UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For
the quarterly period ended June 30, 2007
or
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For
the transition period from ________ to _________
Commission
file number: 000-27927
Charter
Communications, Inc.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
43-1857213
|
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification
Number)
|
12405
Powerscourt Drive
St.
Louis, Missouri 63131
(Address
of principal executive offices including zip code)
(314)
965-0555
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. YES [X] NO [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer o Accelerated
filer
þ Non-accelerated
filer
o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes oNo þ
Number
of
shares of Class A common stock outstanding as of June 30, 2007:
400,398,208
Number
of
shares of Class B common stock outstanding as of June 30, 2007:
50,000
Charter
Communications, Inc.
Quarterly
Report on Form 10-Q for the Period ended June 30, 2007
Table
of Contents
|
PART
I. FINANCIAL INFORMATION
|
Page
|
|
Item
1. Financial
Statements - Charter Communications, Inc. and
Subsidiaries
|
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2007
|
|
|
and
December 31, 2006
|
4
|
|
Condensed
Consolidated Statements of Operations for the three and
six
|
|
|
months
ended June 30, 2007 and 2006
|
5
|
|
Condensed
Consolidated Statements of Cash Flows for the
|
|
|
six
months ended June 30, 2007 and 2006
|
6
|
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
|
Item
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
|
18
|
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
|
29
|
|
Item
4. Controls and Procedures
|
30
|
|
PART
II. OTHER INFORMATION
|
|
|
Item
1. Legal Proceedings
|
31
|
|
Item
1A. Risk Factors
|
31
|
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
36
|
|
Item
5. Other Information
|
37
|
|
Item
6. Exhibits
|
38
|
|
SIGNATURES
|
S-1
|
|
EXHIBIT
INDEX
|
E-1
|
This
quarterly report on Form 10-Q is for the three and six months ended June
30, 2007. The Securities and Exchange Commission ("SEC") allows
us to "incorporate by reference" information that we file with the SEC, which
means that we can disclose important information to you by referring you
directly to those documents. Information incorporated by reference is
considered to be part of this quarterly report. In addition,
information that we file with the SEC in the future will automatically update
and supersede information contained in this quarterly report. In this
quarterly report, "we," "us" and "our" refer to Charter Communications, Inc.,
Charter Communications Holding Company, LLC and their subsidiaries.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:
This
quarterly report includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities
Act"), and Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), regarding, among other things, our plans, strategies
and
prospects, both business and financial including, without limitation, the
forward-looking statements set forth in the "Results of Operations" and
"Liquidity and Capital Resources" sections under Part I, Item 2. "Management’s
Discussion and Analysis of Financial Condition and Results of Operations" in
this quarterly report. 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 including, without
limitation, the factors described under "Risk Factors" under Part II, Item
1A. Many of the forward-looking statements contained in this
quarterly report may be identified by the use of forward-looking words such
as
"believe," "expect," "anticipate," "should," "planned," "will," "may," "intend,"
"estimated," "aim," "on track," "target," "opportunity" and "potential" among
others. Important factors that could cause actual results to differ
materially from the forward-looking statements we make in this quarterly report
are set forth in this quarterly report and in other reports or documents that
we
file from time to time with the SEC, and include, but are not limited
to:
|
|
·
|
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;
|
|
|
·
|
our
ability to comply with all covenants in our indentures and credit
facilities, any violation of which could trigger a default of our
other
obligations under cross-default
provisions;
|
|
|
·
|
our
ability to pay or refinance debt prior to or when it becomes due
and/or
refinance that debt through new issuances, exchange offers or otherwise,
including restructuring our balance sheet and leverage
position;
|
|
·
|
competition
from other distributors, including incumbent telephone companies,
direct
broadcast satellite operators, wireless broadband providers, and
DSL
providers;
|
|
·
|
difficulties
in introducing and operating our telephone services, such as our
ability
to adequately meet customer expectations for the reliability of voice
services, and our ability to adequately meet demand for installations
and
customer service;
|
|
|
·
|
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 our customer base, particularly
in the
face of increasingly aggressive
competition;
|
|
|
·
|
our
ability to obtain programming at reasonable prices or to adequately
raise
prices to offset the effects of higher programming
costs;
|
|
|
·
|
general
business conditions, economic uncertainty or slowdown;
and
|
|
|
·
|
the
effects of governmental regulation, including but not limited to
local and
state franchise authorities, on our
business.
|
All
forward-looking statements attributable to us or any person acting on our behalf
are expressly qualified in their entirety by this cautionary
statement. We are under no duty or obligation to update any of the
forward-looking statements after the date of this quarterly report.
3
PART
I. FINANCIAL INFORMATION.
Item
1. Financial Statements.
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(DOLLARS
IN MILLIONS, EXCEPT PER SHARE
DATA)
|
June
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
(Unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
and cash equivalents
|
$ |
81
|
$ |
60
|
||||
|
Accounts
receivable, less allowance for doubtful accounts of
|
||||||||
|
$19
and $16, respectively
|
224
|
195
|
||||||
|
Prepaid
expenses and other current assets
|
58
|
84
|
||||||
|
Total
current assets
|
363
|
339
|
||||||
|
INVESTMENT
IN CABLE PROPERTIES:
|
||||||||
|
Property,
plant and equipment, net of accumulated
|
||||||||
|
depreciation
of $8,283 and $7,644, respectively
|
5,121
|
5,217
|
||||||
|
Franchises,
net
|
9,201
|
9,223
|
||||||
|
Total
investment in cable properties, net
|
14,322
|
14,440
|
||||||
|
OTHER
NONCURRENT ASSETS
|
366
|
321
|
||||||
|
Total
assets
|
$ |
15,051
|
$ |
15,100
|
||||
|
LIABILITIES
AND SHAREHOLDERS’ DEFICIT
|
||||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ |
1,258
|
$ |
1,298
|
||||
|
Total
current liabilities
|
1,258
|
1,298
|
||||||
|
LONG-TERM
DEBT
|
19,576
|
19,062
|
||||||
|
NOTE
PAYABLE – RELATED PARTY
|
61
|
57
|
||||||
|
DEFERRED
MANAGEMENT FEES – RELATED PARTY
|
14
|
14
|
||||||
|
OTHER
LONG-TERM LIABILITIES
|
792
|
692
|
||||||
|
MINORITY
INTEREST
|
195
|
192
|
||||||
|
PREFERRED
STOCK – REDEEMABLE; $.001 par value; 1 million
|
||||||||
|
shares
authorized; 36,713 shares issued and outstanding
|
4
|
4
|
||||||
|
SHAREHOLDERS’
DEFICIT:
|
||||||||
|
Class
A Common stock; $.001 par value; 1.75 billion shares
authorized;
|
||||||||
|
400,398,208
and 407,994,585 shares issued and outstanding,
respectively
|
--
|
--
|
||||||
|
Class
B Common stock; $.001 par value; 750 million
|
||||||||
|
shares
authorized; 50,000 shares issued and outstanding
|
--
|
--
|
||||||
|
Preferred
stock; $.001 par value; 250 million shares
|
||||||||
|
authorized;
no non-redeemable shares issued and outstanding
|
--
|
--
|
||||||
|
Additional
paid-in capital
|
5,324
|
5,313
|
||||||
|
Accumulated
deficit
|
(12,221 | ) | (11,536 | ) | ||||
|
Accumulated
other comprehensive income
|
48
|
4
|
||||||
|
Total
shareholders’ deficit
|
(6,849 | ) | (6,219 | ) | ||||
|
Total
liabilities and shareholders’ deficit
|
$ |
15,051
|
$ |
15,100
|
||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
4
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSEDCONSOLIDATED
STATEMENTS OF OPERATIONS
(DOLLARS
IN MILLIONS, EXCEPT PER SHARE DATA)
Unaudited
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
REVENUES
|
$ |
1,499
|
$ |
1,383
|
$ |
2,924
|
$ |
2,703
|
||||||||
|
COSTS
AND EXPENSES:
|
||||||||||||||||
|
Operating
(excluding depreciation and amortization)
|
647
|
611
|
1,278
|
1,215
|
||||||||||||
|
Selling,
general and administrative
|
317
|
279
|
620
|
551
|
||||||||||||
|
Depreciation
and amortization
|
334
|
340
|
665
|
690
|
||||||||||||
|
Asset
impairment charges
|
--
|
--
|
--
|
99
|
||||||||||||
|
Other
operating expenses, net
|
1
|
7
|
5
|
10
|
||||||||||||
|
1,299
|
1,237
|
2,568
|
2,565
|
|||||||||||||
|
Operating
income from continuing operations
|
200
|
146
|
356
|
138
|
||||||||||||
|
OTHER
EXPENSES:
|
||||||||||||||||
|
Interest
expense, net
|
(471 | ) | (475 | ) | (935 | ) | (943 | ) | ||||||||
|
Other
expense, net
|
(30 | ) | (21 | ) | (34 | ) | (10 | ) | ||||||||
| (501 | ) | (496 | ) | (969 | ) | (953 | ) | |||||||||
|
Loss
from continuing operations before income taxes
|
(301 | ) | (350 | ) | (613 | ) | (815 | ) | ||||||||
|
INCOME
TAX EXPENSE
|
(59 | ) | (52 | ) | (128 | ) | (60 | ) | ||||||||
|
Loss
from continuing operations
|
(360 | ) | (402 | ) | (741 | ) | (875 | ) | ||||||||
|
INCOME
FROM DISCONTINUED OPERATIONS, NET OF TAX
|
--
|
20
|
--
|
34
|
||||||||||||
|
Net
loss
|
$ | (360 | ) | $ | (382 | ) | $ | (741 | ) | $ | (841 | ) | ||||
|
LOSS
PER COMMON SHARE, BASIC AND DILUTED:
|
||||||||||||||||
|
Loss
from continuing operations
|
$ | (.98 | ) | $ | (1.27 | ) | $ | (2.02 | ) | $ | (2.76 | ) | ||||
|
Net
loss
|
$ | (.98 | ) | $ | (1.20 | ) | $ | (2.02 | ) | $ | (2.65 | ) | ||||
|
Weighted
average common shares outstanding, basic and diluted
|
367,582,677
|
317,646,946
|
366,855,427
|
317,531,492
|
||||||||||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
5
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS
IN MILLIONS)
Unaudited
|
Six
Months Ended June 30,
|
||||||||
|
2007
|
2006
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net
loss
|
$ | (741 | ) | $ | (841 | ) | ||
|
Adjustments
to reconcile net loss to net cash flows from operating
activities:
|
||||||||
|
Depreciation
and amortization
|
665
|
698
|
||||||
|
Asset
impairment charges
|
--
|
99
|
||||||
|
Noncash
interest expense
|
30
|
87
|
||||||
|
Deferred
income taxes
|
123
|
60
|
||||||
|
Other,
net
|
34
|
17
|
||||||
|
Changes
in operating assets and liabilities, net of effects from acquisitions
and
dispositions:
|
||||||||
|
Accounts
receivable
|
(29 | ) |
30
|
|||||
|
Prepaid
expenses and other assets
|
26
|
29
|
||||||
|
Accounts
payable, accrued expenses and other
|
10
|
26
|
||||||
|
Net
cash flows from operating activities
|
118
|
205
|
||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Purchases
of property, plant and equipment
|
(579 | ) | (539 | ) | ||||
|
Change
in accrued expenses related to capital expenditures
|
(39 | ) | (9 | ) | ||||
|
Other,
net
|
31
|
(5 | ) | |||||
|
Net
cash flows from investing activities
|
(587 | ) | (553 | ) | ||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Borrowings
of long-term debt
|
7,247
|
5,830
|
||||||
|
Repayments
of long-term debt
|
(6,727 | ) | (5,858 | ) | ||||
|
Proceeds
from issuance of debt
|
--
|
440
|
||||||
|
Payments
for debt issuance costs
|
(33 | ) | (29 | ) | ||||
|
Other,
net
|
3
|
--
|
||||||
|
Net
cash flows from financing activities
|
490
|
383
|
||||||
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
21
|
35
|
||||||
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
60
|
21
|
||||||
|
CASH
AND CASH EQUIVALENTS, end of period
|
$ |
81
|
$ |
56
|
||||
|
CASH
PAID FOR INTEREST
|
$ |
918
|
$ |
791
|
||||
|
NONCASH
TRANSACTIONS:
|
||||||||
|
Cumulative
adjustment to Accumulated Deficit for the adoption of FIN
48
|
$ |
56
|
$ |
--
|
||||
|
Issuance
of debt by Charter Communications Operating, LLC
|
$ |
--
|
$ |
37
|
||||
|
Retirement
of Renaissance Media Group LLC debt
|
$ |
--
|
$ | (37 | ) | |||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
6
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
1. Organization and Basis of Presentation
Charter
Communications, Inc. ("Charter") is a holding company whose principal assets
at
June 30, 2007 are the 55% controlling common equity interest (52% for accounting
purposes) in Charter Communications Holding Company, LLC ("Charter Holdco")
and
"mirror" notes that are payable by Charter Holdco to Charter and have the same
principal amount and terms as those of Charter’s convertible senior
notes. Charter Holdco is the sole owner of CCHC, LLC ("CCHC"), which
is the sole owner of Charter Communications Holdings, LLC ("Charter
Holdings"). The condensed consolidated financial statements include
the accounts of Charter, Charter Holdco, CCHC, Charter Holdings and all of
their
subsidiaries where the underlying operations reside, which are collectively
referred to herein as the "Company." Charter has 100% voting control
over Charter Holdco and had historically consolidated Charter Holdco and its
subsidiaries on that basis. Charter continues to consolidate Charter
Holdco as a variable interest entity under Financial Accounting Standards Board
("FASB") Interpretation ("FIN") 46(R) Consolidation of Variable Interest
Entities. Charter Holdco’s limited liability company agreement
provides that so long as Charter’s Class B common stock retains its special
voting rights, Charter will maintain a 100% voting interest in Charter
Holdco. Voting control gives Charter full authority and control over
the operations of Charter Holdco. All significant intercompany
accounts and transactions among consolidated entities have been
eliminated.
