8-KMaterial AgreementsShareholder MattersExhibits & Filings

CHARTER COMMUNICATIONS, INC. /MO/ 8-K Report, Material Agreement (Dec 23, 2008)

Filed December 23, 2008For Securities:CHTR

Summary

Charter Communications, Inc. (CHTR) filed a Form 8-K on December 23, 2008, primarily to report an amendment to its existing Rights Agreement. The key action taken was the extension of the expiration date of this Rights Agreement from December 31, 2008, to December 31, 2009. This agreement is designed to protect Charter's substantial net operating loss carryforwards (NOLs) from being significantly limited by Section 382 of the Internal Revenue Code, which could occur through an "Ownership Change." The amendment was approved by the Board of Directors and subsequently by the holders of a majority of Charter's Class B Common Stock via written consent. The Rights Agreement, which was originally established to deter such ownership changes, grants a "poison pill"-like right to stockholders. This filing also notes a corresponding extension to a related "Holdco Mirror Agreement," ensuring that the economic effects on membership units are aligned with the extension of the stock rights. For investors, this indicates a continued effort by management to preserve a potentially valuable tax asset.

Key Highlights

  • 1Charter Communications extended its Rights Agreement, originally set to expire on December 31, 2008, to December 31, 2009.
  • 2The primary purpose of the Rights Agreement is to protect the company's Net Operating Loss Carryforwards (NOLs) from limitations imposed by Section 382 of the Internal Revenue Code.
  • 3The amendment was approved by Charter's Board of Directors and by unanimous written consent of the holders of a majority of the Class B Common Stock.
  • 4The Rights Agreement, if triggered, provides for the distribution of preferred share purchase rights to Class A and Class B common stockholders.
  • 5A related "Holdco Mirror Agreement" has also been amended to extend its expiration date to December 31, 2009, maintaining alignment with the stock rights.
  • 6The filing addresses Item 1.01 (Entry into a Material Definitive Agreement) and Item 3.03 (Material Modifications to Rights of Security Holders).

Frequently Asked Questions

The primary reason for extending the Rights Agreement is to continue protecting Charter's significant Net Operating Loss Carryforwards (NOLs). These NOLs are a valuable asset that could be substantially limited under Section 382 of the Internal Revenue Code if an 'Ownership Change' occurs. The extension aims to deter such changes and preserve the company's ability to utilize these tax benefits in the future.

The Rights Agreement, often referred to as a 'poison pill,' was adopted to prevent an 'Ownership Change' that could trigger limitations on the company's NOLs. It establishes a dividend distribution of one preferred share purchase right for each outstanding share of Class A and Class B common stock. If certain conditions are met (specifically, an 'Ownership Change' event), these rights become exercisable, allowing holders to purchase a fraction of a share of preferred stock, which is designed to make any acquisition of control prohibitively expensive for a potential acquirer.

The extension was approved by Charter's Board of Directors. Furthermore, it required and received the prior approval of the holders of a majority of Charter's Class B Common Stock, which was obtained through unanimous written consent as of December 23, 2008.

No, the rights themselves do not confer any stockholder rights (like dividends or voting) until they become exercisable upon a public announcement of an ownership change event. The amendment primarily extends the duration of the agreement designed to prevent such triggering events.