affected class, voting as a separate class. In addition, the following actions
by Charter must be approved by the affirmative vote of the holders of at least
a
majority of the voting power of the outstanding Class B common stock,
voting as a separate class:
· the
issuance of any Class B common stock other than to Mr. Allen and his
affiliates and other than pursuant to specified stock splits and
dividends;
· the
issuance of any stock other than Class A common stock (and other than
Class B common stock as described above); and
· the
amendment, modification or repeal of any provision of its restated certificate
of incorporation relating to capital stock or the removal of
directors.
Charter
will lose its rights to manage the business of Charter Holdco and Charter
Investment, Inc. will become the sole manager of Charter Holdco if at any time
a
court holds that the holders of the Class B common stock no longer:
42
· have
the
number of votes per share of Class B common stock described
above;
· have
the
right to elect, voting separately as a class, all but one member of Charter’s
board of directors, except for any directors elected separately by the holders
of preferred stock; or
· have
the
right to vote as a separate class on matters that adversely affect the
Class B common stock with respect to:
(1) the
issuance of equity securities of Charter other than the Class A common
stock; or
(2) the
voting power of the Class B common stock.
These
provisions are contained in the amended and restated limited liability company
agreement of Charter Holdco. The Class B common stock could lose these
rights if a holder of Class A common stock successfully challenges in a
court proceeding the voting rights of the Class B common stock. In any of
these circumstances, Charter would also lose its 100% voting control of Charter
Holdco as provided in Charter Holdco’s amended and restated limited liability
company agreement. These provisions exist to assure Mr. Allen that he will
be able to control Charter Holdco in the event he was no longer able to control
Charter through his ownership of Class B common stock. These events could
have a material adverse impact on our business and the market price of the
Class A common stock and the notes.
Dividends.
Holders
of Class A common stock and Class B common stock will share ratably
(based on the number of shares of common stock held) in any dividend declared
by
our board of directors, subject to any preferential rights of any outstanding
preferred stock. Dividends consisting of shares of Class A common stock and
Class B common stock may be paid only as follows:
· shares
of
Class A common stock may be paid only to holders of Class A common
stock;
· shares
of
Class B common stock may be paid only to holders of Class B common
stock; and
· the
number of shares of each class of common stock payable per share of such class
of common stock shall be equal in number.
Our
restated certificate of incorporation provides that we may not pay a stock
dividend unless the number of outstanding Charter Holdco common membership
units
are adjusted accordingly. This provision is designed to maintain the equal
value
between shares of common stock and membership units and the one-to-one exchange
ratio.
Conversion
of Class B Common Stock.
Each
share of outstanding Class B common stock will automatically convert into
one share of Class A common stock if, at any time, Mr. Allen or any of
his affiliates sells any shares of common stock of Charter or membership units
of Charter Holdco and as a result of such sale, Mr. Allen and his
affiliates no longer own directly and indirectly common stock and other equity
interests in Charter and membership units in Charter Holdco that in total
represent at least:
· 20%
of
the sum of the values, calculated as of November 12, 1999, of the shares of
Class B common stock directly or indirectly owned by Mr. Allen and his
affiliates and the shares of Class B common stock for which outstanding
Charter Holdco membership units directly or indirectly owned by Mr. Allen
and his affiliates were exchangeable on that date, and
· 5%
of the
sum of the values, calculated as of the measuring date, of shares of outstanding
common stock and other equity interests in Charter and the shares of Charter
common stock for which outstanding Charter Holdco membership units are
exchangeable on such date.
These
provisions exist to assure that Mr. Allen will no longer be able to control
Charter if after sales of his equity interests he owns an insignificant economic
interest in our business. The conversion of all Class B common stock in
accordance with these provisions would not trigger Charter Holdco’s limited
liability company agreement provisions described above whereby Charter would
lose its management rights and special voting rights relating to Charter Holdco
in the event of an adverse determination of a court affecting the rights of
the
Class B common stock.
Each
holder of a share of Class B common stock has the right to convert such
share into one share of Class A common stock at any time on a one-for-one
basis. If a Class B common shareholder transfers any shares of
43
Class B
common stock to a person other than an authorized Class B common
shareholder, these shares of Class B common stock will automatically
convert into shares of Class A common stock. Authorized Class B common
shareholders are Paul G. Allen entities controlled by Mr. Allen,
Mr. Allen’s estate, any organization qualified under Section 501(c)(3)
of the Internal Revenue Code that is Mr. Allen’s beneficiary upon his death
and certain trusts established by or for the benefit of Mr. Allen. In this
context "controlled" means the ownership of more than 50% of the voting power
and economic interest of an entity and "transfer" means the transfer of record
or beneficial ownership of any such share of Class B common stock.
Other
Rights.
Shares
of Class A common stock will be treated equally in the event of any merger
or consolidation of Charter so that:
· each
class of common shareholders will receive per share the same kind and amount
of
capital stock, securities, cash and/or other property received by any other
class of common shareholders, provided that any shares of capital stock so
received may differ in a manner similar to the manner in which the shares of
Class A common stock and Class B common stock differ; or
· each
class of common shareholders, to the extent they receive a different kind (other
than as described above) or different amount of capital stock, securities,
cash
and/or other property than that received by any other class of common
shareholders, will receive for each share of common stock they hold, stock,
securities, cash and/or either property having a value substantially equivalent
to that received by such other class of common shareholders.
Upon
Charter’s liquidation, dissolution or winding up, after payment in full of the
amounts required to be paid to preferred shareholders, if any, all common
shareholders, regardless of class, are entitled to share ratably in any assets
and funds available for distribution to common shareholders.
No
shares
of any class of common stock are subject to redemption or have preemptive right
to purchase additional shares of common stock.
Preferred
Stock
Charter’s
board of directors is authorized, subject to the approval of the holders of
the
Class B common stock, to issue from time to time up to a total of
250 million shares of preferred stock in one or more series and to fix the
numbers, powers, designations, preferences, and any special rights of the shares
of each such series thereof, including:
· dividend
rights and rates;
· conversion
rights;
· voting
rights;
· terms
of
redemption (including any sinking fund provisions) and redemption price or
prices;
· liquidation
preferences; and
· the
number of shares constituting and the designation of such series.
Pursuant
to their authority the board of directors has designated 1 million of the
above-described 250 million shares as Series A Convertible Redeemable
Preferred Stock ("Series A Preferred Stock"). Holders of the Series A
Preferred Stock have no voting rights but are entitled to receive cumulative
cash dividends at an annual rate of 5.75%, payable quarterly. If for any reason
Charter fails to pay the dividends on the Series A Preferred Stock on a
timely basis, the dividend rate on each share increases to an annual rate of
7.75% until the payment is made. The Series A Preferred Stock is redeemable
by Charter at its option on or after August 31, 2004 and must be redeemed
by Charter at any time upon a change of control, or if not previously redeemed
or converted, on August 31, 2008. The Series A Preferred Stock is
convertible, in whole or in part, at the option of the holders on or before
August 31, 2008, into shares of common stock at an initial conversion rate
equal to a conversion price of $24.71 per share of common stock, subject to
certain customary adjustments. The redemption price per share of Series A
Preferred Stock is the liquidation preference of $100, subject to certain
customary adjustments. At December 31, 2005, there
44
were
36,713 shares of Series A Preferred Stock outstanding, with an
aggregate liquidation preference of approximately $4 million. These shares
are convertible into approximately 148,575 shares of Class A common stock.
In
connection with the repurchase of 508,546 shares in November 2005, the holders
of Preferred Stock consented to an amendment to the Certificate of Designation
governing the Preferred Stock that will eliminate the quarterly dividends on
all
of the outstanding Preferred Stock and will provide that the liquidation
preference for the remaining shares outstanding will be $105.4063 per share,
which amount shall accrete from September 30, 2005 at an annual rate of 7.75%,
compounded quarterly. Certain holders of Preferred Stock also released Charter
from various threatened claims relating to their acquisition and ownership
of
the Preferred Stock, including threatened claims for breach of
contract.
Charter
has no present plans to issue any other shares of preferred stock.
Options
As
of
December 31, 2005, options to purchase a total of 1,196,621 membership units
in
Charter Holdco were outstanding pursuant to the 1999 Charter Communications
Option Plan, and options to purchase a total of 27,930,123 shares of
Class A common stock were outstanding pursuant to Charter’s 2001 Stock
Incentive Plan. Of these options, 9,999,306 have vested. The membership units
received upon exercise of any of the options under the 1999 Charter
Communications Option Plan are automatically exchanged for shares of our
Class A common stock on a one-for-one basis. In addition, a portion of the
unvested options will vest each month. There are also additional options
outstanding to purchase an aggregate of 289,268 shares of Class A
common stock, which were issued to a consultant outside of the plan.
Convertible
Notes
At
December 31, 2005, we had outstanding $862.5 million principal amount of
our 5.875% convertible senior notes due 2009, which are convertible (at
approximately $2.42 per share) into a total of approximately 356 million
shares of our Class A common stock. At December 31, 2005, we also had
outstanding approximately $20 million principal amount of our 4.75% senior
convertible notes due 2006, which are convertible into Class A common stock
at
approximately $26.25 per share.
Anti-takeover
Effects of Provisions of Charter’s Restated Certificate of Incorporation and
Bylaws
Provisions
of Charter’s restated certificate of incorporation and bylaws may be deemed to
have an anti-takeover effect and may delay, defer or prevent a tender offer
or
takeover attempt that a shareholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by shareholders.
Special
Meeting of Shareholders.
Our
bylaws provide that, subject to the rights of holders of any series of preferred
stock, special meetings of our shareholders may be called only by the chairman
of our board of directors, our chief executive officer or a majority of our
board of directors.