The
Company is a broadband communications company operating in the United
States. The Company offers to residential and commercial customers
traditional cable video programming (analog and digital video), high-speed
Internet services, advanced broadband services such as high definition
television, Charter OnDemand™, and digital video recorder service, and, in many
of our markets, telephone service. The Company sells its cable video
programming, high-speed Internet, telephone, and advanced broadband services
on
a subscription basis. The Company also sells local advertising on
cable networks.
The
accompanying condensed consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in
the
United States for interim financial information and the rules and regulations
of
the Securities and Exchange Commission (the "SEC"). Accordingly,
certain information and footnote disclosures typically included in Charter’s
Annual Report on Form 10-K have been condensed or omitted for this quarterly
report. The accompanying condensed consolidated financial statements
are unaudited and are subject to review by regulatory
authorities. However, in the opinion of management, such financial
statements include all adjustments, which consist of only normal recurring
adjustments, necessary for a fair presentation of the results for the periods
presented. Interim results are not necessarily indicative of results
for a full year.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Areas involving significant judgments and estimates
include capitalization of labor and overhead costs; depreciation and
amortization costs; impairments of property, plant and equipment, franchises
and
goodwill; income taxes; and contingencies. Actual results could
differ from those estimates.
2. Liquidity
and Capital Resources
The
Company incurred net losses of $360 million and $382 million for the three
months ended June 30, 2007 and 2006, respectively, and $741 million and $841
million for the six months ended June 30, 2007 and 2006,
respectively. The Company’s net cash flows from operating activities
were $118 million and $205 million for the six months ended June 30, 2007 and
2006, respectively.
The
Company has a significant amount of debt. The Company's long-term
financing as of June 30, 2007 consisted of $6.9 billion of credit facility
debt,
$12.3 billion accreted value of high-yield notes, and $411 million accreted
value of convertible senior notes. For the remaining two quarterly
periods of 2007, none of the Company’s debt matures. In 2008, $65
million of the Company’s debt matures, and in 2009, $666 million
matures. In 2010 and beyond, significant additional amounts will
become due under the Company’s remaining long-term debt
obligations.
7
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
The
Company requires significant cash to fund debt service costs, capital
expenditures and ongoing operations. The Company has historically
funded these requirements through cash flows from operating activities,
borrowings under its credit facilities, sales of assets, issuances of debt
and
equity securities, and cash on hand. However, the mix of funding
sources changes from period to period. For the six months ended June
30, 2007, the Company generated $118 million of net cash flows from operating
activities, after paying cash interest of $918 million. In addition,
the Company used approximately $579 million for purchases of property, plant
and
equipment. Finally, the Company generated net cash flows from
financing activities of $490 million, as a result of refinancing transactions
completed during the period.
The
Company expects that cash on hand, cash flows from operating activities, and
the
amounts available under its credit facilities will be adequate to meet its
cash
needs through 2008. The Company believes that cash flows from operating
activities and amounts available under the Company’s credit facilities may not
be sufficient to fund the Company’s operations and satisfy its interest and
principal repayment obligations in 2009, and will not be sufficient to fund
such
needs in 2010 and beyond. The Company continues to work with its
financial advisors concerning its approach to addressing liquidity, debt
maturities, and overall balance sheet leverage.
Credit
Facility Availability
The
Company’s ability to operate depends upon, among other things, its continued
access to capital, including credit under the Charter Communications Operating,
LLC (“Charter Operating”) credit facilities. The Charter Operating
credit facilities, along with the Company’s indentures and the CCO Holdings, LLC
(“CCO Holdings”) credit facilities, contain certain restrictive covenants, some
of which require the Company to maintain specified leverage ratios, meet
financial tests, and provide annual audited financial statements with an
unqualified opinion from the Company’s independent auditors. As of
June 30, 2007, the Company was in compliance with the covenants under its
indentures and credit facilities, and the Company expects to remain in
compliance with those covenants for the next twelve months. As of
June 30, 2007, the Company’s potential availability under its revolving credit
facility totaled approximately $1.4 billion, none of which was limited by
covenant restrictions. Continued access to the Company’s credit
facilities is subject to the Company remaining in compliance with these
covenants, including covenants tied to the Company’s leverage
ratio. If any event of non-compliance were to occur, funding under
the credit facilities may not be available and defaults on some or potentially
all of the Company’s debt obligations could occur. An event of
default under any of the Company’s debt instruments could result in the
acceleration of its payment obligations under that debt and, under certain
circumstances, in cross-defaults under its other debt obligations, which could
have a material adverse effect on the Company’s consolidated financial condition
and results of operations.
Limitations
on Distributions
As
long
as Charter’s convertible notes remain outstanding and are not otherwise
converted into shares of common stock, Charter must pay interest on the
convertible senior notes and repay the principal amount in November
2009. Charter’s ability to make interest payments on its convertible
senior notes, and, in 2009, to repay the outstanding principal of its
convertible senior notes of $413 million, net of $450 million of convertible
senior notes now held by Charter Holdco, will depend on its ability to raise
additional capital and/or on receipt of payments or distributions from Charter
Holdco and its subsidiaries. As of June 30, 2007, Charter Holdco was owed
$4 million in intercompany loans from its subsidiaries and had $14 million
in
cash, which were available to pay interest and principal on Charter's
convertible senior notes. In addition, Charter has $25 million of U.S.
government securities pledged as security for the semi-annual interest payments
on Charter’s convertible senior notes scheduled in 2007. On August 1,
2007, Charter Holdings distributed to CCHC an intercompany note issued by
Charter Operating with an outstanding balance, including accrued
interest, of $119 million. On the same day, CCHC distributed
such note to Charter Holdco along with $450 million of Charter’s convertible
senior notes and an investment account with $26 million of cash. As
long as Charter Holdco continues to hold the $450 million of Charter’s
convertible senior notes, Charter Holdco will receive interest payments from
the
government securities pledged for Charter’s convertible senior notes. The
cumulative amount of interest payments expected to be received by Charter Holdco
is $40 million and may be available to be distributed to pay semiannual interest
due in 2008 and May 2009 on the outstanding principal amount of $413 million
of
Charter’s convertible senior notes, although Charter Holdco may use those
amounts for other purposes.
8
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
Distributions
by Charter’s subsidiaries to a parent company (including Charter, Charter Holdco
and CCHC) for payment of principal on parent company notes, are restricted
under
the indentures governing the CCH I Holdings, LLC (“CIH”) notes, CCH I, LLC (“CCH
I”) notes, CCH II, LLC (“CCH II”) notes, CCO Holdings notes, and Charter
Operating notes and under the CCO Holdings credit facilities unless there is
no
default under the applicable indenture and credit facilities, and unless each
applicable subsidiary’s leverage ratio test is met at the time of such
distribution. For the quarter ended June 30, 2007, there was no
default under any of these indentures or credit facilities and each subsidiary
met its applicable leverage ratio tests based on June 30, 2007 financial
results. Such distributions would be restricted, however, if any such
subsidiary fails to meet these tests at the time of the contemplated
distribution. In the past, certain subsidiaries have from time to
time failed to meet their leverage ratio test. There can be no
assurance that they will satisfy these tests at the time of the contemplated
distribution. Distributions by Charter Operating for payment of
principal on parent company notes are further restricted by the covenants in
its
credit facilities.
Distributions
by CIH, CCH I, CCH II, CCO Holdings, and Charter Operating to a parent company
for payment of parent company interest are permitted if there is no default
under the aforementioned indentures and CCO Holdings credit
facilities.
The
indentures governing the Charter Holdings notes permit Charter Holdings to
make
distributions to Charter Holdco for payment of interest or principal on
Charter’s convertible senior notes, only if, after giving effect to the
distribution, Charter Holdings can incur additional debt under the leverage
ratio of 8.75 to 1.0, there is no default under Charter Holdings’ indentures,
and other specified tests are met. For the quarter ended June 30,
2007, there was no default under Charter Holdings’ indentures, the other
specified tests were met, and Charter Holdings met its leverage ratio test
based
on June 30, 2007 financial results. Such distributions would be
restricted, however, if Charter Holdings fails to meet these tests at the time
of the contemplated distribution. In the past, Charter Holdings has
from time to time failed to meet this leverage ratio test. There can
be no assurance that Charter Holdings will satisfy these tests at the time
of
the contemplated distribution. During periods in which distributions
are restricted, the indentures governing the Charter Holdings notes permit
Charter Holdings and its subsidiaries to make specified investments (that are
not restricted payments) in Charter Holdco or Charter, up to an amount
determined by a formula, as long as there is no default under the
indentures.
Recent
Financing Transactions
In
March
2007, Charter Operating entered into an Amended and Restated Credit Agreement
(the “Charter Operating Credit Agreement”) which provides for a $1.5 billion
senior secured revolving line of credit, a continuation of the existing $5.0
billion term loan facility (which was refinanced with new term loans in April
2007), and a $1.5 billion new term loan facility, which was funded in March
and
April 2007. In March 2007, CCO Holdings entered into a credit
agreement which consisted of a $350 million term loan facility funded in March
and April 2007. In April 2007, Charter Holdings completed a cash
tender offer to purchase $97 million of its outstanding notes. In
addition, Charter Holdings redeemed $187 million of its 8.625% senior notes
due
April 1, 2009 and CCO Holdings redeemed $550 million of its senior floating
rate
notes due December 15, 2010. These redemptions closed in April
2007. See Note 6.
3. Sale
of
Assets
In
2006,
the Company sold certain cable television systems serving a total of
approximately 356,000 analog video customers in 1) West Virginia and Virginia
to
Cebridge Connections, Inc. (the “Cebridge Transaction”); 2) Illinois
and Kentucky to Telecommunications Management, LLC, doing business as New Wave
Communications (the “New Wave Transaction”) and 3) Nevada, Colorado, New Mexico
and Utah to Orange Broadband Holding Company, LLC (the “Orange Transaction”) for
a total sales price of approximately $971 million. The Company used
the net proceeds from the asset sales to reduce borrowings, but not commitments,
under the revolving portion of the Company’s credit facilities. These
cable systems met the criteria for assets held for sale. As such, the
assets were written down to fair value less estimated costs to sell resulting
in
asset impairment charges during the six months ended June 30, 2006 of
approximately $99 million related to the New Wave Transaction and the Orange
Transaction. The Company determined that the West Virginia and
Virginia cable systems comprise operations and cash flows that for financial
9
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
reporting
purposes meet the criteria for discontinued operations. Accordingly,
the results of operations for the West Virginia and Virginia cable systems
have
been presented as discontinued operations, net of tax for the three and six
months ended June 30, 2006.
