corporate transactions requiring equity holder approval, including without
limitation, election of directors, approval of merger transactions involving us
and sales of all or substantially all of our assets. Further, through his
effective control of our management and affairs, Mr. Allen could cause us to
enter into contracts with another corporation in which he owns an interest, or
cause us to decline a transaction that he or an entity in which he owns an
interest ultimately enters into.
Mr. Allen may engage in other businesses involving the operation of cable
television systems, video programming, high-speed Internet access or electronic
commerce, or other businesses that compete or may in the future compete with us
through one or more of his affiliates, subject to the provisions of the
certificate of incorporation of Charter Communications, Inc. and the operating
agreement of Charter Communications Holding Company. See "Certain Relationships
and Related Transactions -- Allocation of Business Opportunities with Mr.
Allen." If he did so, we and Mr. Allen would be competing. In addition, Mr.
Allen currently engages and may engage in the future in businesses that are
complementary to our cable television business. Accordingly, conflicts could
arise with respect to the allocation of corporate opportunities between us and
Mr. Allen's affiliates. Current or future agreements between us and Mr. Allen
may not be the result of arm's-length negotiations. Consequently, such
agreements may be less favorable to us than agreements that we could otherwise
have entered into with unaffiliated third parties. Further, many past and future
transactions with Mr. Allen or his affiliates are informal in nature and,
therefore, costs and benefits are not formally allocated among the parties to
the transactions. As a result, there inevitably will be some discretion left to
the parties, who are subject to the potentially conflicting interests described
We have not instituted any formal plan or arrangement to address potential
conflicts of interest that may arise.
UPON THE COMPLETION OF THE INITIAL PUBLIC OFFERING BY CHARTER COMMUNICATIONS,
INC., IT IS ANTICIPATED THAT WE WILL NOT BE PERMITTED TO ENGAGE IN ANY BUSINESS
ACTIVITY OTHER THAN THE CABLE TRANSMISSION OF VIDEO, AUDIO AND DATA UNLESS MR.
ALLEN FIRST DETERMINES NOT TO PURSUE THAT PARTICULAR BUSINESS ACTIVITY. THIS
COULD ADVERSELY AFFECT OUR ABILITY TO OFFER NEW PRODUCTS AND SERVICES OUTSIDE OF
THE CABLE TRANSMISSION BUSINESS AND ENTER INTO NEW BUSINESSES, WHICH COULD
ADVERSELY AFFECT OUR GROWTH, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The certificate of incorporation of Charter Communications, Inc. and
Charter Communications Holding Company's operating agreement will provide that,
until all of the shares of Charter Communications, Inc.'s Class B common stock
held by Mr. Allen have automatically converted into shares of Class A common
stock, Charter Communications, Inc. and Charter Communications Holding Company,
including their subsidiaries, cannot engage in any business activity outside the
cable transmission business, unless the opportunity to pursue that particular
business activity is first offered to Mr. Allen. The cable transmission business
means the business of transmitting video, audio, including telephone services,
and data on cable television systems owned or managed by us from time to time.
Mr. Allen must decide not to pursue such other business activity and consent to
our engaging in the business activity. These provisions may limit our ability to
take advantage of attractive business opportunities. Consequently, our ability
to offer new products and services outside of the cable transmission business
and enter into new businesses could be adversely affected, resulting in an
adverse effect on our growth, financial condition and results of operations. See
"Certain Relationships and Related Transactions -- Allocation of Business
Opportunities with Mr. Allen."