Advance
Notice Requirements For Shareholder Proposals And Director
Nominations.
Our
bylaws provide that shareholders seeking to bring business before an annual
meeting of shareholders, or to nominate candidates for election as directors
at
an annual meeting of shareholders, must provide timely prior written notice
of
their proposals. To be timely, a shareholder’s notice must be received at our
principal executive offices not less than 45 days nor more than
70 days prior to the first anniversary of the date on which we first mailed
our proxy statement for the prior year’s annual meeting. If, however, the date
of the annual meeting is more than 30 days before or after the anniversary
date of the prior year’s annual meeting, notice by the shareholder must be
received not less than 90 days prior to the annual meeting or by the 10th
day following the public announcement of the date of the meeting, whichever
occurs later, and not more than 120 days prior to the annual meeting. Our
bylaws specify requirements as to the form and content of a shareholder’s
notice. These provisions may limit shareholders in bringing matters before
an
annual meeting of shareholders or in making nominations for directors at an
annual meeting of shareholders.
45
Authorized
But Unissued Shares.
The
authorized but unissued shares of Class A common stock are available for
future issuance without shareholder approval and, subject to approval by the
holders of the Class B common stock, the authorized but unissued shares of
Class B common stock and preferred stock are available for future issuance.
These additional shares may be utilized for a variety of corporate purposes,
including future public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of authorized but
unissued shares of common stock and preferred stock could render more difficult
or discourage an attempt to obtain control of us by means of a proxy contest,
tender offer, merger or otherwise.
Membership
Units of Charter Holdco
The
Charter Holdco limited liability company agreement provides for three separate
classes of common membership units designed Class A, Class B and
Class C and one class of preferred membership units designated
Class A. As of December 31, 2005, there were 755,386,702 Charter Holdco
common membership units issued and outstanding, 416,254,671 of which were held
by Charter.
Class A
Common Membership Units.
As of
December 31, 2005, there were a total of 324,300,479 issued and outstanding
Class A common membership units, consisting of 217,585,246 units owned
by Charter Investment, Inc. and 106,715,233 units owned by Vulcan
Cable III Inc.
Class B
Common Membership Units.
As of
December 31, 2005, there were a total of 416,254,671 issued and outstanding
Class B common membership units, all of which are owned by
Charter.
Class C
Common Membership Units.
As of
December 31, 2005, there were a total of 14,831,552 issued and outstanding
Class C common membership units, consisting of 5,233,612 units owned by
Charter Investment, Inc. and 9,597,940 units owned by Vulcan Cable III Inc.
Convertible
Preferred Membership Units.
As of
December 31, 2005, there were a total of 36,713 issued and outstanding
convertible preferred membership units. These units are owned by Charter and
mirror the terms of Charter’s Series A Preferred Stock.
Any
matter requiring a vote of the members of Charter Holdco requires the
affirmative vote of a majority of the Class B common membership units.
Charter owns all Class B common membership units and therefore controls
Charter Holdco. Because Mr. Allen owns high vote Class B common
stock of Charter that entitles him to approximately 90% of the voting power
of
the outstanding common stock of Charter. Mr. Allen controls us and through
us has voting control of Charter Holdco.
The
net
cash proceeds that Charter receives from any issuance of shares of common stock
will be immediately transferred to Charter Holdco in exchange for membership
units equal in number to the number of shares of common stock issued by Charter.
In
addition, in October 2005 a settlement was reached in a dispute concerning
the
ownership of 24,273,943 units of CC VIII, LLC. As part of the settlement,
Charter Investment, Inc. ("CII") received an accreting exchangeable note of
CCHC, LLC with an initial value of $48 million, accreting at 14%,
compounded quarterly, with a 15-year maturity. 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
Class A 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
Class A 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 units at the Exchange
Rate.
46
Exchange
Agreement
Charter
is a party to an agreement permitting Vulcan Cable III Inc., Charter
Investment, Inc. and any other affiliate of Mr. Allen to exchange at any
time on a one-for-one basis any or all of their Charter Holdco common membership
units for shares of Class B common stock. This exchange may occur directly
or, at the election of the exchanging holder, indirectly through a tax-free
reorganization such as a share exchange or a statutory merger of any
Allen-controlled entity with and into Charter or a wholly owned subsidiary
of
Charter. In the case of an exchange in connection with a tax-free share exchange
or a statutory merger, shares of Class A common stock held by
Mr. Allen or the Allen-controlled entity will also be exchanged for
Class B common stock. Mr. Allen currently owns shares of Class A
common stock as a result of the exercise of put rights granted to sellers in
the
Falcon acquisition and the Rifkin acquisition.
Charter
Holdco common membership units held by Mr. Allen and his affiliates are
exchangeable at any time for shares of our Class B common stock, which is
then convertible into shares of Class A common stock. The exchange
agreement and the 1999 Charter Communications Option Plan state that common
membership units are exchangeable for shares of common stock at a value equal
to
the fair market value of the common membership units. The exchange ratio of
common membership units to shares of Class A common stock will be one to
one because Charter and Charter Holdco have been structured so that the fair
market value of a share of the Class A common stock equals the fair market
value of a common membership unit owned by Charter.
Our
organizational documents achieve this result by:
· limiting
the assets and liabilities that Charter may hold; and
· requiring
the number of shares of our common stock outstanding at any time to equal the
number of common membership units owned by Charter.
If
we
fail to comply with these provisions or they are changed, the exchange ratio
may
vary from one to one and will then be based on a pre-determined formula
contained in the exchange agreements and the 1999 Charter Communications Option
Plan. This formula will be based on the then current relative fair market values
of common membership units and common stock.
Special
Tax Allocation Provisions.
Charter
Holdco’s limited liability company agreement contains a number of provisions
affecting allocation of net tax losses and net tax profits to its members.
In
some situations, these provisions could result in Charter having to pay income
taxes in an amount that is more or less than it would have had to pay if these
provisions did not exist.
Other
Material Terms of the Amended and Restated Limited Company Agreement of Charter
Holdco
General.
Charter
Holdco’s amended and restated limited liability company agreement contains
provisions that permit each member (and its officers, directors, agents,
shareholders, members, partners or affiliates) to engage in businesses that
may
compete with the businesses of Charter Holdco or any subsidiary. However, the
directors of Charter, including Mr. Allen, are subject to fiduciary duties
under Delaware corporate law that generally require them to present business
opportunities in the cable transmission business to Charter.
The
amended and restated limited liability company agreement restricts the business
activities that Charter Holdco may engage in.
Transfer
Restrictions.
The
amended and restated limited liability company agreement restricts the ability
of each member to transfer its membership interest unless specified conditions
have been met. These conditions include:
47
· the
transfer will not result in the loss of any license or regulatory approval
or
exemption that has been obtained by Charter Holdco and is materially useful
in
its business as then conducted or proposed to be conducted;
· the
transfer will not result in a material and adverse limitation or restriction
on
the operations of Charter Holdco and its subsidiaries taken as a
whole;
· the
proposed transferee agrees in writing to be bound by the limited liability
company agreement; and
· except
for a limited number of permitted transfers under the limited liability company
agreement, the transfer has been approved by the manager in its sole
discretion.
Amendments
to the Limited Liability Company Agreement.
Any
amendment to the limited liability company agreement generally may be adopted
only upon the approval of a majority of the Class B common membership
units. The agreement may not be amended in a manner that adversely affects
the
rights of any class of common membership units without the consent of holders
holding a majority of the membership units of that class.
Registration
Rights
Holders
of Class B Common Stock.
Charter,
Mr. Allen, Charter Investment, Inc. and Vulcan Cable III Inc., are
parties to a registration rights agreement. The agreement gives Mr. Allen
and his affiliates the right to cause us to register the shares of Class A
common stock issued to them upon conversion of any shares of Class B common
stock that they may hold.
This
registration rights agreement provides that each eligible holder is entitled
to
unlimited "piggyback" registration rights permitting them to include their
shares of Class A common stock in registration statements filed by us.
These holders may also exercise their demand rights causing us, subject to
specified limitations, to register their Class A shares, provided that the
amount of shares subject to each demand has a market value at least equal to
$50 million or, if the market value is less than $50 million, all of
the Class A shares of the holders participating in the offering are
included in such registration. We are obligated to pay the costs associated
with
all such registrations.
Holders
may elect to have their shares registered pursuant to a shelf registration
statement if at the time of the election, Charter is eligible to file a
registration statement on Form S-3 and the amount of shares to be
registered has a market value equal to at least $100 million on the date of
the election.
All
shares of Class A common stock issuable to the registration rights holders
in exchange for Charter Holdco membership units and upon conversion of
outstanding Class B common stock and conversion of Class B common
stock issuable to the registration rights holders upon exchange of Charter
Holdco membership units are subject to the registration rights described above.
Transfer
Agent and Registrar
The
transfer agent and registrar for our Class A common stock is Mellon
Investor Services, LLC.
48
UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS
The
following discussion describes the material U.S. federal income tax
consequences of the ownership and disposition of the notes and our Class A
common stock into which the notes may be converted. This discussion applies
only
to notes that are held as capital assets.
This
discussion does not describe all of the tax consequences that may be relevant
to
a holder in light of its particular circumstances or to holders subject to
special rules, such as:
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·
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certain
financial institutions;
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·
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insurance
companies;
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·
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dealers
and certain traders in securities;
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·
|
persons
holding the notes as part of a "straddle," "hedge," "conversion"
or
similar transaction;
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·
|
U.S. Holders
(as defined below) whose functional currency is not the
U.S. dollar;
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·
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certain
former citizens or residents of the United
States;
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·
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partnerships
or other entities classified as partnerships for U.S. federal income
tax purposes; and
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·
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persons
subject to the alternative minimum
tax.