Summarized
consolidated financial information for the three and six months ended June
30,
2006 for the West Virginia and Virginia cable systems is as
follows:
|
Three
Months
Ended
June 30, 2006
|
Six
Months
Ended
June 30, 2006
|
|||||||
|
Revenues
|
$ |
55
|
$ |
109
|
||||
|
Income
before income taxes
|
$ |
23
|
$ |
38
|
||||
|
Income
tax expense
|
$ | (3 | ) | $ | (4 | ) | ||
|
Net
income
|
$ |
20
|
$ |
34
|
||||
|
Earnings
per common share, basic and diluted
|
$ |
0.06
|
$ |
0.11
|
||||
4. Franchises
and Goodwill
Franchise
rights represent the value attributed to agreements with local authorities
that
allow access to homes in cable service areas acquired through the purchase
of
cable systems. Management estimates the fair value of franchise
rights at the date of acquisition and determines if the franchise has a
finite-life or an indefinite-life as defined by Statement of Financial
Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible
Assets. Franchises that qualify for indefinite-life treatment
under SFAS No. 142 are tested for impairment annually each October 1 based
on valuations, or more frequently as warranted by events or changes in
circumstances. Franchises are aggregated into essentially inseparable
asset groups to conduct the valuations. The asset groups generally
represent geographical clustering of the Company’s cable systems into groups by
which such systems are managed. Management believes such grouping
represents the highest and best use of those assets.
As
of
June 30, 2007 and December 31, 2006, indefinite-lived and finite-lived
intangible assets are presented in the following table:
|
June
30, 2007
|
December 31,
2006
|
|||||||||||||||||||||||
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
|||||||||||||||||||
|
Indefinite-lived
intangible assets:
|
||||||||||||||||||||||||
|
Franchises
with indefinite lives
|
$ |
9,187
|
$ |
--
|
$ |
9,187
|
$ |
9,207
|
$ |
--
|
$ |
9,207
|
||||||||||||
|
Goodwill
|
64
|
--
|
64
|
61
|
--
|
61
|
||||||||||||||||||
| $ |
9,251
|
$ |
--
|
$ |
9,251
|
$ |
9,268
|
$ |
--
|
$ |
9,268
|
|||||||||||||
|
Finite-lived
intangible assets:
|
||||||||||||||||||||||||
|
Franchises
with finite lives
|
$ |
23
|
$ |
9
|
$ |
14
|
$ |
23
|
$ |
7
|
$ |
16
|
||||||||||||
For
the
six months ended June 30, 2007, the net carrying amount of indefinite-lived
franchises was reduced by $20 million, related to cable asset sales completed
in
the first six months of 2007. Franchise amortization expense
represents the amortization relating to franchises that did not qualify for
indefinite-life treatment under SFAS No. 142, including costs associated with
franchise renewals. Franchise amortization expense for the three and
six months ended June 30, 2007 was approximately $1 million and $2 million,
respectively. The Company expects that amortization expense on
franchise assets will be approximately $3 million annually for each of the
next
five years. Actual amortization expense in future periods could
differ from these estimates as a result of new intangible asset acquisitions
or
divestitures, changes in useful lives and other relevant factors.
10
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
For
the
six months ended June 30, 2007, the net carrying amount of goodwill increased
$3
million as a result of the Company’s purchase of certain cable systems in
Pasadena, California in June 2007.
5. Accounts
Payable and Accrued Expenses
Accounts
payable and accrued expenses consist of the following as of June 30, 2007 and
December 31, 2006:
|
June
30,
2007
|
December 31,
2006
|
|||||||
|
Accounts
payable - trade
|
$ |
100
|
$ |
92
|
||||
|
Accrued
capital expenditures
|
58
|
97
|
||||||
|
Accrued
expenses:
|
||||||||
|
Interest
|
397
|
410
|
||||||
|
Programming
costs
|
283
|
268
|
||||||
|
Franchise-related
fees
|
52
|
68
|
||||||
|
Compensation
|
102
|
110
|
||||||
|
Other
|
266
|
253
|
||||||
| $ |
1,258
|
$ |
1,298
|
|||||
6. Long-Term
Debt
Long-term
debt consists of the following as of June 30, 2007 and December 31,
2006:
|
June
30, 2007
|
December
31, 2006
|
|||||||||||||||
|
Principal
Amount
|
Accreted
Value
|
Principal
Amount
|
Accreted
Value
|
|||||||||||||
|
Long-Term
Debt
|
||||||||||||||||
|
Charter
Communications, Inc.:
|
||||||||||||||||
|
5.875%
convertible senior notes due November 16, 2009
|
$ |
413
|
$ |
411
|
$ |
413
|
$ |
408
|
||||||||
|
Charter
Communications Holdings, LLC:
|
||||||||||||||||
|
8.250%
senior notes due April 1, 2007
|
--
|
--
|
105
|
105
|
||||||||||||
|
8.625%
senior notes due April 1, 2009
|
--
|
--
|
187
|
187
|
||||||||||||
|
10.000%
senior notes due April 1, 2009
|
88
|
88
|
105
|
105
|
||||||||||||
|
10.750%
senior notes due October 1, 2009
|
63
|
63
|
71
|
71
|
||||||||||||
|
9.625%
senior notes due November 15, 2009
|
37
|
37
|
52
|
52
|
||||||||||||
|
10.250%
senior notes due January 15, 2010
|
18
|
18
|
32
|
32
|
||||||||||||
|
11.750%
senior discount notes due January 15, 2010
|
16
|
16
|
21
|
21
|
||||||||||||
|
11.125%
senior discount notes due January 15, 2011
|
47
|
47
|
52
|
52
|
||||||||||||
|
13.500%
senior discount notes due January 15, 2011
|
60
|
60
|
62
|
62
|
||||||||||||
|
9.920%
senior discount notes due April 1, 2011
|
51
|
51
|
63
|
63
|
||||||||||||
|
10.000%
senior notes due May 15, 2011
|
69
|
69
|
71
|
71
|
||||||||||||
|
11.750%
senior discount notes due May 15, 2011
|
54
|
54
|
55
|
55
|
||||||||||||
|
12.125%
senior discount notes due January 15, 2012
|
75
|
75
|
91
|
91
|
||||||||||||
|
CCH
I Holdings, LLC:
|
||||||||||||||||
|
11.125%
senior notes due January 15, 2014
|
151
|
151
|
151
|
151
|
||||||||||||
|
13.500%
senior discount notes due January 15, 2014
|
581
|
581
|
581
|
581
|
||||||||||||
|
9.920%
senior discount notes due April 1, 2014
|
471
|
471
|
471
|
471
|
||||||||||||
11
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
|
10.000%
senior notes due May 15, 2014
|
299
|
299
|
299
|
299
|
||||||||||||
|
11.750%
senior discount notes due May 15, 2014
|
815
|
815
|
815
|
815
|
||||||||||||
|
12.125%
senior discount notes due January 15, 2015
|
217
|
217
|
217
|
216
|
||||||||||||
|
CCH
I, LLC:
|
||||||||||||||||
|
11.000%
senior notes due October 1, 2015
|
3,987
|
4,087
|
3,987
|
4,092
|
||||||||||||
|
CCH
II, LLC:
|
||||||||||||||||
|
10.250%
senior notes due September 15, 2010
|
2,198
|
2,190
|
2,198
|
2,190
|
||||||||||||
|
10.250%
senior notes due October 1, 2013
|
250
|
261
|
250
|
262
|
||||||||||||
|
CCO
Holdings, LLC:
|
||||||||||||||||
|
Senior
floating notes due December 15, 2010
|
--
|
--
|
550
|
550
|
||||||||||||
|
8
3/4% senior notes due November 15, 2013
|
800
|
795
|
800
|
795
|
||||||||||||
|
Credit
facility
|
350
|
350
|
--
|
--
|
||||||||||||
|
Charter
Communications Operating, LLC:
|
||||||||||||||||
|
8.000%
senior second lien notes due April 30, 2012
|
1,100
|
1,100
|
1,100
|
1,100
|
||||||||||||
|
8
3/8% senior second lien notes due April 30, 2014
|
770
|
770
|
770
|
770
|
||||||||||||
|
Credit
facilities
|
6,500
|
6,500
|
5,395
|
5,395
|
||||||||||||
| $ |
19,480
|
$ |
19,576
|
$ |
18,964
|
$ |
19,062
|
The
accreted values presented above generally represent the principal amount of
the
notes less the original issue discount at the time of sale plus the accretion
to
the balance sheet date. However, certain of the CIH notes, CCH I
notes and CCH II notes issued in exchange for Charter Holdings notes and Charter
convertible notes in 2006 and 2005 are recorded for financial reporting purposes
at values different from the current accreted value for legal purposes and
notes
indenture purposes (the amount that is currently payable if the debt becomes
immediately due). As of June 30, 2007, the accreted value of the
Company’s debt for legal purposes and notes indenture purposes is approximately
$19.4 billion.
In
March
2007, Charter Operating entered into the Charter Operating Credit Agreement
which provides for a $1.5 billion senior secured revolving line of credit,
a
continuation of the existing $5.0 billion term loan facility (the “Existing Term
Loan”), and a $1.5 billion new term loan facility (the “New Term Loan”), which
was funded in March and April 2007. Borrowings under the Charter
Operating Credit Agreement bear interest at a variable interest rate based
on
either LIBOR or a base rate, plus in either case, an applicable
margin. The applicable margin for LIBOR loans under the New Term Loan
and revolving loans is 2.00% above LIBOR. The revolving line of
credit commitments terminate in March 2013. The Existing Term Loan
and the New Term Loan are subject to amortization at 1% of their initial
principal amount per annum commencing on March 31, 2008 with the remaining
principal amount of the New Term Loan due in March 2014. The Charter
Operating Credit Agreement also modified the quarterly consolidated leverage
ratio to be less restrictive.
In
March
2007, CCO Holdings entered into a credit agreement (the “CCO Holdings Credit
Agreement”) which consisted of a $350 million term loan facility (the “Term
Facility”). The Term Facility matures in September 2014 (the
“Maturity Date”). Borrowings under the CCO Holdings Credit Agreement
bear interest at a variable interest rate based on either LIBOR or a base rate
plus, in either case, an applicable margin. The applicable margin for
LIBOR term loans is 2.50% above LIBOR. The CCO Holdings Credit
Agreement is secured by the equity interests of Charter Operating, and all
proceeds thereof.
As
part
of the refinancing, the existing $350 million revolving/term credit facility
was
terminated. The refinancing resulted in a loss on extinguishment of
debt for the three and six months ended June 30, 2007 of approximately $12
million and $13 million, respectively, included in other expense, net on the
Company’s condensed consolidated statements of operations.
In
April
2007, Charter Holdings completed a tender offer, in which $97 million of Charter
Holdings’ notes were accepted in exchange for $100 million of total
consideration, including premiums and accrued interest. In addition,
Charter Holdings redeemed $187 million of its 8.625% senior notes due April
1,
2009 and CCO Holdings redeemed
12
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
$550
million of its senior floating rate notes due December 15,
2010. These redemptions closed in April 2007. The
redemptions and tender resulted in a loss on extinguishment of debt for each
of
the three and six months ended June 30, 2007 of approximately $22 million
included in other expense, net on the Company’s condensed consolidated
statements of operations.