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This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
administrative pronouncements, judicial decisions and final, temporary and
proposed Treasury regulations, changes to any of which subsequent to the date
of
this prospectus may affect the tax consequences described herein, possibly
with
retroactive effect. Persons
considering the purchase of notes are strongly urged to consult with their
tax
advisors regarding all aspects of the United States federal income tax
consequences of an investment in the notes and with respect to any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
Classification
of the Notes
We
believe that the notes will be treated as indebtedness subject to the special
Treasury regulations governing contingent payment debt instruments (the
"contingent debt regulations"). Such regulations generally apply to debt
instruments that provide for one or more payments that are contingent in timing
or amount, if the likelihood of such payment being made is not "remote" and
the
amount of such payment is not "incidental." While it is unclear whether in
fact
any of the alternative payments on the notes are remote, we intend to take
the
position that the potential receipt of the Early Conversion Make Whole Amount
may be a contingency that is not "remote" or "incidental" within the meaning
of
the contingent debt regulations. Accordingly, while the correct treatment of
the
notes is uncertain, we intend to treat the notes as debt instruments subject
to
the contingent debt regulations because of the potential receipt of the Early
Conversion Make Whole Amount. Moreover, under the indenture governing the notes,
we have agreed, and by acceptance of a beneficial interest in a note each holder
of a note is deemed to have agreed (in the absence of an administrative
pronouncement or judicial ruling to the contrary), for U.S. federal income
tax purposes, to treat the notes as debt instruments that are subject to the
contingent debt regulations and to be bound by our application of the contingent
debt regulations to the notes, including our determination of the rate at which
interest will be deemed to accrue on the notes and the related "projected
payment schedule" determined by us as described below, and our treatment of
the
fair market value of any common stock received upon conversion of a note as
a
contingent payment.
We
do not
intend to seek a ruling from the Internal Revenue Service ("IRS") with respect
to the U.S. federal income tax consequences discussed below. Due to the
absence of authorities that directly address the proper characterization of
the
notes and the application of the contingent payment regulations to the notes,
no
assurance can be given that the IRS will accept, or that a court will uphold,
the characterization of the notes as indebtedness or the tax consequences
described herein. Holders should be aware that a different treatment from that
described below could affect the amount, timing, source and character
of income, gain or loss with respect to an investment in the notes. For example,
a holder might be required to accrue interest income at a higher or lower rate,
might not recognize income, gain or loss upon conversion of a note into common
stock, and might recognize capital gain or loss upon a taxable disposition
of a
note.
49
The
remainder of this discussion assumes that the notes are treated as indebtedness
subject to the contingent debt regulations.
Tax
Consequences to U.S. Holders
As
used
herein, the term "U.S. Holder" means a beneficial owner of a note that is
for United States federal income tax purposes:
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·
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a
citizen or resident of the United
States;
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·
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a
corporation, or other entity taxable as a corporation for
U.S. federal income tax purposes, created or organized in or under
the laws of the United States or of any political subdivision
thereof; or
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·
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an
estate the income of which is subject to United States federal income
taxation regardless of its source or a trust the administration of
which
is subject to the primary supervision of a U.S. court and which has
one or more United States persons who have the authority to control
all
substantial decisions of the trust or that was in existence on,
August 20, 1996, was treated as a United States person under the Code
on that date and has made a valid election to be treated as a United
States person under the Code.
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Interest
Accruals on the Notes
Pursuant
to the contingent debt regulations, U.S. Holders of the notes are required
to accrue interest income on the notes on a constant-yield basis, based on
a
comparable yield to maturity as described below, regardless of whether such
holders use the cash or accrual method of tax accounting. As such,
U.S. Holders generally are required to include interest in income each year
in excess of any stated interest payments actually received in that year.
The
contingent debt regulations provide that a U.S. Holder must accrue an
amount of ordinary interest income, as original issue discount for
U.S. federal income tax purposes, for each accrual period prior to and
including the maturity date of the notes that equals:
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·
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the
product of (a) the adjusted issue price (as defined below) of the
notes as of the beginning of the accrual period and (b) the
comparable yield to maturity (as defined below) of the notes, adjusted
for
the length of the accrual period;
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·
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divided
by the number of days in the accrual
period; and
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·
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multiplied
by the number of days during the accrual period that the U.S. Holder
held the notes.
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The
"issue price" of the notes is the first price at which a substantial amount
of
the notes is sold to the public, excluding sales to bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The "adjusted issue price" of a note is its
issue price increased by any interest income previously accrued, determined
without regard to any adjustments to interest accruals described below, and
decreased by the projected amount of any payments (in accordance with the
projected payment schedule described below) previously made with respect to
the
notes.
The
term
"comparable yield" as used in the contingent debt regulations means the annual
yield we would pay, as of the issue date, on a fixed-rate, nonconvertible debt
instrument with no contingent payments, but with terms and conditions otherwise
comparable to those of the notes. We have determined that the comparable yield
for the notes is 15%, compounded semi-annually. The precise manner of
calculating the comparable yield is not entirely clear. If our determination
of
the comparable yield were successfully
challenged by the IRS, the redetermined yield could be materially greater or
less than the comparable yield determined by us.
The
contingent debt regulations require that we provide to U.S. Holders, solely
for U.S. federal income tax purposes, a schedule of the projected amounts
of payments (which we refer to as "projected payments") on the notes. This
schedule must produce a yield to maturity that equals the comparable yield.
The
projected payment schedule includes an estimate for a payment at maturity taking
into account the conversion feature. In this regard, the fair market value
of
any common stock (and cash, if any) received by a holder upon conversion will
be
treated as a contingent payment. U.S. Holders also may obtain the projected
payment schedule by submitting a written request for such information to us
at:
Charter Communications, Inc., 12405 Powerscourt Drive, St. Louis,
Missouri 63131. Attention: Investor Relations.
50
The
comparable yield and the projected payment schedule are not used for any purpose
other than to determine a holder’s interest accruals and adjustments thereto in
respect of the notes for U.S. federal income tax purposes. They do not
constitute a projection or representation by us regarding the actual amounts
that will be paid on the notes, or the value at any time of the common stock
into which the notes may be converted. For
U.S. federal income tax purposes, a U.S. Holder is required under the
contingent debt regulations to use the comparable yield and the projected
payment schedule established by us in determining interest accruals and
adjustments in respect of a note, unless such U.S. Holder timely discloses
and justifies the use of a different comparable yield and projected payment
schedule to the IRS.
Adjustments
to Interest Accruals on the Notes
If,
during any taxable year, a U.S. Holder of notes receives actual payments
with respect to such notes that, in the aggregate, exceed the total amount
of
projected payments for that taxable year, the U.S. Holder will incur a "net
positive adjustment" under the contingent debt regulations equal to the amount
of such excess. The U.S. Holder will treat a net positive adjustment as
additional interest income in that taxable year.
If
a
U.S. Holder receives in a taxable year actual payments with respect to the
notes that, in the aggregate, are less than the amount of projected payments
for
that taxable year, the U.S. Holder will incur a "net negative adjustment"
under the contingent debt regulations equal to the amount of such deficit.
This
net negative adjustment will (a) reduce the U.S. Holder’s interest
income on the notes for that taxable year, and (b) to the extent of any
excess after the application of (a), give rise to an ordinary loss to the extent
of the U.S. Holder’s interest income on the notes during prior taxable
years, reduced to the extent such interest was offset by prior net negative
adjustments.
A
net
negative adjustment is not subject to the two percent floor limitation on
miscellaneous itemized deductions under Section 67 of the Code. Any net
negative adjustment in excess of the amounts described in (a) and (b) will
be
carried forward as a negative adjustment to offset future interest income with
respect to the notes or to reduce the amount realized on a sale, exchange,
conversion, redemption or repurchase of the notes.
Purchasers
of Notes at a Price Other than the Adjusted Issue Price
If
a U.S.
Holder purchases a note in the secondary market for an amount that differs
from
the "adjusted issue price" (as defined above) of the notes at the time of
purchase, such holder will be required to accrue interest income on the notes
in
accordance with the comparable yield even if market conditions have changed
since the date of issuance. A U.S. Holder must reasonably determine whether
the
difference between the tax basis in a note and the adjusted issue price of
a
note is attributable to a change in expectations as to the contingent amounts
potentially payable in respect of the notes or a change in daily portion of
interest, or both, and allocate the difference accordingly. If the tax basis
in
a note is less than its adjusted issue price, a positive adjustment discussed
above in "— Adjustments to Interest Accruals on the Notes" will result, and
if the tax basis exceeds the adjusted issue price of a note, a negative
adjustment discussed above in "— Adjustments to Interest Accruals on the
Notes" will result.
Adjustments
allocated to the contingent payments will be taken into account when the
contingent payments are made. Adjustments allocated to the daily portion of
interest will be taken into account as the daily portion of interest accrues.
Any negative or positive adjustment of the kind described above made by a U.S.
Holder will decrease or increase, respectively, the holder’s tax basis in the
notes. U.S. Holders should consult their own tax advisors regarding these
allocations.
Sale,
Exchange, Conversion, Redemption or Repurchase of Notes
Generally
the sale, exchange, conversion, redemption or repurchase of a note will result
in taxable gain or loss to a U.S. Holder. The amount of gain or loss on a
sale, exchange, conversion, redemption or repurchase of a note will be equal
to
the difference between (a) the amount of cash plus the fair market value of
any other property received by the U.S. Holder, including the fair market
value of any common stock received, and (b) the U.S. Holder’s adjusted
tax basis in the note.