On
April
1, 2007, $105 million of Charter Holdings 8.25% notes matured and were paid
off
with proceeds from the CCO Holdings Credit Agreement.
7. Minority
Interest and Equity Interest of Charter Holdco
Charter
is a holding company whose primary assets are a controlling equity interest
in
Charter Holdco, the indirect owner of the Company’s cable systems, and $413
million at June 30, 2007 and December 31, 2006 of mirror notes that are payable
by Charter Holdco to Charter, and which have the same principal amount and
terms
as those of Charter’s convertible senior notes. Minority interest on
the Company’s consolidated balance sheets represents Mr. Allen’s, Charter’s
chairman and controlling shareholder, 5.6% preferred membership interests in
CC
VIII, LLC ("CC VIII"), an indirect subsidiary of Charter Holdco, of $195 million
and $192 million as of June 30, 2007 and December 31, 2006,
respectively.
8. Share
Lending Agreement
As
of
June 30, 2007, there were 29.8 million shares of Charter Class A common stock
outstanding that were issued in various offerings as required by the share
lending agreement, pursuant to which Charter had previously agreed to loan
up to
150 million shares to Citigroup Global Markets Limited
("CGML"). These offerings of Charter’s Class A common stock were
conducted to facilitate transactions by which investors in Charter’s 5.875%
convertible senior notes due 2009, issued on November 22, 2004, hedged their
investments in the convertible senior notes. Charter did not receive
any of the proceeds from the sale of this Class A common
stock. However, under the share lending agreement, Charter received a
loan fee of $.001 for each share that it lent to CGML. Charter has no
further obligation to issue shares pursuant to this share lending
agreement.
The
issuance of shares pursuant to this 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 shares borrowed must be
returned at the end of the arrangement). The fair value of the 29.8
million loaned shares outstanding was approximately $121 million as of June
30,
2007. However, the net effect on shareholders’ deficit of the shares
lent pursuant to the share lending agreement, which includes Charter’s
requirement to lend the shares and the counterparties’ requirement to return the
shares, is de minimis and represents the cash received upon lending of the
shares and is equal to the par value of the common stock to be
issued.
9. Comprehensive
Loss
Certain
marketable equity securities are classified as available-for-sale and reported
at market value with unrealized gains and losses recorded as accumulated other
comprehensive income on the accompanying condensed consolidated balance sheets.
Additionally, the Company reports changes in the fair value of interest rate
agreements designated as hedging the variability of cash flows associated with
floating-rate debt obligations, that meet the effectiveness criteria of SFAS
No.
133, Accounting for Derivative Instruments and Hedging Activities, in
accumulated other comprehensive income, after giving effect to the minority
interest share of such gains and losses. Comprehensive loss was $310
million and $381 million for the three months ended June 30, 2007 and 2006,
respectively, and $697 million and $841 million for the six months ended June
30, 2007 and 2006, respectively.
13
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
10. Accounting for Derivative Instruments and Hedging Activities
The
Company uses interest rate risk management derivative instruments, including
but
not limited to interest rate swap agreements and interest rate collar agreements
(collectively referred to herein as interest rate agreements) to manage its
interest costs. The Company’s policy is to manage its exposure to
fluctuations in interest rates by maintaining a mix of fixed and variable rate
debt within a targeted range. Using interest rate swap agreements,
the Company has agreed to exchange, at specified intervals through 2013, the
difference between fixed and variable interest amounts calculated by reference
to agreed-upon notional principal amounts.
The
Company’s
hedging
policy does not permit it to hold or issue derivative instruments for trading
purposes. The Company does, however, have certain interest rate
derivative instruments that have been designated as cash flow hedging
instruments. Such instruments effectively convert variable interest
payments on certain debt instruments into fixed payments. For
qualifying hedges, SFAS No. 133 allows derivative gains and losses to offset
related results on hedged items in the consolidated statement of
operations. The Company has formally documented, designated and
assessed the effectiveness of transactions that receive hedge
accounting. For each of the three months ended June 30,
2007 and 2006, other expense, net includes $0, and for the six months ended
June
30, 2007 and 2006, other expense, net includes $0 and a gain of $2 million,
respectively, which represent cash flow hedge ineffectiveness on interest rate
hedge agreements. This ineffectiveness arises from differences
between critical terms of the agreements and the related hedged
obligations. Changes in the fair value of interest rate agreements
that are designated as hedging instruments of the variability of cash flows
associated with floating rate debt obligations, and that meet the effectiveness
criteria of SFAS No. 133 are reported in accumulated other comprehensive
income. For the three months ended June 30,
2007 and 2006, gains of $50 million and $1 million, respectively, and for the
six months ended June 30, 2007 and 2006, a gain of $48 million and $0,
respectively, related to derivative instruments designated as cash flow hedges,
were recorded in accumulated other comprehensive income. The amounts
are subsequently reclassified as an increase or decrease to interest expense
in
the same periods in which the related interest on the floating-rate debt
obligations affects earnings (losses).
Certain
interest rate derivative instruments are not designated as hedges as they do
not
meet the effectiveness criteria specified by SFAS No. 133. However,
management believes such instruments are closely correlated with the respective
debt, thus managing associated risk. Interest rate derivative
instruments not designated as hedges are marked to fair value, with the impact
recorded as other income (expense) in the Company’s condensed consolidated
statements of operations. For the three months ended June 30,
2007 and 2006, other expense, net, includes gains of $6 million and $3 million,
respectively, and for the six months ended June 30, 2007 and 2006, other
expense, net includes gains of $5 million and $9 million, respectively,
resulting from interest rate derivative instruments not designated as hedges.
As
of
June
30, 2007 and December 31, 2006, the Company had outstanding $3.0 billion
and $1.7 billion, respectively, in notional amounts of interest rate
swaps. The notional amounts of interest rate instruments do not
represent amounts exchanged by the parties and, thus, are not a measure of
exposure to credit loss. The amounts exchanged are determined by
reference to the notional amount and the other terms of the
contracts.
Certain
provisions of the Company’s 5.875% convertible senior notes due 2009 are
considered embedded derivatives for accounting purposes and are required to
be
accounted for separately from the convertible senior notes. In
accordance with SFAS No. 133, these derivatives are marked to market with gains
or losses recorded in interest expense on the Company’s condensed consolidated
statement of operations. For the three months ended June 30, 2007 and
2006, the Company recognized losses of $9 million and $0, respectively, and
for
the six months ended June 30, 2007 and 2006, the Company recognized losses
of $9
million and gains of $2 million, respectively. The losses resulted in
an increase in interest expense related to these derivatives and the gains
resulted in a decrease in interest expense. At June 30,
2007 and December 31, 2006, $9 million and $12 million, respectively, is
recorded in accounts payable and accrued expenses relating to the short-term
portion of these derivatives and $12 million and $0, respectively, is recorded
in other long-term liabilities related to the long-term portion.
14
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
11. Other
Operating Expenses, Net
Other
operating expenses, net consist of the following for the three and six months
ended June 30, 2007 and 2006
|
Three
Months
Ended
June 30,
|
Six
Months
Ended
June 30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Loss
on sale of assets, net
|
$ |
--
|
$ |
--
|
$ |
3
|
$ |
--
|
||||||||
|
Special
charges, net
|
1
|
7
|
2
|
10
|
||||||||||||
| $ |
1
|
$ |
7
|
$ |
5
|
$ |
10
|
|||||||||
Special
charges, net for the three and six months ended June 30, 2007 and 2006 primarily
represent severance associated with the closing of call centers and divisional
restructuring.
12. Other
Expense, Net
Other
expense, net consists of the following for the three and six months ended June
30, 2007 and 2006:
|
Three
Months
Ended
June 30,
|
Six
Months
Ended
June 30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Gain
on derivative instruments and
hedging
activities, net
|
$ |
6
|
$ |
3
|
$ |
5
|
$ |
11
|
||||||||
|
Loss
on extinguishment of debt
|
(34 | ) | (27 | ) | (35 | ) | (27 | ) | ||||||||
|
Minority
interest
|
(1 | ) | (1 | ) | (3 | ) | (1 | ) | ||||||||
|
Gain
(loss) on investments
|
(1 | ) |
5
|
(1 | ) |
4
|
||||||||||
|
Other,
net
|
--
|
(1 | ) |
--
|
3
|
|||||||||||
| $ | (30 | ) | $ | (21 | ) | $ | (34 | ) | $ | (10 | ) | |||||
13. Income
Taxes
All
operations are held through Charter Holdco and its direct and indirect
subsidiaries. Charter Holdco and the majority of its subsidiaries are
generally limited liability companies that are not subject to income
tax. However, certain of these limited liability companies are
subject to state income tax. In addition, the subsidiaries that are
corporations are subject to federal and state income tax. All of the
taxable income, gains, losses, deductions and credits of Charter Holdco are
passed through to its members: Charter, Charter
Investment,
Inc. (“CII”) and
Vulcan Cable III Inc. ("Vulcan Cable"). Charter is responsible for
its allocated share of taxable income or loss of Charter Holdco in accordance
with the Charter Holdco limited liability company agreement (the "LLC
Agreement") and partnership tax rules and regulations. Charter also
records financial statement deferred tax assets and liabilities related to
its
investments in Charter Holdco.
As
of
June 30, 2007 and December 31, 2006, the Company had net deferred income tax
liabilities of approximately $582 million and $514 million,
respectively. Included in these deferred tax liabilities is
approximately $197 million and $200 million of deferred tax liabilities at
June
30, 2007 and December 31, 2006, respectively, relating to certain indirect
subsidiaries of Charter Holdco, which file separate income tax
returns.
During
the three and six months ended June 30, 2007, the Company recorded $59 million
and $128 million of income tax expense, respectively. During the
three and six months ended June 30, 2006, the Company recorded $55 million
15
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
and
$64
million of income tax expense, respectively. Income tax expense of $3
million and $4 million was associated with discontinued operations for the
same
periods. Income tax
expense is recognized through increases in the deferred tax liabilities related
to Charter’s investment in Charter Holdco, as well as current federal and state
income tax expense and increases to the deferred tax liabilities of certain
of
Charter’s indirect corporate subsidiaries.
The
Company recorded an additional deferred tax asset of approximately $238 million
during the six months ended June 30, 2007, relating to net operating loss
carryforwards, but recorded a valuation allowance with respect to this amount
because of the uncertainty of the ability to realize a benefit from the
Company’s carryforwards in the future. The Company had deferred tax
assets of approximately $4.9 billion and $4.6 billion as of June 30, 2007 and
December 31, 2006, respectively, which included $2.0 billion of financial losses
in excess of tax losses allocated to Charter from Charter Holdco. The
deferred tax assets also included approximately $2.9 billion and $2.7 billion
of
tax net operating loss carryforwards as of June 30, 2007 and December 31, 2006,
respectively (expiring in years 2007 through 2027), of Charter and its indirect
corporate subsidiaries. Valuation allowances of $4.4 billion and $4.2
billion as of June 30, 2007 and December 31, 2006, respectively, existed with
respect to these deferred tax assets, of which $2.4 billion and $2.2 billion,
respectively, relate to the tax net operating loss carryforwards.
The
amount of any potential benefit from the Company’s tax net operating losses is
dependent on: (1) Charter and its indirect corporate subsidiaries’
ability to generate future taxable income and (2) the impact of any future
“ownership changes” of Charter's common stock. An “ownership change”
as defined in the applicable federal income tax rules, would place significant
limitations, on an annual basis, on the use of such net operating losses to
offset any future taxable income the Company may generate. Such
limitations, in conjunction with the net operating loss expiration provisions,
could effectively eliminate the Company’s ability to use a substantial portion
of its net operating losses to offset any future taxable
income. Future transactions and the timing of such transactions could
cause such an ownership change. Transactions that could contribute to
causing such an ownership change include, but are not limited to, the following:
The issuance of shares
of common stock upon future conversion of Charter’s convertible senior notes;
reacquisition of the shares borrowed under the share lending agreement by
Charter (of which 29.8 million remain outstanding as of June 30, 2007); or
acquisitions or sales of shares by certain holders of Charter’s shares,
including persons who have held, currently hold, or accumulate in the future
five percent or more of Charter’s outstanding stock (including upon an exchange
by Mr. Allen or his affiliates, directly or indirectly, of membership units
of
Charter Holdco into CCI common stock). Many of the foregoing
transactions, including whether Mr. Allen exchanges his Charter Holdco units,
are beyond management’s control.
The
Company’s deferred tax liability arises from Charter’s investment in Charter
Holdco, and is largely attributable to the characterization of franchises for
financial reporting purposes as indefinite-lived. If certain
exchanges, as described above, were to take place, Charter would likely record
for financial reporting purposes additional deferred tax liability related
to
its increased interest in Charter Holdco.
Charter
Holdco is currently under examination by the Internal Revenue Service for the
tax years ending December 31, 2002 through 2005. In addition, Charter
and one
of the Company’s indirect corporate subsidiaries are under examination by the
Internal Revenue Service for the tax year ended December 31,
2004. Management does not expect the results of these
examinations to have a material adverse effect on the Company’s consolidated
financial condition or results of operations.
In
January 2007, the Company adopted FIN 48, Accounting for Uncertainty in
Income Taxes—an Interpretation of FASB Statement No. 109, which
provides criteria for the recognition, measurement, presentation and disclosure
of uncertain tax positions. A tax benefit from an uncertain position may be
recognized only if it is “more likely than not” that the position is sustainable
based on its technical merits. The adoption of FIN 48 resulted in a
deferred tax benefit of $56 million related to a settlement with Mr. Allen
regarding ownership of the CC VIII preferred membership interests, which was
recognized as a cumulative adjustment to accumulated deficit in the first
quarter of 2007.
16
CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars
in millions, except per share amounts and where
indicated)
14. Contingencies
The
Company is a defendant or co-defendant in several unrelated lawsuits claiming
infringement of various patents relating to various aspects of its
businesses. Other industry participants are also defendants in
certain of these cases, and, in many cases, the Company expects that any
potential liability would be the responsibility of its equipment vendors
pursuant to applicable contractual indemnification provisions. In the event
that
a court ultimately determines that the Company infringes on any intellectual
property rights, it may be subject to substantial damages and/or an injunction
that could require the Company or its vendors to modify certain products and
services the Company offers to its subscribers. While the Company
believes the lawsuits are without merit and intends to defend the actions
vigorously, the lawsuits could be material to the Company’s consolidated results
of operations of any one period, and no assurance can be given that any adverse
outcome would not be material to the Company’s consolidated financial condition,
results of operations, or liquidity.
Charter
is a party to other lawsuits and claims that arise in the ordinary course of
conducting its business. The ultimate outcome of these other legal
matters pending against the Company or its subsidiaries cannot be predicted,
and
although such lawsuits and claims are not expected individually to have a
material adverse effect on the Company’s consolidated financial condition,
results of operations, or liquidity, such lawsuits could have, in the aggregate,
a material adverse effect on the Company’s consolidated financial condition,
results of operations, or liquidity.
15. Stock
Compensation Plans
The
Company has stock option plans (the “Plans”) which provide for the grant of
non-qualified stock options, stock appreciation rights, dividend equivalent
rights, performance units and performance shares, share awards, phantom stock
and/or restricted stock (not to exceed 20,000,000 shares of Charter Class A
common stock), as each term is defined in the Plans. Employees,
officers, consultants and directors of the Company and its subsidiaries and
affiliates are eligible to receive grants under the Plans. Options
granted generally vest over four years from the grant date, with 25% generally
vesting on the anniversary of the grant date and ratably
thereafter. Generally, options expire 10 years from the grant
date. The Plans allow for the issuance of up to a total of 90,000,000
shares of Charter Class A common stock (or units convertible into Charter
Class A common stock). During the three and six months ended June 30,
2007, Charter granted 0.1 million and 3.9 million stock options, respectively,
and 0.2 million and 6.9 million performance units, respectively, under Charter’s
Long-Term Incentive Program. The Company recorded $5 million and $3
million of stock compensation expense for the three months ended June 30, 2007
and 2006, respectively, and $10 million and $7 million for the six months ended
June 30, 2007 and 2006, which is included in selling, general, and
administrative expense.
17
Item
2. Management's
Discussion and Analysis of Financial Condition and Results of Operations.
General
Charter
Communications, Inc. ("Charter") is a holding company whose principal assets
at
June 30, 2007 are the 55% controlling common equity interest (52% for accounting
purposes) in Charter Communications Holding Company, LLC ("Charter Holdco")
and
"mirror" notes that are payable by Charter Holdco to Charter and have the same
principal amount and terms as Charter’s convertible senior notes. "We," "us" and
"our" refer to Charter and its subsidiaries.
We
are a
broadband communications company operating in the United States. We
offer our residential and commercial customers traditional cable video
programming (analog and digital video, which we refer to as “video service”),
high-speed Internet services, advanced broadband cable services (such as Charter
OnDemand™ video service (“OnDemand”), high definition television service, and
digital video recorder (“DVR”) service) and, in many of our markets, telephone
service. We sell our cable video programming, high-speed Internet,
telephone, and advanced broadband services on a subscription basis.
The
following table summarizes our customer statistics for analog and digital video,
residential high-speed Internet and residential telephone as of June 30, 2007
and 2006:
|
Approximate
as of
|
||||||||
|
June
30,
|
June
30,
|
|||||||
|
2007
(a)
|
2006
(a)
|
|||||||
|
Video
Cable Services:
|
||||||||
|
Analog
Video:
|
||||||||
|
Residential
(non-bulk) analog video customers (b)
|
5,107,800
|
5,600,300
|
||||||
|
Multi-dwelling
(bulk) and commercial unit customers (c)
|
269,000
|
275,800
|
||||||
|
Total
analog video customers (b)(c)
|
5,376,800
|
5,876,100
|
||||||
|
Digital
Video:
|
||||||||
|
Digital
video customers (d)
|
2,866,000
|
2,889,000
|
||||||
|
Non-Video
Cable Services:
|
||||||||
|
Residential
high-speed Internet customers (e)
|
2,583,200
|
2,375,100
|
||||||
|
Telephone
customers (f)
|
700,300
|
257,600
|
||||||
After
giving effect to sales of certain non-strategic cable systems in the third
quarter of 2006, January 2007 and May 2007, analog video customers, digital
video customers, high-speed Internet customers and telephone customers would
have been 5,439,800, 2,703,300, 2,252,500 and 257,600, respectively, as of
June
30, 2006.
|
(a)
|
"Customers"
include all persons our corporate billing records show as receiving
service (regardless of their payment status), except for complimentary
accounts (such as our employees). At June 30, 2007 and 2006,
"customers" include approximately 33,600 and 55,900 persons whose
accounts
were over 60 days past due in payment, approximately 4,000 and 14,300
persons whose accounts were over 90 days past due in payment, and
approximately 1,700 and 8,900 of which were over 120 days past due
in
payment, respectively.
|
|
(b)
|
"Analog
video customers" include all customers who receive video
services.
|
|
(c)
|
Included
within "video customers" are those in commercial and multi-dwelling
structures, which are calculated on an equivalent bulk unit ("EBU")
basis. EBU is calculated for a system by dividing the bulk
price charged to accounts in an area by the most prevalent price
charged
to non-bulk residential customers in that market for the comparable
tier
of service. The EBU method of estimating analog video customers
is consistent with the methodology used in determining costs paid
to
programmers and has been used
consistently.
|
18
|
(d)
|
"Digital
video customers" include all households that have one or more digital
set-top boxes or cable cards
deployed.
|
|
(e)
|
"Residential
high-speed Internet customers" represent those residential customers
who
subscribe to our high-speed Internet
service.
|
|
(f)
|
"Telephone
customers" include all customers receiving telephone
service.
|
Overview
For
the
three months ended June 30, 2007 and 2006, our operating income from continuing
operations was $200 million and $146 million, respectively, and for the six
months ended June 30, 2007 and 2006, our operating income from continuing
operations was $356 million and $138 million, respectively. We had
operating margins of 13% and 11% for the three months ended June 30, 2007 and
2006, respectively, and 12% and 5% for the six months ended June 30, 2007 and
2006, respectively. The increase in operating income from continuing
operations and operating margins for the three and six months ended June 30,
2007 compared to the three and six months ended June 30, 2006 was principally
due to revenues increasing at a faster rate than expenses, reflecting increased
operational efficiencies, improved geographic footprint, and benefits from
improved third party contracts, coupled with asset impairment charges during
the
six months ended June 30, 2006, which did not recur in 2007.
We
have a
history of net losses. Further, we expect to continue to report net
losses for the foreseeable future. Our net losses are principally
attributable to insufficient revenue to cover the combination of operating
expenses and interest expenses we incur because of our high level of debt,
and
depreciation expenses resulting from the capital investments we have made and
continue to make in our cable properties. We expect that these
expenses will remain significant.
Sale
of Assets
In
2006,
we sold cable systems serving a total of approximately 356,000 analog video
customers for a total sales price of approximately $971 million. We
used the net proceeds from the asset sales to reduce borrowings, but not
commitments, under the revolving portion of our credit
facilities. These cable systems met the criteria for assets held for
sale. As such, the assets were written down to fair value less
estimated costs to sell resulting in asset impairment charges during the six
months ended June 30, 2006 of approximately $99 million. The results
of operations for the West Virginia and Virginia cable systems have been
presented as discontinued operations, net of tax for the three and six months
ended June 30, 2006.
Critical
Accounting Policies and Estimates
For
a
discussion of our critical accounting policies and the means by which we develop
estimates therefore, see "Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations" in our 2006 Annual Report on
Form
10-K.