A
U.S. Holder’s adjusted tax basis in a note generally will be equal to the
U.S. Holder’s original purchase price for the note, increased by any
interest income previously accrued by the U.S. Holder (determined without
51
regard
to
any adjustments to interest accruals described above) and decreased by the
amount of any projected payments that previously have been scheduled to be
made
in respect of the notes (without regard to the actual amount paid).
Gain
recognized by a U.S. Holder upon a sale, exchange, conversion, redemption
or repurchase of a Note generally will be treated as ordinary interest income;
any loss will be ordinary loss to the extent of the excess of previous interest
inclusions over the total net negative adjustments previously taken into account
as ordinary losses in respect of the note, and thereafter capital loss (which
will be long-term if the note is held for more than one year). The deductibility
of capital losses is subject to limitations. A U.S. Holder who sells the
notes at a loss that meets certain thresholds may be required to file a
disclosure statement with the IRS.
A
U.S. Holder’s tax basis in common stock received upon a conversion of a
note will equal the then current fair market value of such common stock. The
U.S. Holder’s holding period for the common stock received will commence on
the day immediately following the date of conversion.
Constructive
Dividends
If
at any
time we were to make a distribution of cash or property to our stockholders
that
would be taxable to the stockholders as a dividend for U.S. federal income
tax purposes and, in accordance with the anti-dilution provisions of the notes,
the conversion rate of the notes were increased, such increase may be deemed
to
be the payment of a taxable dividend to holders of the notes to the extent
of
our current and accumulated earnings and profits, notwithstanding the fact
that
the holders do not receive a cash payment.
If
the
conversion rate is increased at our discretion or in certain other
circumstances, such increase also may be deemed to be the payment of a taxable
dividend to holders, notwithstanding the fact that the holders do not receive
a
cash payment. In certain circumstances the failure to make an adjustment of
the
conversion rate under the indenture may result in a taxable distribution to
holders of our common stock.
Any
deemed distribution will be taxable as a dividend, return of capital or capital
gain in accordance with the tax rules applicable to corporate distributions,
but
may not be eligible for the reduced rates of tax applicable to certain dividends
paid to individual holders or the dividends-received deduction applicable to
certain dividends paid to corporate holders.
Generally,
a reasonable increase in the conversion rate in the event of stock dividends
or
distributions of rights to subscribe for our common stock will not be a taxable
constructive dividend.
Taxation
of Distributions on Common Stock
Distributions
paid on our common stock received upon a conversion of a note, other than
certain pro rata distributions of common shares, will be treated as a dividend
to the extent paid out of current or accumulated
earnings and profits (as determined under U.S. federal income tax
principles) and will be includible in income by the U.S. Holder and taxable
as ordinary income when received. If a distribution exceeds our current and
accumulated earnings and profits, the excess will be first treated as a tax-free
return of the U.S. Holder’s investment, up to the U.S. Holder’s basis
in the common stock. Any remaining excess will be treated as a capital gain.
Dividends received by non-corporate U.S. Holders in tax years prior to 2009
will be eligible to be taxed at reduced rates if the holder meets certain
holding period and other applicable requirements. Dividends received by a
corporate U.S. Holder will be eligible for the dividends-received deduction
if the holder meets certain holding period and other applicable requirements.
Sale
or Other Disposition of Common Stock
Gain
or
loss realized by a U.S. Holder on the sale or other disposition of our
common stock received upon a conversion of a note will be capital gain or loss
for U.S. federal income tax purposes, and will be long-term capital gain or
loss if the U.S. Holder held the common stock for more than one year. The
amount of the U.S. Holder’s gain or loss will be equal to the difference
between the U.S. Holder’s tax basis in the common stock disposed of and the
52
amount
realized on the disposition. A U.S. Holder who sells the stock at a loss
that meets certain thresholds may be required to file a disclosure statement
with the IRS.
Tax
Consequences to Non-U.S. Holders
As
used
herein, the term "Non-U.S. Holder" means a beneficial owner of a note that
is, for U.S. federal income tax purposes:
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an
individual who is classified as a nonresident alien for U.S. federal
income tax purposes;
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a
foreign corporation; or
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·
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a
foreign estate or trust.
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Non-U.S. Holders
should consult their own tax advisors to determine the United States federal,
state, local and foreign tax consequences that may be relevant to
them.
Payments
on the Notes
Generally,
all payments on the notes made to a Non-U.S. Holder, including a payment in
our common stock or cash pursuant to a conversion, exchange, redemption or
retirement of a note and any gain realized on a sale of the notes, will be
exempt from United States federal withholding tax, provided that:
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1.
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in
the case of gain realized on the sale, exchange, conversion, redemption
or
repurchase of the notes, we are not, and have not been within the
shorter
of the five-year period preceding such sale, conversion, exchange,
redemption or retirement and the period during which the
Non-U.S. Holder held the notes, a U.S. real property holding
corporation; and
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2.
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(a) such
Non-U.S. Holder does not own, actually or constructively, 10% or more
of the total combined voting power of all classes of our stock entitled
to
vote, and is not a controlled foreign corporation related, directly
or
indirectly, to us through stock ownership and is not a bank receiving
certain types of interest and the certification requirement described
below has been fulfilled with respect to the Non-U.S. Holder;
or
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(b)
such
payments are effectively connected with the conduct by the Non-U.S. Holder
of a trade or business in the United States.
If,
contrary to our expectations, the notes were not treated as indebtedness, any
of
the payments thereon could be subject to United States federal withholding
tax
despite a Non-U.S. Holder’s compliance with all of the requirements enumerated
above in clauses 1 and 2.
We
believe that we are not, and do not anticipate becoming, a U.S. real
property holding corporation.
The
certification requirement referred to above will be fulfilled if the beneficial
owner of a note certifies on IRS Form W-8BEN, under penalties of perjury,
that is not a U.S. person and provides its name and address.
If
a
Non-U.S. Holder of the notes is engaged in a trade or business in the
United States, and if the payments on the notes are effectively connected with
the conduct of this trade or business, the Non-U.S. Holder, although exempt
from U.S. withholding tax, will generally be taxed in the same manner as a
U.S. Holder (see "— Tax Consequences to U.S. Holders" above),
except that the Non-U.S. Holder will be required to provide a properly
executed IRS Form W-8ECI in order to claim an exemption from withholding
tax. These Non-U.S. Holders should consult their own tax advisors with
respect to other tax consequences of the ownership of the notes, including
the
possible imposition of a branch profits tax at 30% (or at a reduced rate under
an applicable tax treaty) for corporate Non-U.S. Holders.
53
Constructive
Dividends
If
a
Non-U.S. Holder were deemed to have received a constructive dividend (see
"— Tax Consequences to U.S. Holders — Constructive Dividends"
above), the Non-U.S. Holder generally will be subject to withholding tax at
a 30% rate, subject to reduction by an applicable tax treaty, on the taxable
amount of the dividend. To claim the benefit of a tax treaty, a
Non-U.S. Holder must comply with all certification requirements necessary
to qualify for treaty benefits. In the case of any constructive dividend it
is
possible that the U.S. federal tax on this constructive dividend would be
withheld from interest, shares of your common stock or sales proceeds
subsequently paid or credited to a Non-U.S. Holder. A Non-U.S. Holder
who is subject to withholding tax under such circumstances should consult its
own tax advisor as to whether it can obtain a refund for all or a portion of
the
withholding tax.
Common
Stock
Dividends
paid to a Non-U.S. Holder of common stock generally will be subject to
U.S. withholding tax at a 30% rate, subject to reduction under an
applicable treaty. In order to obtain a reduced rate of withholding, a
Non-U.S. Holder will be required to provide a properly executed IRS
Form W-8BEN certifying its entitlement to benefits under a treaty. A
Non-U.S. Holder who is subject to withholding tax under such circumstances
should consult its tax advisor as to whether it can obtain a refund for all
or a
portion of the withholding tax.
If
a
Non-U.S. Holder of a common stock is engaged in a trade or business in the
United States, and if the dividends (or constructive dividends) are effectively
connected with the conduct of this trade or business, the Non-U.S. Holder,
although exempt from U.S. withholding tax, will generally be taxed in the
same manner as a U.S. Holder (see "— Tax Consequences to
U.S. Holders" above), except that the Non-U.S. Holder will be required
to provide a properly executed IRS Form W-8ECI in order to claim an
exemption from withholding tax. These Non-U.S. Holders should consult their
own tax advisors with respect to other tax consequences of the ownership of
our
common stock, including the possible imposition of a branch profits tax at
30%
(or at a reduced rate under an applicable tax treaty) for corporate
Non-U.S. Holders.
A
Non-U.S. Holder generally will not be subject to U.S. federal income
and withholding tax on gain realized on a sale or other disposition of common
stock received upon a conversion of a note, unless:
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the
gain is effectively connected with the conduct by such
Non-U.S. Holder of a trade or business in the United
States;
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·
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in
the case of a Non-U.S. Holder who is a nonresident alien individual,
the individual is present in the United States for 183 or more days
in the
taxable year of the disposition and certain other conditions are
met; or
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·
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we
are or have been a U.S. real property holding corporation at any time
within the shorter of the five year period preceding such sale, exchange
or disposition and the period the Non-U.S. Holder held the common
stock. We believe that we were not, are not, and do not anticipate
becoming, a U.S. real property holding
corporation.
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Backup
Withholding Tax and Information Reporting
Information
returns may be filed with the IRS in connection with payments on the notes,
common stock and the proceeds from a sale or other disposition of the notes
or
common stock. A U.S. Holder may be subject to United States backup
withholding tax on these payments if it fails to provide its taxpayer
identification number to the paying agent and comply with certification
procedures or otherwise establish an exemption from backup withholding. A
Non-U.S. Holder may be subject to United States backup withholding tax on
these payments unless the Non-U.S. Holder complies with certification
procedures to establish that it is not
a
U.S. person. The certification procedures required to claim the exemption
from withholding tax on certain payments on the notes, described above, will
satisfy the certification requirements necessary to avoid the backup withholding
tax as well. The amount of any backup withholding from a payment will be allowed
as a credit against the Holder’s U.S. federal income tax liability and may
entitle the Holder to a refund, provided that the required information is timely
furnished to the IRS.