19
RESULTS
OF OPERATIONS
The
following table sets forth the percentages of revenues that items in the
accompanying condensed consolidated statements of operations constituted for
the
periods presented (dollars in millions, except per share data):
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||||||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||||||||||||||||||
|
REVENUES
|
$ |
1,499
|
100 | % | $ |
1,383
|
100 | % | $ |
2,924
|
100 | % | $ |
2,703
|
100 | % | ||||||||||||||||
|
COSTS
AND EXPENSES:
|
||||||||||||||||||||||||||||||||
|
Operating
(excluding depreciation
and amortization)
|
647
|
43 | % |
611
|
44 | % |
1,278
|
44 | % |
1,215
|
45 | % | ||||||||||||||||||||
|
Selling,
general and administrative
|
317
|
21 | % |
279
|
20 | % |
620
|
21 | % |
551
|
20 | % | ||||||||||||||||||||
|
Depreciation
and amortization
|
334
|
23 | % |
340
|
25 | % |
665
|
23 | % |
690
|
26 | % | ||||||||||||||||||||
|
Asset
impairment charges
|
--
|
--
|
--
|
--
|
--
|
--
|
99
|
4 | % | |||||||||||||||||||||||
|
Other
operating expenses, net
|
1
|
--
|
7
|
--
|
5
|
--
|
10
|
--
|
||||||||||||||||||||||||
|
1,299
|
87 | % |
1,237
|
89 | % |
2,568
|
88 | % |
2,565
|
95 | % | |||||||||||||||||||||
|
Operating
income from continuing operations
|
200
|
13 | % |
146
|
11 | % |
356
|
12 | % |
138
|
5 | % | ||||||||||||||||||||
|
OTHER
EXPENSES:
|
||||||||||||||||||||||||||||||||
|
Interest
expense, net
|
(471 | ) | (475 | ) | (935 | ) | (943 | ) | ||||||||||||||||||||||||
|
Other
expense, net
|
(30 | ) | (21 | ) | (34 | ) | (10 | ) | ||||||||||||||||||||||||
| (501 | ) | (496 | ) | (969 | ) | (953 | ) | |||||||||||||||||||||||||
|
Loss
from continuing operations before income taxes
|
(301 | ) | (350 | ) | (613 | ) | (815 | ) | ||||||||||||||||||||||||
|
INCOME
TAX EXPENSE
|
(59 | ) | (52 | ) | (128 | ) | (60 | ) | ||||||||||||||||||||||||
|
Loss
from continuing operations
|
(360 | ) | (402 | ) | (741 | ) | (875 | ) | ||||||||||||||||||||||||
|
INCOME
FROM DISCONTINUED OPERATIONS, NET OF TAX
|
--
|
20
|
--
|
34
|
||||||||||||||||||||||||||||
|
Net
loss
|
$ | (360 | ) | $ | (382 | ) | $ | (741 | ) | $ | (841 | ) | ||||||||||||||||||||
|
LOSS
PER COMMON SHARE, BASIC AND DILUTED:
|
||||||||||||||||||||||||||||||||
|
Loss
from continuing operations
|
$ | (.98 | ) | $ | (1.27 | ) | $ | (2.02 | ) | $ | (2.76 | ) | ||||||||||||||||||||
|
Net
loss
|
$ | (.98 | ) | $ | (1.20 | ) | $ | (2.02 | ) | $ | (2.65 | ) | ||||||||||||||||||||
|
Weighted
average common shares outstanding, basic and diluted
|
367,582,677
|
317,646,946
|
366,855,427
|
317,531,492
|
||||||||||||||||||||||||||||
Revenues. Average
monthly revenue per analog video customer increased to $93 for the three months
ended June 30, 2007 from $82 for the three months ended June 30, 2006 and
increased to $88 for the six months ended June 30, 2007 from $80 for the six
months ended June 30, 2006, primarily as a result of increases in digital,
high-speed Internet and telephone customers, and incremental revenues from
OnDemand, DVR, high-definition television services, and rate
adjustments. Average monthly revenue per analog video customer
represents total quarterly revenue, divided by the number of respective months,
divided by the average number of analog video customers during the respective
period.
20
Revenues
by service offering were as follows (dollars in millions):
|
Three
Months Ended June 30,
|
||||||||||||||||||||||||
|
2007
|
2006
|
2007
over 2006
|
||||||||||||||||||||||
|
Revenues
|
%
of
Revenues
|
Revenues
|
%
of
Revenues
|
Change
|
%
Change
|
|||||||||||||||||||
|
Video
|
$ |
859
|
57 | % | $ |
853
|
62 | % | $ |
6
|
1 | % | ||||||||||||
|
High-speed
Internet
|
310
|
21 | % |
261
|
19 | % |
49
|
19 | % | |||||||||||||||
|
Telephone
|
80
|
5 | % |
29
|
2 | % |
51
|
176 | % | |||||||||||||||
|
Advertising
sales
|
76
|
5 | % |
79
|
6 | % | (3 | ) | (4 | )% | ||||||||||||||
|
Commercial
|
83
|
6 | % |
76
|
5 | % |
7
|
9 | % | |||||||||||||||
|
Other
|
91
|
6 | % |
85
|
6 | % |
6
|
7 | % | |||||||||||||||
| $ |
1,499
|
100 | % | $ |
1,383
|
100 | % | $ |
116
|
8 | % | |||||||||||||
|
Six
Months Ended June 30,
|
||||||||||||||||||||||||
|
2007
|
2006
|
2007
over 2006
|
||||||||||||||||||||||
|
Revenues
|
%
of
Revenues
|
Revenues
|
%
of
Revenues
|
Change
|
%
Change
|
|||||||||||||||||||
|
Video
|
$ |
1,697
|
58 | % | $ |
1,684
|
62 | % | $ |
13
|
1 | % | ||||||||||||
|
High-speed
Internet
|
606
|
21 | % |
506
|
19 | % |
100
|
20 | % | |||||||||||||||
|
Telephone
|
142
|
5 | % |
49
|
2 | % |
93
|
190 | % | |||||||||||||||
|
Advertising
sales
|
139
|
4 | % |
147
|
5 | % | (8 | ) | (5 | )% | ||||||||||||||
|
Commercial
|
164
|
6 | % |
149
|
6 | % |
15
|
10 | % | |||||||||||||||
|
Other
|
176
|
6 | % |
168
|
6 | % |
8
|
5 | % | |||||||||||||||
| $ |
2,924
|
100 | % | $ |
2,703
|
100 | % | $ |
221
|
8 | % | |||||||||||||
Video
revenues consist primarily of revenues from analog and digital video services
provided to our non-commercial customers. Analog video customers
decreased by 259,700 customers from June 30, 2006, 196,700 of which was related
to asset sales, compared to June 30, 2007. Digital video customers
increased by 97,000, offset by a loss of 65,600 customers related to asset
sales. The increase in video revenues is attributable to the
following (dollars in millions):
|
Three
months ended
June
30, 2007
compared
to
three
months ended
June
30, 2006
Increase
/ (Decrease)
|
Six
months ended
June
30, 2007
compared
to
six
months ended
June
30, 2006
Increase
/ (Decrease)
|
|||||||
|
Rate
adjustments and incremental video services
|
$ |
24
|
$ |
43
|
||||
|
Increase
in digital video customers
|
16
|
32
|
||||||
|
Decrease
in analog video customers
|
(11 | ) | (18 | ) | ||||
|
System
sales
|
(23 | ) | (44 | ) | ||||
| $ |
6
|
$ |
13
|
|||||
21
High-speed
Internet customers grew by 291,100 customers, offset by a loss of 39,600
customers related to asset sales, from June 30, 2006 to June 30,
2007. The increase in high-speed Internet revenues from our
non-commercial customers is attributable to the following (dollars in
millions):
|
Three
months ended
June
30, 2007
compared
to
three
months ended
June
30, 2006
Increase
/ (Decrease)
|
Six
months ended
June
30, 2007
compared
to
six
months ended
June
30, 2006
Increase
/ (Decrease)
|
|||||||
|
Increase
in high-speed Internet customers
|
$ |
40
|
$ |
76
|
||||
|
Price
increases
|
14
|
33
|
||||||
|
System
sales
|
(5 | ) | (9 | ) | ||||
| $ |
49
|
$ |
100
|
|||||
Revenues
from telephone services increased primarily as a result of an increase of
442,700 telephone customers from June 30, 2006 to June 30, 2007.
Advertising
sales revenues consist primarily of revenues from commercial advertising
customers, programmers, and other vendors. Advertising sales revenues
decreased primarily as a result of a decrease in national advertising sales,
including political advertising and as a result of decreases in advertising
sales revenues from programmers. For the three months ended June 30,
2007 and 2006, we received $2 million and $4 million, and for the six months
ended June 30, 2007 and 2006, we received $6 million and $10 million, in
advertising sales revenues from programmers, respectively.
Commercial
revenues consist primarily of revenues from cable video and high-speed Internet
services provided to our commercial customers. Commercial revenues
increased primarily as a result of an increase in commercial video and
high-speed Internet revenues, offset by decreases of $2 million and $5 million
related to asset sales for the three months and six months ended June 30, 2007,
respectively.
Other
revenues consist of franchise fees, equipment rental, customer installations,
home shopping, dial-up Internet service, late payment fees, wire maintenance
fees and other miscellaneous revenues. For the three months ended
June 30, 2007 and 2006, franchise fees represented approximately 49% and 52%,
respectively, of total other revenues. For the six months ended June
30, 2007 and 2006, franchise fees represented approximately 50% and 53%,
respectively, of total other revenues. The increase in other revenues
was primarily the result of increases in wire maintenance fees and late payment
fees.
Operating
expenses. The increase in operating
expenses is attributable to the following (dollars in millions):
|
Three
months ended
June
30, 2007
compared
to
three
months ended
June
30, 2006
Increase
/ (Decrease)
|
Six
months ended
June
30, 2007
compared
to
six
months ended
June
30, 2006
Increase
/ (Decrease)
|
|||||||
|
Programming
costs
|
$ |
21
|
$ |
47
|
||||
|
Costs
of providing telephone services
|
10
|
21
|
||||||
|
Labor
costs
|
16
|
17
|
||||||
|
Maintenance
costs
|
4
|
8
|
||||||
|
Other,
net
|
2
|
5
|
||||||
|
System
sales
|
(17 | ) | (35 | ) | ||||
| $ |
36
|
$ |
63
|
|||||
22
Programming
costs were approximately $388 million and $379 million, representing 60% and
62%
of total operating expenses for the three months ended June 30, 2007 and 2006,
respectively, and were approximately $781 million and $755 million, representing
61% and 62% of total operating expenses for the six months ended June 30, 2007
and 2006, respectively. Programming costs consist primarily of costs
paid to programmers for analog, premium, digital, OnDemand, and pay-per-view
programming. The increase in programming costs is primarily a result
of contractual rate increases and in the three months ended June 30, 2007 was
offset by approximately $4 million of favorable programming contract
settlements. Programming costs were also offset by the amortization
of payments received from programmers in support of launches of new channels
of
$5 million and $4 million for the three months ended June 30, 2007 and 2006
and
$10 million and $9 million for the six months ended June 30, 2007 and 2006,
respectively. System sales above include decreases in expense of
approximately $12 million and $21 million, respectively, for the three and
six
months ended June 30, 2007 related to programming. We expect
programming expenses to continue to increase due to a variety of factors,
including annual increases imposed by programmers, and additional programming,
including high-definition and OnDemand programming, being provided to
customers.
Selling,
general and administrative expenses. The increase in
selling, general and administrative expenses is attributable to the following
(dollars in millions):
|
Three
months ended
June
30, 2007
compared
to
three
months ended
June
30, 2006
Increase
/ (Decrease)
|
Six
months ended
June
30, 2007
compared
to
six
months ended
June
30, 2006
Increase
/ (Decrease)
|
|||||||
|
Customer
care costs
|
$ |
19
|
$ |
37
|
||||
|
Marketing
costs
|
17
|
35
|
||||||
|
Employee
costs
|
8
|
15
|
||||||
|
Other,
net
|
(1 | ) | (8 | ) | ||||
|
System
sales
|
(5 | ) | (10 | ) | ||||
| $ |
38
|
$ |
69
|
|||||
Depreciation
and amortization. Depreciation and amortization
expense decreased by $6 million and $25 million for the three and six months
ended June 30, 2007 compared to June 30, 2006, respectively, and was primarily
the result of systems sales and certain assets becoming fully
depreciated.
Other
operating expenses, net. For the three months ended
June 30, 2007 compared to June 30, 2006, the decrease in other operating
expenses, net is attributable to a $6 million decrease in special
charges. For the six months ended June 30, 2007 compared to June 30,
2006, the decrease in other operating expenses, net is attributable to an $8
million decrease in special charges, offset by a $3 million increase in losses
on sales of assets. For more information, see Note 11 to the
accompanying condensed consolidated financial statements contained in “Item 1.
Financial Statements.”
Interest
expense, net. For the three months ended June 30,
2007 compared to the three months ended June 30, 2006, net interest expense
decreased by $4 million, which was a result of a decrease in our average debt
outstanding from $19.7 billion for the second quarter of 2006 to $19.2 billion
for the second quarter of 2007 as well as a decrease in our average borrowing
rate from 9.4% in the second quarter of 2006 to 9.2% in the second quarter
of
2007. For the six months ended June 30, 2007 compared to the six
months ended June 30, 2006, net interest expense decreased by $8 million, which
was a result of a decrease in our average debt outstanding from $19.7 billion
to
$19.2 billion as well as a decrease in our average borrowing rate from 9.4%
for
the six months ended June 30, 2006 to 9.3% for the six months ended June 30,
2007, respectively.
23
Other
expense, net. The decrease in other expense, net is
attributable to the following (dollars in millions):
|
Three
months ended
June
30, 2007
compared
to
three
months ended
June
30, 2006
Increase
/ (Decrease)
|
Six
months ended
June
30, 2007
compared
to
six
months ended
June
30, 2006
Increase
/ (Decrease)
|
|||||||
|
Increase
(decrease) in gain on derivative instruments
and
hedging activities, net
|
$ |
3
|
$ | (6 | ) | |||
|
Increase
in loss on extinguishment of debt
|
(7 | ) | (8 | ) | ||||
|
Increase
in minority interest
|
--
|
(2 | ) | |||||
|
Increase
in loss on investments
|
(6 | ) | (5 | ) | ||||
|
Other,
net
|
1
|
(3 | ) | |||||
| $ | (9 | ) | $ | (24 | ) | |||
For
more
information, see Note 12 to the accompanying condensed consolidated financial
statements contained in “Item 1. Financial Statements.”
Income
tax expense. Income tax expense was recognized
through increases in deferred tax liabilities related to our investment in
Charter Holdco, as well as through current federal and state income tax expense,
and increases in the deferred tax liabilities of certain of our indirect
corporate subsidiaries. Income tax expense was offset by deferred tax
benefits of $21 million related to asset impairment charges recorded in the
six
months ended June 30, 2006. Income tax expense includes $19 million
of deferred tax expense related to asset sales occurring in the six months
ended
June 30, 2007.
Income
from discontinued operations, net of tax. Income from
discontinued operations, net of tax decreased in the three and six months
ending
June 30, 2007 compared to three and six months ended June 30, 2006 due to
the
sale of the West Virginia and Virginia systems in July 2006. For more
information, see Note 3 to the accompanying condensed consolidated financial
statements contained in “Item 1. Financial Statements.”
Net
loss. Net loss decreased by $22 million, or 6%, for
the three months ended June 30, 2007 compared to the three months ended June
30,
2006 and by $100 million, or 12%, for the six months ended June 30, 2007
compared to the six months ended June 30, 2006 as a result of the factors
described above.
Loss
per common share. During the three months ended June
30, 2007 compared to the three months ended June 30, 2006, net loss per common
share decreased by $0.22, or 18%, and during the six months ended June 30,
2007,
net loss per common share decreased by $0.63, or 24%, compared to the six months
ended June 30, 2006, as a result of the factors described above.
Liquidity
and Capital Resources
Introduction
This
section contains a discussion of our liquidity and capital resources, including
a discussion of our cash position, sources and uses of cash, access to credit
facilities and other financing sources, historical financing activities, cash
needs, capital expenditures and outstanding debt.
We
have
significant amounts of debt. Our long-term financing as of June 30,
2007 consisted of $6.9 billion of credit facility debt, $12.3 billion accreted
value of high-yield notes, and $411 million accreted value of convertible senior
notes. For the remaining two quarterly periods of 2007, none of our
debt matures. In 2008, $65 million of our debt matures, and in 2009,
$666 million matures. In 2010 and beyond, significant additional
amounts will become due under our remaining long-term debt
obligations.
Our
business requires significant cash to fund debt service costs, capital
expenditures and ongoing operations. We have historically funded
these requirements through cash flows from operating activities, borrowings
under our
24
credit
facilities, sales of assets, issuances of debt and equity securities and cash
on
hand. However, the mix of funding sources changes from period to
period. For the six months ended June 30, 2007, we generated $118
million of net cash flows from operating activities after paying cash interest
of $918 million. In addition, we used approximately $579 million for
purchases of property, plant and equipment. Finally, we had net cash
flows provided by financing activities of $490 million, as a result of
refinancing transactions completed during the period. We expect that
our mix of sources of funds will continue to change in the future based on
overall needs relative to our cash flow and on the availability of funds under
our credit facilities, our access to the debt and equity markets, the timing
of
possible asset sales and based on our ability to generate cash flows from
operating activities. We continue to explore asset dispositions as
one of several possible actions that we could take in the future to improve
our
liquidity, but we do not presently believe future asset sales to be a
significant source of liquidity.
We
expect
that cash on hand, cash flows from operating activities, and the amounts
available under our credit facilities will be adequate to meet our cash needs
through 2008. We believe that cash flows from operating activities and
amounts available under our credit facilities may not be sufficient to fund
our
operations and satisfy our interest and principal repayment obligations in
2009,
and will not be sufficient to fund such needs in 2010 and beyond. We
continue to work with our financial advisors concerning our approach to
addressing liquidity, debt maturities and our overall balance sheet
leverage.
Credit
Facility Availability
Our
ability to operate depends upon, among other things, our continued access to
capital, including credit under the Charter Communications Operating, LLC
(“Charter Operating”) credit facilities. The Charter Operating credit
facilities, along with our indentures and the CCO Holdings, LLC (“CCO Holdings”)
credit facilities, contain certain restrictive covenants, some of which require
us to maintain specified leverage ratios and meet financial tests and to provide
annual audited financial statements with an unqualified opinion from our
independent auditors. As of June 30, 2007, we were in compliance with
the covenants under our indentures and credit facilities, and we expect to
remain in compliance with those covenants for the next twelve
months. As of June 30, 2007, our potential availability under our
revolving credit facility totaled approximately $1.4 billion, none of which
was
limited by covenant restrictions. Continued access to our credit
facilities is subject to our remaining in compliance with these covenants,
including covenants tied to our leverage ratio. If any events of
non-compliance occur, funding under the credit facilities may not be available
and defaults on some or potentially all of our debt obligations could
occur. An event of default under any of our debt instruments could
result in the acceleration of our payment obligations under that debt and,
under
certain circumstances, in cross-defaults under our other debt obligations,
which
could have a material adverse effect on our consolidated financial condition
and
results of operations.
Limitations
on Distributions
As
long
as Charter’s convertible notes remain outstanding and are not otherwise
converted into shares of common stock, Charter must pay interest on the
convertible senior notes and repay the principal amount in November
2009. Charter’s ability to make interest payments on its convertible
senior notes, and, in 2009, to repay the outstanding principal of its
convertible senior notes of $413 million, net of $450 million of convertible
senior notes now held by Charter Holdco, will depend on its ability to raise
additional capital and/or on receipt of payments or distributions from Charter
Holdco and its subsidiaries. As of June 30, 2007, Charter Holdco was owed
$4 million in intercompany loans from its subsidiaries and had $14 million
in
cash, which were available to pay interest and principal on Charter's
convertible senior notes. In addition, Charter has $25 million of U.S.
government securities pledged as security for the semi-annual interest payments
on Charter’s convertible senior notes scheduled in 2007. On
August 1, 2007, Charter Holdings distributed to CCHC an intercompany note issued
by Charter Operating with an outstanding balance, including accrued
interest, of $119 million. On the same day, CCHC distributed
such note to Charter Holdco along with $450 million of Charter’s convertible
senior note and an investment account with $26 million of cash. As
long as Charter Holdco continues to hold the $450 million of Charter’s
convertible senior notes, Charter Holdco will receive interest payments from
the
government securities pledged for the convertible senior notes. The
cumulative amount of interest payments expected to be received by Charter Holdco
is $40 million and may be available to be distributed to pay semiannual interest
due in 2008 and May 2009 on the outstanding principal amount of $413 million
of
Charter’s convertible senior notes, although Charter Holdco may use those
amounts for other purposes.
Distributions
by Charter’s subsidiaries to a parent company (including Charter, Charter Holdco
and CCHC) for payment of principal on parent company notes, are restricted
under
the indentures governing the CCH I Holdings,
25
LLC
(“CIH”) notes, CCH I, LLC (“CCH I”) notes, CCH II, LLC (“CCH II”) notes, CCO
Holdings notes, and Charter Operating notes and under the CCO Holdings credit
facilities unless there is no default under the applicable indenture and credit
facilities, and unless each applicable subsidiary’s leverage ratio test is met
at the time of such distribution. For the quarter ended June 30,
2007, there was no default under any of these indentures or credit facilities
and each subsidiary met its applicable leverage ratio tests based on June 30,
2007 financial results. Such distributions would be restricted,
however, if any such subsidiary fails to meet these tests at the time of the
contemplated distribution. In the past, certain subsidiaries have
from time to time failed to meet their leverage ratio test. There can
be no assurance that they will satisfy these tests at the time of the
contemplated distribution. Distributions by Charter Operating for
payment of principal on parent company notes are further restricted by the
covenants in its credit facilities.
Distributions
by CIH, CCH I, CCH II, CCO Holdings and Charter Operating to a parent company
for payment of parent company interest are permitted if there is no default
under the aforementioned indentures and CCO Holdings Credit
facilities.
The
indentures governing the Charter Holdings notes permit Charter Holdings to
make
distributions to Charter Holdco for payment of interest or principal on
Charter’s convertible senior notes, only if, after giving effect to the
distribution, Charter Holdings can incur additional debt under the leverage
ratio of 8.75 to 1.0, there is no default under Charter Holdings’ indentures,
and other specified tests are met. For the quarter ended June 30,
2007, there was no default under Charter Holdings’ indentures, the other
specified tests were met, and Charter Holdings met its leverage ratio test
based
on June 30, 2007 financial results. Such distributions would be
restricted, however, if Charter Holdings fails to meet these tests at the time
of the contemplated distribution. In the past, Charter Holdings has
from time to time failed to meet this leverage ratio test. There can
be no assurance that Charter Holdings will satisfy these tests at the time
of
the contemplated distribution. During periods in which distributions
are restricted, the indentures governing the Charter Holdings notes permit
Charter Holdings and its subsidiaries to make specified investments (that are
not restricted payments) in Charter Holdco or Charter, up to an amount
determined by a formula, as long as there is no default under the
indentures.
In
addition to the limitation on distributions under the various indentures
discussed above, distributions by our subsidiaries may be limited by applicable
law. See “Risk Factors — Because of our holding company structure,
our outstanding notes are structurally subordinated in right of payment to
all
liabilities of our subsidiaries. Restrictions in our subsidiaries’
debt instruments and under applicable law limit their ability to provide funds
to us or our various debt issuers.”
Access
to Capital
Our
significant amount of debt could negatively affect our ability to access
additional capital in the future. Additionally, our ability to incur
additional debt may be limited by the restrictive covenants in our indentures
and credit facilities. No assurances can be given that we will not
experience liquidity problems if we do not obtain sufficient additional
financing on a timely basis as our debt becomes due or because of adverse market
conditions, increased competition or other unfavorable events. If, at
any time, additional capital or borrowing capacity is required beyond amounts
internally generated or available under our credit facilities or through
additional debt or equity financings, we would consider:
|
•
|
issuing
equity that would significantly dilute existing
shareholders;
|
|
|
•
|
issuing
convertible debt or some other securities that may have structural
or
other priority over our existing notes and may also, in the case
of
convertible debt, significantly dilute Charter’s existing
shareholders;
|
|
|
•
|
further
reducing our expenses and capital expenditures, which may impair
our
ability to increase revenue and grow operating cash
flows;
|
|
|
•
|
selling
assets; or
|
|
|
•
|
requesting
waivers or amendments with respect to our credit facilities, which
may not
be available on acceptable terms; and cannot be
assured.
|
If
the
above strategies were not successful, we could be forced to restructure our
obligations or seek protection under the bankruptcy laws. In
addition, if we need to raise additional capital through the issuance of equity
or find it necessary to engage in a recapitalization or other similar
transaction, our shareholders could suffer significant dilution and our
noteholders might not receive the full principal and interest payments to which
they are contractually entitled.
26
Recent
Financing Transactions
On
March
6, 2007, Charter Operating entered into an Amended and Restated Credit Agreement
among Charter Operating, CCO Holdings, the several lenders from time to time
that are parties thereto, JPMorgan Chase Bank, N.A., as administrative agent,
and certain other agents (the “Charter Operating Credit
Agreement”).