54
SELLING
SECURITYHOLDERS
Convertible
Senior Notes and Shares of Class A Common Stock Issuable Upon Conversion
We
originally sold the 5.875% convertible senior notes offered hereby on
November 22, 2004 to certain initial purchasers, who have advised us that
the convertible senior notes were resold in transactions exempt from the
registration requirements of the Securities Act to "qualified institutional
buyers", as defined in Rule 144A of the Securities Act. These subsequent
purchasers, or their transferees, pledgees, donees or successors, may from
time
to time offer and sell any or all of the convertible senior notes and/or shares
of the Class A common stock issuable upon conversion of the convertible
senior notes pursuant to this prospectus.
The
Notes
and the shares of Class A common stock issuable upon conversion of the
convertible senior notes have been registered in accordance with a registration
rights agreement. Pursuant to the registration rights agreement, we were
required to file a registration statement with regard to the Notes and the
shares of our Class A common stock issuable upon conversion of the Notes
and we are required to keep the registration statement effective until the
earliest of:
(1) the
sale
of all the registrable securities registered under the registration rights
agreement;
(2) the
expiration of the holding period applicable to these securities under Rule
144(k) under the Securities Act with respect to persons who are not our
affiliates; or
(3) there
are
no registrable securities outstanding.
The
selling securityholders may choose to sell the Notes and/or the shares of
Class A common stock issuable upon conversion of the Notes from time to
time. See "Plan of Distribution."
Table
Listing Securities Offered In This Prospectus
The
following table sets forth:
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(1)
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the
name of each selling securityholder who has provided us with notice
as of
the date of this prospectus pursuant to the registration rights agreement
entered into in connection with the issuance of the Notes or shares
of
Class A common stock, as applicable, of its possible intent to sell
or otherwise dispose of Notes and/or shares of Class A common stock;
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(2)
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the
amount of outstanding Notes beneficially owned by the selling
securityholder prior to the offering, assuming no conversion of the
Notes,
and the principal amount of Notes which it may sell pursuant to the
registration statement of which this prospectus forms a part; and
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(3)
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the
principal number of shares of our Class A common stock issued or
issuable to the selling securityholder prior to the offering, and
the
principal number of shares which it may sell pursuant to the registration
statement of which this prospectus forms a part. The information
contained
under the column heading "Shares That May be Sold" assumes conversion
of
the full amount of the Notes held by the holder at the initial
rate of
413.2231 shares of Class A common stock per each $1,000
principal amount of Notes prior to the offering.
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To
our
knowledge, no selling securityholder nor any of its affiliates has held any
position or office with, been employed by or otherwise has had any material
relationship with us or our affiliates during the three years prior to the
date
of this prospectus.
A
selling
securityholder may offer all or some portion of the Notes and shares of the
Class A common stock. Accordingly, no estimate can be given as to the
amount or percentage of Notes or our Class A common stock that will be held
by the selling securityholders upon termination of sales pursuant to this
prospectus. In addition, the selling securityholders identified below may have
sold, transferred or disposed of all or a portion of their Notes since
55
the
date
on which they provided the information regarding their holdings in transactions
exempt from the registration requirements of the Securities
Act.
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Convertible
Senior Notes
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Shares
of Class A
Common
Stock
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Shares
of
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Class
A
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||||||
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Principal
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Common
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|||||
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Amount
of
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Amount
of
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Stock
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||||
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Notes
Owned
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Notes
That
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Owned
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Shares
That
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Selling
Securityholder
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Before
Offering
|
May
Be Sold
|
Before
Offering
|
May
Be Sold
|
||
|
ADAR
Investment Fund LTD
|
$
|
22,145,000
|
$
|
22,145,000
|
9,150,825
|
9,150,825
|
|
AG
Offshore Convertibles, Ltd.
|
$
|
30,500,000
|
$
|
30,500,000
|
12,603,304
|
12,603,304
|
|
AHFP
Context
|
$
|
300,000
|
$
|
300,000
|
123,966
|
123,966
|
|
AIG
Annuity Insurance Company
|
$
|
1,790,000
|
$
|
1,790,000
|
739,669
|
739,669
|
|
AIG
Life Insurance Company
|
$
|
520,000
|
520,000
|
214,876
|
214,876
|
|
|
Akanthos
Arbitrage Master Fund, LP
|
$
|
16,000,000
|
$
|
16,000,000
|
6,611,569
|
6,611,569
|
|
American
General Life and Accident Insurance Company
|
$
|
540,000
|
$
|
540,000
|
223,140
|
223,140
|
|
American
General Life Insurance Company
|
$
|
1,070,000
|
$
|
1,070,000
|
442,148
|
442,148
|
|
American
International Life Assurance Company of New York
|
$
|
40,000
|
$
|
40,000
|
16,528
|
16,528
|
|
Argent
Classic Convertible Arbitrage Fund L.P.
|
$
|
2,590,000
|
$
|
2,590,000
|
1,070,247
|
1,070,247
|
|
Argent
Classic Convertible Arbitrage Fund II, L.P.
|
$
|
350,000
|
$
|
350,000
|
144,625
|
144,628
|
|
Argent
Classic Convertible Arbitrage Fund (Bermuda) Ltd.
|
$
|
7,670,000
|
$
|
7,670,000
|
3,169,421
|
3,169,421
|
|
Argent
Opportunities Fund LLC
|
$
|
150,000
|
$
|
150,000
|
61,983
|
61,983
|
|
Banc
of America Securities LLC (1)
|
$
|
350,000
|
$
|
350,000
|
144,628
|
144,628
|
|
Basso
Fund Ltd.
|
$
|
2,392,000
|
$
|
2,392,000
|
988,429
|
988,429
|
|
Basso
Holdings Ltd.
|
$
|
5,290,000
|
$
|
5,290,000
|
2,185,950
|
2,185,950
|
|
Basso
Multi-Strategy Holding Fund Ltd.
|
$
|
11,290,000
|
$
|
11,290,000
|
4,665,288
|
4,665,288
|
|
BBT
Fund, L.P.
|
$
|
3,000,000
|
$
|
3,000,000
|
1,239,669
|
1,239,669
|
|
Bear,
Stearns & Co., Inc. (1)
|
$
|
1,000,000
|
$
|
1,000,000
|
413,223
|
413,223
|
|
BlackRock
Liechtenstein Global Trust High Yield
|
$
|
1,580,000
|
$
|
1,580,000
|
652,892
|
652,892
|
|
Canyon
Balanced Equity Master Fund, Ltd.
|
$
|
375,000
|
$
|
375,000
|
154,958
|
154,958
|
|
Canyon
Value Realization Fund L.P.
|
$
|
760,000
|
$
|
760,000
|
314,049
|
314,049
|
|
Canyon
Value Realization MAC 18, Ltd.
|
$
|
35,000
|
$
|
35,000
|
14,462
|
14,462
|
|
CC
Convertible Arbitrage, Ltd.
|
$
|
4,950,000
|
$
|
4,950,000
|
2,045,454
|
2,045,454
|
|
Citadel
Equity Fund Ltd.
|
$
|
10,000,000
|
$
|
10,000,000
|
4,132,231
|
4,132,231
|
|
Citigroup
Global Markets, Inc.(1)
|
$
|
23,751,000
|
$
|
23,751,000
|
9,814,461
|
9,814,461
|
|
Citigroup
Global Markets Ltd.(1)
|
$
|
141,387,000
|
$
|
141,387,000
|
58,424,374
|
58,424,374
|
|
CNH
CA Master Account, L.P.
|
$
|
1,500,000
|
$
|
1,500,000
|
619,834
|
619,834
|
|
Concentrated
Alpha Partners, L.P.
|
$
|
1,050,000
|
$
|
1,050,000
|
433,884
|
433,884
|
|
Context
Convertible Arbitrage Fund, LP
|
$
|
1,725,000
|
$
|
1,725,000
|
712,809
|
712,809
|
|
Context
Convertible Arbitrage Offshore, Ltd.
|
$
|
5,400,000
|
$
|
5,400,000
|
2,231,404
|
2,231,404
|
|
Corporate
High Yield III, Inc.
|
$
|
945,000
|
$
|
945,000
|
390,495
|
390,495
|
|
Corporate
High Yield V, Inc.
|
$
|
1,555,000
|
$
|
1,555,000
|
642,561
|
642,561
|
|
Corporate
High Yield VI, Inc.
|
$
|
1,625,000
|
$
|
1,625,000
|
671,487
|
671,487
|
56
|
Convertible
Senior Notes
|
Shares
of Class A
Common
Stock
|
|||||
|
Shares
of
|
||||||
|
Class
A
|
||||||
|
Principal
|
Common
|
|||||
|
Amount
of
|
Amount
of
|
Stock
|
||||
|
Notes
Owned
|
Notes
That
|
Owned
|
Shares
That
|
|||
|
Selling
Securityholder
|
Before
Offering
|
May
Be Sold
|
Before
Offering
|
May
Be Sold
|
||
|
Corporate
High Yield Fund, Inc.
|
$
|
875,000
|
$
|
875,000
|
361,570
|
361,570
|
|
Credit
Suisse First Boston Europe LTD (1)
|
$
|
25,000,000
|
$
|
25,000,000
|
10,330,577
|
10,330,577
|
|
Credit
Suisse First Boston LLC (1)
|
$
|
3,000,000
|
$
|
3,000,000
|
1,239,669
|
1,239,669
|
|
CRT
Capital Group LLC
|
$
|
7,300,000
|
$
|
7,300,000
|
3,016,528
|
3,016,528
|
|
CSS,
LLC
|
$
|
1,500,000
|
$
|
1,500,000
|
619,834
|
619,834
|
|
Cyrus
Opportunities Master Fund II, Ltd.
|
$
|
2,000,000
|
$
|
2,000,000
|
826,446
|
826,446
|
|
DBAG
London
|
$
|
13,600,000
|
$
|
13,600,000
|
5,619,834
|
5,619,834
|
|
D.E.
Shaw Valence Portfolios, L.L.C.
|
$
|
3,500,000
|
$
|
3,500,000
|
1,446,280
|
1,446,280
|
|
Deephaven
Domestic Convertible Trading Ltd.
|
$
|
4,650,000
|
$
|
4,650,000
|
1,921,487
|
1,921,487
|
|
Delaware
Delchester Fund
|
$
|
1,080,000
|
$
|
1,080,000
|
446,280
|
446,280
|
|
Delaware
Diversified Income Fund
|
$
|
415,000
|
$
|
415,000
|
171,487
|
171,487
|
|
Delaware
Dividend Income Fund
|
$
|
500,000
|
$
|
500,000
|
206,611
|
206,611
|
|
Delaware
Group Equity Funds I-Delaware Balanced Fund Series
|
$
|
10,000
|
$
|
10,000
|
4,132
|
4,132
|
|
Delaware
High-Yield Opportunities Fund
|
$
|
300,000
|
$
|
300,000
|
123,966
|
123,966
|
|
Delaware
VIP Diversified Income Series
|
$
|
65,000
|
$
|
65,000
|
26,859
|
26,859
|
|
Delaware
VIP High Yield Series
|
$
|
655,000
|
$
|
655,000
|
270,661
|
270,661
|
|
Deutsche
Bank Securities Inc. (1)
|
$
|
4,584,000
|
$
|
4,584,000
|
1,894,214
|
1,894,214
|
|
Dividend
& Income Fund
|
$
|
165,000
|
$
|
165,000
|
68,181
|
68,181
|
|
DKR
Saturn Multi-Strategy Holding Fund Ltd.
|
$
|
2,000,000
|
$
|
2,000,000
|
826,446
|
826,446
|
|
Duma
Master Fund, L.P.
|
$
|
1,000,000
|
$
|
1,000,000
|
413,223
|
413,223
|
|
Edge
Investment Master Fund, LTD
|
$
|
3,500
|
$
|
3,500
|
1,446
|
1,446
|
|
Empyrean
Capital Fund, LP
|
$
|
4,315,000
|
$
|
4,315,000
|
1,783,057
|
1,783,057
|
|
Empyrean
Capital Overseas Benefit Plan Fund, Ltd
|
$
|
832,000
|
$
|
832,000
|
343,801
|
343,801
|
|
Empyrean
Capital Overseas Fund, Ltd
|
$
|
7,353,000
|
$
|
7,353,000
|
3,038,429
|
3,038,429
|
|
Eton
Park Fund, L.P.
|
$
|
1,872,000
|
$
|
1,872,000
|
773,553
|
773,553
|
|
Eton
Park Master Fund, Ltd.
|
$
|
2,928,000
|
$
|
2,928,000
|
1,209,917
|
1,209,917
|
|
Fidelity
Advisor Series II: Fidelity Advisor High Income Advantage Fund
(2)
|
$
|
22,580,000
|
$
|
22,580,000
|
9,330,578
|
9,330,578
|
|
Fidelity
Financial Trust: Fidelity Convertible Securities Fund (2)
|
$
|
11,300,000
|
$
|
11,300,000
|
4,669,421
|
4,669,421
|
|
Fidelity
Financial Trust: Fidelity Strategic Dividend & Income Fund
(2)
|
$
|
700,000
|
$
|
700,000
|
289,256
|
289,256
|
|
Fidelity
Management Trust Company on behalf of funds and accounts managed
by it
(3)
|
$
|
7,420,000
|
$
|
7,420,000
|
3,066,115
|
3,066,115
|
|
Finch
Tactical Plus Class B
|
$
|
200,000
|
$
|
200,000
|
82,644
|
82,644
|
|
Fore
Convertible Master Fund, Ltd.
|
$
|
1,500,000
|
$
|
1,500,000
|
619,834
|
619,834
|
|
Fore
ERISA Fund, Ltd.
|
$
|
179,000
|
$
|
179,000
|
73,966
|
73,966
|
|
Fore
Multi Strategy Master Fund, Ltd.
|
$
|
350,000
|
$
|
350,000
|
144,628
|
144,628
|
57
|
Convertible
Senior Notes
|
Shares
of Class A
Common
Stock
|
|||||
|
Shares
of
|
||||||
|
Class
A
|
||||||
|
Principal
|
Common
|
|||||
|
Amount
of
|
Amount
of
|
Stock
|
||||
|
Notes
Owned
|
Notes
That
|
Owned
|
Shares
That
|
|||
|
Selling
Securityholder
|
Before
Offering
|
May
Be Sold
|
Before
Offering
|
May
Be Sold
|
||
|
Fore
Opportunity Fund, LP
|
$
|
69,000
|
$
|
69,000
|
28,512
|
28,512
|
|
Fore
Opportunity Offshore Fund, Ltd
|
$
|
231,000
|
$
|
231,000
|
95,454
|
95,454
|
|
Geode
U.S. Convertible Arbitrage Fund, aggregated account of Geode Capital
Master Fund Ltd.
|
$
|
3,000,000
|
$
|
3,000,000
|
1,239,669
|
1,239,669
|
|
Global
Dividend & Income Fund
|
$
|
40,000
|
$
|
40,000
|
16,528
|
16,528
|
|
Goldman
Sachs & Co. (1)
|
$
|
47,313,000
|
$
|
47,313,000
|
19,550,824
|
19,550,824
|
|
Grace
Brothers, Ltd.
|
$
|
1,500,000
|
$
|
1,500,000
|
619,834
|
619,834
|
|
Greywolf
Capital Overseas Fund
|
$
|
6,475,000
|
$
|
6,475,000
|
2,675,619
|
2,675,619
|
|
Greywolf
Capital Partners II LP
|
$
|
1,525,000
|
$
|
1,525,000
|
630,165
|
630,165
|
|
Greywolf
High Yield Master Fund
|
$
|
2,000,000
|
$
|
2,000,000
|
826,446
|
826,446
|
|
Guggenheim
Portfolio Company VIII (Cayman), Ltd.
|
$
|
1,138,000
|
$
|
1,138,000
|
470,247
|
470,247
|
|
HFR
RVA Combined Master Trust
|
$
|
125,000
|
$
|
125,000
|
51,652
|
51,652
|
|
Highbridge
International LLC
|
$
|
36,520,000
|
$
|
36,520,000
|
15,090,907
|
15,090,907
|
|
Institutional
Benchmarks Master Fund, Ltd.
|
$
|
35,000
|
$
|
35,000
|
14,462
|
14,462
|
|
Kamunting
Street Master Fund, LTD
|
$
|
22,500,000
|
$
|
22,500,000
|
9,297,519
|
9,297,519
|
|
KBC
Financial Products USA Inc.
|
$
|
4,885,000
|
$
|
4,885,000
|
2,018,594
|
2,018,594
|
|
KDC
Convertible Arbfund L.P.
|
$
|
2,000,000
|
$
|
2,000,000
|
826,446
|
826,446
|
|
Laurel
Ridge Capital, LP
|
$
|
5,000,000
|
$
|
5,000,000
|
2,066,115
|
2,066,115
|
|
LDG
Limited
|
$
|
322,000
|
$
|
322,000
|
133,057
|
133,057
|
|
Lehman
Brothers International Europe
|
$
|
8,410,000
|
$
|
8,410,000
|
3,475,206
|
3,475,206
|
|
Lincoln
National Life Insurance Company Separate Account 20
|
$
|
590,000
|
$
|
590,000
|
243,801
|
243,801
|
|
Lyxor/
Context Fund Ltd.
|
$
|
1,075,000
|
$
|
1,075,000
|
444,214
|
444,214
|
|
Man
Mac I, Limited
|
$
|
3,391,000
|
$
|
3,391,000
|
1,401,239
|
1,401,239
|
|
Marathon
Global Convertible Master Fund Ltd.
|
$
|
1,500,000
|
$
|
1,500,000
|
619,834
|
619,834
|
|
Merced
Partners Limited Partnership
|
$
|
2,500,000
|
$
|
2,500,000
|
1,033,057
|
1,033,057
|
|
Merrill
Lynch Bond High Income Fund (1)
|
$
|
9,000,000
|
$
|
9,000,000
|
3,719,007
|
3,719,007
|
|
Merrill
Lynch Global Investment Series: Income Strategies Fund (1)
|
$
|
5,000,000
|
$
|
5,000,000
|
2,066,115
|
2,066,115
|
|
MLIF
US High Yield Fund, Inc. (1)
|
$
|
500,000
|
$
|
500,000
|
206,611
|
206,611
|
|
ML
Master US High Yield Fund, Inc. (1)
|
$
|
2,200,000
|
$
|
2,200,000
|
909,090
|
909,090
|
|
Mohican
VCA Master Fund, Ltd.
|
$
|
500,000
|
$
|
500,000
|
206,611
|
206,611
|
|
Morgan
Stanley Convertible Securities Trust
|
$
|
800,000
|
$
|
800,000
|
330,578
|
330,578
|
|
MSS
Convertible Arbitrage 1 c/o TQA Investors, LLC
|
$
|
31,000
|
$
|
31,000
|
12,809
|
12,809
|
|
National
Bank of Canada
|
$
|
700,000
|
$
|
700,000
|
289,256
|
289,256
|
|
Oppenheimer
Convertible Securities Fund
|
$
|
2,000,000
|
$
|
2,000,000
|
826,446
|
826,446
|
|
Optimum
Fixed Income Fund
|
$
|
65,000
|
$
|
65,000
|
26,859
|
26,859
|
58
|
Convertible
Senior Notes
|
Shares
of Class A
Common
Stock
|
|||||
|
Shares
of
|
||||||
|
Class
A
|
||||||
|
Principal
|
Common
|
|||||
|
Amount
of
|
Amount
of
|
Stock
|
||||
|
Notes
Owned
|
Notes
That
|
Owned
|
Shares
That
|
|||
|
Selling
Securityholder
|
Before
Offering
|
May
Be Sold
|
Before
Offering
|
May
Be Sold
|
||
|
PIMCO
Convertible Fund
|
$
|
275,000
|
$
|
275,000
|
113,636
|
113,636
|
|
President
and Fellows of Harvard College
|
$
|
350,000
|
$
|
350,000
|
144,628
|
144,628
|
|
PSEG
Master Employee Benefit Plan Trust
|
$
|
200,000
|
$
|
200,000
|
82,644
|
82,644
|
|
Putnam
Convertible Income-Growth Trust
|
$
|
8,425,000
|
$
|
8,425,000
|
3,481,404
|
3,481,404
|
|
Putnam
High Income Bond Fund
|
$
|
2,075,000
|
$
|
2,075,000
|
857,437
|
857,437
|
|
Quattro
Fund Ltd.
|
$
|
1,250,000
|
$
|
1,250,000
|
516,528
|
516,528
|
|
Raytheon
Savings & Investment Plan Trust
|
$
|
150,000
|
$
|
150,000
|
61,983
|
61,983
|
|
Regiment
Capital, Ltd.
|
$
|
650,000
|
$
|
650,000
|
268,595
|
268,595
|
|
Ritchie
Capital Structure Arbitrage Trading, Ltd.
|
$
|
12,000,000
|
$
|
12,000,000
|
4,958,677
|
4,958,677
|
|
Royal
Bank of Canada (Norshield) (1)
|
$
|
100,000
|
$
|
100,000
|
41,322
|
41,322
|
|
Royal
Bank of Ontario
|
$
|
2,000,000
|
$
|
2,000,000
|
826,446
|
826,446
|
|
Salomon
Brothers Asset Management, Inc. (1)
|
$
|
9,350,000
|
$
|
9,350,000
|
3,863,635
|
3,863,635
|
|
Saranac
Capital Management L.P. on behalf of Citigroup Alternative Investments
Diversified Arbitrage Strategies Fund Ltd.
|
$
|
357,000
|
$
|
357,000
|
147,520
|
147,520
|
|
Saranac
Capital Management L.P. on behalf of Citigroup Alternative Investments
Enhanced Arbitrage Strategies Fund
|
$
|
65,000
|
$
|
65,000
|
26,859
|
26,859
|
|
Saranac
Capital Management L.P. on behalf of Citigroup Alternative Investments
QIP
Multi Strategy Arbitrage Portfolio
|
$
|
1,692,000
|
$
|
1,692,000
|
699,173
|
699,173
|
|
Saranac
Capital Management L.P. on behalf of Saranac Erisa Arbitrage
LTD
|
$
|
698,000
|
$
|
698,000
|
288,429
|
288,429
|
|
Saranac
Capital Management L.P. on behalf of Saranac Erisa Arbitrage
LP
|
$
|
48,000
|
$
|
48,000
|
19,834
|
19,834
|
|
Saranac
Capital Management L.P. on behalf of Saranac Arbitrage LTD
|
$
|
40,000
|
$
|
40,000
|
16,528
|
16,528
|
|
Satellite
Asset Management, L.P.
|
$
|
12,300,000
|
$
|
12,300,000
|
5,082,644
|
5,082,644
|
|
Severn
River Master Fund, Ltd.
|
$
|
8,000,000
|
$
|
8,000,000
|
3,305,784
|
3,305,784
|
|
Sphinx
Convertible Arbitrage Fund SPC
|
$
|
350,000
|
$
|
350,000
|
144,628
|
144,628
|
|
Sphinx
Fund c/o TQA Investors, LLC
|
$
|
496,000
|
$
|
496,000
|
204,958
|
204,958
|
|
Sphinx
Special Situations Fund SPC
|
$
|
35,000
|
$
|
35,000
|
14,462
|
14,462
|
|
SRI
Fund, L.P.
|
$
|
180,000
|
$
|
180,000
|
74,380
|
74,380
|
|
St.
Albans Partners Ltd.
|
$
|
1,000,000
|
$
|
1,000,000
|
413,223
|
413,223
|
|
Sturgeon
Limited
|
$
|
71,000
|
$
|
71,000
|
29,338
|
29,338
|
|
Susquehanna
Capital Group
|
$
|
6,980,000
|
$
|
6,980,000
|
2,884,297
|
2,884,297
|
|
SuttonBrook
Capital Portfolio LP
|
$
|
12,500,000
|
$
|
12,500,000
|
5,165,288
|
5,165,288
|
|
Tamarack
International, Ltd.
|
$
|
2,500,000
|
$
|
2,500,000
|
1,033,057
|
1,033,057
|
|
Tempo
Master Fund, LP
|
$
|
2,000,000
|
$
|
2,000,000
|
826,446
|
826,446
|
|
Tenor
Opportunity Master Fund Ltd.
|
$
|
4,200,000
|
$
|
4,200,000
|
1,735,537
|
1,735,537
|
|
The
Canyon Value Realization Fund (Cayman) Ltd.
|
$
|
2,260,000
|
$
|
2,260,000
|
933,884
|
933,884
|
|
The
High-Yield Bond Portfolio
|
$
|
15,000
|
$
|
15,000
|
6,198
|
6,198
|
59
|
Convertible
Senior Notes
|
Shares
of Class A
Common
Stock
|
|||||
|
Shares
of
|
||||||
|
Class
A
|
||||||
|
Principal
|
Common
|
|||||
|
Amount
of
|
Amount
of
|
Stock
|
||||
|
Notes
Owned
|
Notes
That
|
Owned
|
Shares
That
|
|||
|
Selling
Securityholder
|
Before
Offering
|
May
Be Sold
|
Before
Offering
|
May
Be Sold
|
||
|
The
United States Life Insurance Company in the City of New
York
|
$
|
40,000
|
$
|
40,000
|
16,528
|
16,528
|
|
TQA
Master Fund, Ltd.
|
$
|
2,836,000
|
$
|
2,836,000
|
1,171,900
|
1,171,900
|
|
TQA
Master Plus Fund, Ltd.
|
$
|
4,551,000
|
$
|
4,551,000
|
1,880,578
|
1,880,578
|
|
Tribeca
Global Convertible Investments LTD
|
$
|
12,000,000
|
$
|
12,000,000
|
4,958,677
|
4,958,677
|
|
UBS
AG London Branch
|
$
|
45,500,000
|
$
|
45,500,000
|
18,801,651
|
18,801,651
|
|
UBS
AG London F/ B/ O HFS
|
$
|
5,000,000
|
$
|
5,000,000
|
2,066,115
|
2,066,115
|
|
UBS
O’Connor LLC F/B/O O’Connor Global Convertible Arbitrage Master
Limited
|
$
|
6,000,000
|
$
|
6,000,000
|
2,479,338
|
2,479,338
|
|
Univest
Convertible Arbitrage Fund II Ltd. (Norshield)
|
$
|
100,000
|
$
|
100,000
|
41,322
|
41,322
|
|
Van
Kampen Harbor Fund
|
$
|
1,200,000
|
$
|
1,200,000
|
495,867
|
495,867
|
|
Whitebox
Convertible Arbitrage Partners, L.P.
|
$
|
3,000,000
|
$
|
3,000,000
|
1,239,669
|
1,239,669
|
|
Whitebox
Hedged High Yield Partners, L.P.
|
$
|
1,000,000
|
$
|
1,000,000
|
413,223
|
413,223
|
|
White
River Securities LLC
|
$
|
1,000,000
|
$
|
1,000,000
|
413,223
|
413,223
|
|
Wolverine
Convertible Arbitrage Fund Limited
|
$
|
250,000
|
$
|
250,000
|
103,305
|
103,305
|
|
World
Income Fund, Inc.
|
$
|
800,000
|
$
|
800,000
|
330,578
|
330,578
|
|
Yield
Strategies Fund I, L.P.
|
$
|
500,000
|
$
|
500,000
|
206,611
|
206,611
|
|
Yield
Strategies Fund II, L.P.
|
$
|
500,000
|
$
|
500,000
|
206,611
|
206,611
|
|
Zurich
Institutional Benchmarks Master Fund Ltd. c/o TQA Investors, LLC
|
$
|
696,000
|
$
|
696,000
|
287,603
|
287,603
|
|
(1)
|
These
entities and/or their affiliates have provided, and may from time
to time
provide, investment banking services to Charter Communications, Inc.
and
its subsidiaries, including, among other things, acting as lead and/or
co-manager with respect to offerings of debt and equity securities.
|
|
(2)
|
The
entity is a registered investment fund (the "Fund") advised by Fidelity
Management & Research Company ("FMR Co."), a registered investment
adviser under the Investment Advisers Act of 1940, as amended. FMR
Co., 82
Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary
of FMR Corp. and an investment adviser registered under Section 203
of the
Investment Advisers Act of 1940, is the beneficial owner of 14,961,471
shares (not including the shares into which the notes are convertible)
of
the Common Stock outstanding of the Company as a result of acting
as
investment adviser to various investment companies registered under
Section 8 of the Investment Company Act of 1940.
|
|
Edward
C. Johnson 3d, FMR Corp., through its control of FMR Co., and the
Fund
each has sole power to dispose of the Securities owned by the Fund.
|
|
Neither
FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the
sole
power to vote or direct the voting of the shares owned directly by
the
Fund, which power resides with the Fund’s Board of Trustees.
|
|
The
Fund is an affiliate of a broker-dealer. The Fund purchased the Securities
in the ordinary course of business and, at the time of the purchase
of the
Securities to be resold, the Fund did not have any
|
60
|
agreements
or understandings, directly or indirectly, with any person
to distribute
the notes or conversion shares.
|
|
(3)
|
Shares
indicated as owned by such entity are owned directly by various private
investment accounts, primarily employee benefit plans for which Fidelity
Management Trust Company ("FMTC") serves as trustee or managing agent.
FMTC is a wholly-owned subsidiary of FMR Corp. and a bank as defined
in
Section 3(a)(6) of the Securities Exchange Act of 1934, as amended.
FMTC
is the beneficial owner of 0 shares (not including the shares into
which
the notes are convertible) of the Common Stock outstanding of the
Company
as a result of its serving as investment manager of the institutional
account(s).
|
|
Edward
C. Johnson 3d and FMR Corp., through its control of Fidelity Management
Trust Company, each has sole dispositive power over 0 shares and
sole
power to vote or to direct the voting of 0 shares of Common Stock
owned by
the institutional account(s) as reported above.
|
|
If,
after the date of this prospectus, a securityholder notifies us pursuant
to the registration rights agreement of its intent to dispose of
convertible senior notes pursuant to the registration statement,
we may
supplement this prospectus to include that
information.
|
PLAN
OF DISTRIBUTION
We
are
registering the Notes and the shares of our Class A common stock issuable
upon conversion of the Notes to permit public secondary trading of these
securities by the holders from time to time after the date of this prospectus.
We have
agreed,
among other things, to bear all expenses, other than underwriting discounts
and
selling commissions, in connection with the registration and sale of the
Notes
and the
shares of our Class A common stock covered by this prospectus.
We
will
not receive any of the proceeds from the offering or sale by the selling
securityholders of the Notes or the shares of our Class A common stock
covered by this prospectus. The Notes and shares of Class A common stock
may be sold from time to time directly by any selling securityholder or,
alternatively, through underwriters, broker-dealers or agents. If Notes or
shares of Class A common stock are sold through underwriters or
broker-dealers, the selling securityholder will be responsible for underwriting
discounts or commissions or agents’ commissions.
The
Notes
or shares of Class A common stock may be sold:
· in
one or
more transactions at fixed prices,
· at
prevailing market prices at the time of sale,
· at
varying prices determined at the time of sale, or
· at
negotiated prices.
These
sales may be effected in transactions, which may involve block trades or
transactions in which the broker acts as agent for the seller and the buyer:
· on
any
national securities exchange or quotation service on which the Notes or shares
of Class A common stock may be listed or quoted at the time of
sale,
· in
the
over-the-counter market,
· in
transactions otherwise than on a national securities exchange or quotation
service or in the over-the-counter market or
· through
the writing of options.
In
connection with sales of the Notes or shares of Class A common stock, any
selling securityholder may loan or pledge Notes or shares of our Class A
common stock to broker-dealers that in turn may sell the securities.
The
outstanding Class A common stock is publicly traded on the Nasdaq National
Market. The initial purchasers of the Notes have advised us that certain of
the
initial purchasers are making and currently intend to continue making a market
in the Notes. However, they are not obligated to do so and any market-making
of
this type
61
may
be
discontinued at any time without notice, in the sole discretion of the initial
purchasers. We do not intend to apply for listing of the Notes on the Nasdaq
National Market or any securities exchange. Accordingly, we cannot assure
that
any trading market will develop or have any liquidity.
The
selling securityholders and any broker-dealers, agents or underwriters that
participate with the selling securityholders in the distribution of the Notes
or
the shares of Class A common stock to be offered by selling securityholders
may be deemed to be "underwriters" within the meaning of the Securities Act,
in
which event any commissions received by these broker-dealers, agents or
underwriters and any profits realized by the selling securityholders on the
resales of the Notes or the shares may be deemed to be underwriting commissions
or discounts under the Securities Act.
In
addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144, Rule 144A or any other available exemption from
registration under the Securities Act may be sold under Rule 144,
Rule 144A or any of the other available exemptions rather than pursuant to
this prospectus.
There
is
no assurance that any selling securityholder will sell any or all of the Notes
or shares of Class A common stock to be offered by selling securityholders
as described in this prospectus, and any selling securityholders may transfer,
devise or gift the securities by other means not described in this prospectus.
We
originally sold the Notes to the initial purchasers in November 2004 in a
private placement. We agreed to indemnify and hold the initial purchasers of
the
Notes harmless against certain liabilities under the Securities Act that could
arise in connection with the sale of the convertible senior notes by the initial
purchasers. The registration rights agreement we entered into in connection
with
the sale of the Notes provides for us and those selling securityholders listed
on the Selling Securityholders Table as holders of Notes to indemnify each
other
against certain liabilities arising under the Securities Act.
Pursuant
to the registration rights agreement we entered into in connection with the
sale
of the Notes, we agreed to use reasonable efforts to cause the registration
statement to which this prospectus relates to become effective within
150 days after the date the Notes were originally issued and to keep the
registration statement effective until the earlier of (1) the date as of which
all the Notes or the Class A common stock issuable upon conversion of the Notes
have been sold either under Rule 144 under the Securities Act (or any similar
provision then in force) or pursuant to the shelf registration statement; (2)
the date as of which all the Notes or the Class A common stock issuable upon
conversion of the notes held by non-affiliates are eligible to be sold to the
public pursuant to Rule 144(k) under the Securities Act or any successor
provision; and (3) the date on which there are no outstanding registrable
securities.
The
registration rights agreement we entered into in connection with the sale of
the
Notes provides that, under certain circumstances, we may suspend the use of
this
prospectus in connection with sales of Notes and shares of Class A common
stock for a period not to exceed an aggregate of 45 days in any 90-day
period or 90 days in any 12-month period. We will bear the expenses of
preparing and filing the registration statement and all post-effective
amendments.
LEGAL
MATTERS
The
validity of the securities offered by this prospectus has been passed upon
for
us by
Irell
& Manella LLP.
EXPERTS
The
consolidated financial statements of Charter Communications, Inc. and
subsidiaries as of December 31, 2005 and 2004 and for each of the years in
the
three year period ended December 31, 2005, and management’s assessment of the
effectiveness of internal control over financial reporting as of December 31,
2005 have been incorporated by reference herein in reliance upon the reports
of
KPMG LLP, independent registered public accounting firm, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditng.
62
Their
report on the consolidated financial statements incorporated by reference
herein, includes explanatory paragraphs regarding the adoption, effective
September 30, 2004 of EITF Topic D-108, "Use of the Residual Method to Value
Acquired Assets Other than Goodwill," and, effective January 1, 2003, of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," as amended by Statement of Financial Accounting Standards No.
148, "Accounting for Stock-Based Compensation — Transition and Disclosure — an
amendment to FASB Statement No. 123."
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
We
file
annual, quarterly, special reports and other information with the SEC. We are
incorporating by reference certain information we have filed with the SEC,
which
means that we disclose important information to you by referring you to those
documents. The information incorporated by reference is an important part of
this document, and information that we file later with the SEC will
automatically update and supersede this information. Specifically, we
incorporate by reference the documents listed below and any future filings
made
with the SEC under Section 13 or 15(d) of the Exchange Act (excluding any
information furnished but not filed) prior to the termination of this offering
(collectively, the "SEC Reports"):
· our
annual report on Form 10-K for the year ended December 31, 2005;
and
· our
current reports on Form 8-K dated January 6, 2006; January 10, 2006; January
27,
2006, February 1, 2006; February 15, 2006, February 28, 2006 and March 3, 2006.
In
addition, all documents filed by us under Sections 13(a), 13(c), 14 or 15(d)
of
the Securities Exchange Act of 1934 after the date of this prospectus and before
the sale of all of the common stock covered hereby or the termination of this
offering shall be deemed to be incorporated by reference into this prospectus
from the respective dates of filing of such documents.
Upon
request, we will provide you without charge, a copy of any or all of the
documents incorporated by reference, other than exhibits to such documents
unless the exhibits are specifically incorporated by reference in the documents.
Please direct requests to:
Secretary
Charter
Communications, Inc.
12405
POWERSCOURT DRIVE
ST.
LOUIS, MISSOURI 63131
(314)
965-0555
The
information in the above reports and any future filings we make with the SEC
speak only as of the respective dates thereof or, where applicable, the dates
identified therein. You may read and copy any document we file at the SEC’s
public reference room at 450 Fifth Street, N.W., Washington, D.C., as well
as
the SEC’s regional offices. Please call the SEC at 1-800-SEC-0330 for further
information relating to the public reference rooms. These SEC filings are also
available to the public at the SEC’s web site at www.sec.gov.
You
should rely only on the information incorporated by reference or provided in
this prospectus and any supplement. We have not authorized anyone else to
provide you with other information.
63
$862,500,000
5.875% Convertible Senior Notes due 2009
356,404,924
Shares of Class A Common Stock Issuable Upon
Conversion
of the 5.875% Convertible Senior Notes due 2009
PROSPECTUS
April
13,
2006
64