The
Charter Operating Credit Agreement provides for a $1.5 billion senior secured
revolving line of credit, a continuation of the existing $5.0 billion term
loan
facility (which was refinanced with new term loans in April 2007) (“Replacement
Existing Term Loan”), and a $1.5 billion new term loan facility (the “New Term
Loan”) which was funded in March and April 2007. Borrowings under the
Charter Operating Credit Agreement bear interest at a variable interest rate
based on either LIBOR or a base rate, plus in either case, an applicable
margin. The applicable margin for LIBOR loans under the Replacement
Existing Term Loan, the New Term Loan, and revolving loans is 2.00% above
LIBOR. The revolving line of credit commitments terminate on March 6,
2013. The Replacement Existing Term Loan and the New Term Loan are
subject to amortization at 1% of their initial principal amount per annum and
amortization commences on March 31, 2008. The remaining principal
amount of the Replacement Existing Term Loan and the New Term Loan will be
due
on March 6, 2014. The Charter Operating Credit Agreement contains
financial covenants requiring Charter Operating to maintain a quarterly
consolidated leverage ratio not to exceed 5 to 1 and a first lien leverage
ratio
not to exceed 4 to 1.
On
March
6, 2007, CCO Holdings entered into a credit agreement among CCO Holdings, the
several lenders from time to time that are parties thereto, Bank of America,
N.A., as administrative agent, and certain other agents (the “CCO Holdings
Credit Agreement”). The CCO Holdings Credit Agreement consists of a
$350 million term loan facility (the “Term Facility”). The term loan
matures on September 6, 2014 (the “Maturity Date”). Borrowings under
the CCO Holdings Credit Agreement bear interest at a variable interest rate
based on either LIBOR or a base rate plus, in either case, an applicable
margin. The applicable margin for LIBOR term loans is 2.50% above
LIBOR. The CCO Holdings Credit Agreement is secured by the equity
interests of Charter Operating, and all proceeds thereof.
We
used a
portion of the additional proceeds from the Charter Operating Credit Agreement
and CCO Holdings Credit Agreement to redeem $550 million of CCO Holdings’
outstanding floating rate notes due 2010, to redeem approximately $187 million
of Charter Holdings’ outstanding 8.625% senior notes due 2009, to fund the
purchase of notes in a tender offer for total consideration (including premiums
and accrued interest) of $100 million of certain Charter Holdings’ notes
outstanding at Charter Holdings, and to repay $105 million of Charter Holdings’
notes maturing in April 2007. The remainder was used for other
general corporate purposes.
Historical
Operating, Financing and Investing Activities
Our
cash
flows for the six months ended June 30, 2006 include the cash flows related
to
our discontinued operations.
We
held
$81 million in cash and cash equivalents as of June 30, 2007 compared to
$60 million as of December 31, 2006. For the six months ended
June 30, 2007, we generated $118 million of net cash flows from operating
activities after paying cash interest of $918 million. In addition,
we used approximately $579 million for purchases of property, plant and
equipment. Finally, we had net cash flows provided by financing
activities of $490 million.
Operating
Activities. Net cash provided by operating
activities decreased $87 million, or 42%, from $205 million for the six months
ended June 30, 2006 to $118 million for the six months ended June 30,
2007. For the six months ended June 30, 2007, net cash provided by
operating activities decreased primarily as a result of changes in operating
assets and liabilities that provided $78 million less cash during the six months
ended June 30, 2007 than the corresponding period in 2006, and an increase
of
$49 million in interest on cash pay obligations during the same period, offset
by revenues increasing at a faster rate than cash expenses.
Investing
Activities. Net cash used by investing activities
increased to $587 million for the six months ended June 30, 2007 compared to
$553 million for the six months ended June 30, 2006, which was primarily related
to an increase in cash used for the purchase of property, plant, and equipment
and a decrease in accrued expenses related to capital expenditures.
27
Financing
Activities. Net cash provided by financing
activities was $490 million and $383 million for the six months ended June
30,
2007 and 2006, respectively. The increase in cash provided during the
six months ended June 30, 2007 as compared to the corresponding period in 2006,
was primarily the result of increased borrowings of long-term debt.
Capital
Expenditures
We
have
significant ongoing capital expenditure requirements. Capital
expenditures were $579 million and $539 million for the six months ended June
30, 2007 and 2006, respectively. Capital expenditures increased as a
result of spending on customer premise equipment and support capital to meet
increased digital, high-speed Internet, and telephone customer
growth. See the table below for more details.
Our
capital expenditures are funded primarily from cash flows from operating
activities, the issuance of debt and borrowings under credit
facilities. In addition, during the six months ended June 30, 2007
and 2006, our liabilities related to capital expenditures decreased $39 million
and $9 million, respectively.
During
2007, we expect capital expenditures to be approximately $1.2
billion. We expect that the nature of these expenditures will
continue to be composed primarily of purchases of customer premise equipment
related to telephone and other advanced services, support capital, and for
scalable infrastructure costs. We have funded and expect to continue
to fund capital expenditures for 2007 primarily from cash flows from operating
activities and borrowings under our credit facilities.
We
have
adopted capital expenditure disclosure guidance, which was developed by eleven
publicly traded cable system operators, including Charter, with the support
of
the National Cable & Telecommunications Association ("NCTA"). The
disclosure is intended to provide more consistency in the reporting of operating
statistics in capital expenditures among peer companies in the cable
industry. These disclosure guidelines are not required disclosure
under Generally Accepted Accounting Principles ("GAAP"), nor do they impact
our
accounting for capital expenditures under GAAP.
The
following table presents our major capital expenditures categories in accordance
with NCTA disclosure guidelines for the three and six months ended June 30,
2007
and 2006 (dollars in millions):
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Customer
premise equipment (a)
|
$ |
128
|
$ |
128
|
$ |
289
|
$ |
258
|
||||||||
|
Scalable
infrastructure (b)
|
51
|
63
|
100
|
97
|
||||||||||||
|
Line
extensions (c)
|
25
|
33
|
49
|
59
|
||||||||||||
|
Upgrade/Rebuild
(d)
|
12
|
14
|
24
|
23
|
||||||||||||
|
Support
capital (e)
|
65
|
60
|
117
|
102
|
||||||||||||
|
Total
capital expenditures
|
$ |
281
|
$ |
298
|
$ |
579
|
$ |
539
|
||||||||
|
(a)
|
Customer
premise equipment includes costs incurred at the customer residence
to
secure new customers, revenue units and additional bandwidth
revenues. It also includes customer installation costs in
accordance with SFAS No. 51, Financial Reporting by Cable Television
Companies, and customer premise equipment (e.g., set-top boxes and
cable modems, etc.).
|
|
(b)
|
Scalable
infrastructure includes costs, not related to customer premise equipment
or our network, to secure growth of new customers, revenue units
and
additional bandwidth revenues or provide service enhancements (e.g.,
headend equipment).
|
|
(c)
|
Line
extensions include network costs associated with entering new service
areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment,
make-ready and design engineering).
|
|
(d)
|
Upgrade/rebuild
includes costs to modify or replace existing fiber/coaxial cable
networks,
including betterments.
|
|
(e)
|
Support
capital includes costs associated with the replacement or enhancement
of
non-network assets due to technological and physical obsolescence
(e.g.,
non-network equipment, land, buildings and
vehicles).
|
28
Item
3. Quantitative and
Qualitative Disclosures about Market Risk.
We
are
exposed to various market risks, including fluctuations in interest
rates. We use interest rate risk management derivative instruments,
including but not limited to interest rate swap agreements and interest rate
collar agreements (collectively referred to herein as interest rate agreements)
as required under the terms of the credit facilities of our
subsidiaries. Our policy is to manage our exposure to fluctuations in
interest rates by maintaining a mix of fixed and variable rate debt within
a
targeted range. Using interest rate swap agreements, we agree to
exchange, at specified intervals through 2013, the difference between fixed
and
variable interest amounts calculated by reference to agreed-upon notional
principal amounts. Interest rate risk management agreements are not
held or issued for speculative or trading purposes.
As
of
June 30, 2007 and December 31, 2006, our long-term debt totaled approximately
$19.6 billion and $19.1 billion, respectively. This debt was
comprised of approximately $6.9 billion and $5.4 billion of credit facilities
debt, $12.3 billion and $13.3 billion accreted amount of high-yield notes and
$411 million and $408 million accreted amount of convertible senior notes,
respectively.
As
of
June 30, 2007 and December 31, 2006, the weighted average interest rate on
the
credit facility debt was approximately 7.1% and 7.9%, respectively, the weighted
average interest rate on the high-yield notes was approximately 10.3% and the
weighted average interest rate on the convertible senior notes was approximately
5.9%, resulting in a blended weighted average interest rate of 9.2% and 9.5%,
respectively. The interest rate on approximately 80% and 78% of the
total principal amount of our debt was effectively fixed, including the effects
of our interest rate hedge agreements as of June 30, 2007 and December 31,
2006,
respectively. The fair value of our high-yield notes was $12.5
billion and $13.3 billion at June 30, 2007 and December 31, 2006,
respectively. The fair value of our convertible senior notes was $730
million and $576 million at June 30, 2007 and December 31, 2006,
respectively. The fair value of our credit facilities is $6.8 billion
and $5.4 billion at June 30, 2007 and December 31, 2006,
respectively. The fair value of high-yield and convertible notes is
based on quoted market prices, and the fair value of the credit facilities
is
based on dealer quotations.
We
do not
hold or issue derivative instruments for trading purposes. We do,
however, have certain interest rate derivative instruments that have been
designated as cash flow hedging instruments. Such instruments
effectively convert variable interest payments on certain debt instruments
into
fixed payments. For qualifying hedges, SFAS No. 133 allows derivative
gains and losses to offset related results on hedged items in the consolidated
statement of operations. We have formally documented, designated and
assessed the effectiveness of transactions that receive hedge
accounting. For each of the three months ended June 30, 2007 and
2006, other expense, net includes $0 and for the six months ended June 30,
2007
and 2006, other expense, net includes $0 and a gain of $2 million, respectively,
which represent cash flow hedge ineffectiveness on interest rate hedge
agreements arising from differences between critical terms of the agreements
and
the related hedged obligations. Changes in the fair value of interest
rate agreements that are designated as hedging instruments of the variability
of
cash flows associated with floating-rate debt obligations, and that meet the
effectiveness criteria of SFAS No. 133 are reported in accumulated other
comprehensive income. For the three months
ended
June 30, 2007
and 2006, gains of $50 million and $1 million, respectively, and for the six
months ended June 30, 2007 and 2006, a gain of $48 million and $0, respectively,
related to derivative instruments designated as cash flow hedges, was recorded
in accumulated other comprehensive income. The amounts are subsequently
reclassified as an increase or decrease to interest expense in the same periods
in which the related interest on the floating-rate debt obligations affects
earnings (losses).
Certain
interest rate derivative instruments are not designated as hedges as they do
not
meet the effectiveness criteria specified by SFAS No. 133. However,
management believes such instruments are closely correlated with the respective
debt, thus managing associated risk. Interest rate derivative
instruments not designated as hedges are marked to fair value, with the impact
recorded as other income (expense) in the Company’s condensed consolidated
statements of operations. For the three months ended June 30,
2007 and 2006, other expense, net
includes gains of $6 million and $3 million, respectively, and for the six
months ended June 30, 2007 and 2006, other expense, net includes gains of $5
million and $9 million, respectively, resulting from interest rate derivative
instruments not designated as hedges.
29
The
table
set forth below summarizes the fair values and contract terms of financial
instruments subject to interest rate risk maintained by us as of June 30, 2007
(dollars in millions):
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
Total
|
Fair
Value at June 30, 2007
|
|||||||||||||||||||||||||||||
|
Debt:
|
|||||||||||||||||||||||||||||||||||||
|
Fixed
Rate
|
$ |
--
|
$ |
--
|
$ | 601 | $ | 2,232 | $ | 282 | $ | 1,175 | $ | 8,340 | $ | 12,630 | $ | 13,212 | |||||||||||||||||||
|
Average
Interest Rate
|
--
|
--
|
7.22 | % | 10.26 | % | 11.25 | % | 8.26 | % | 10.70 | % | 10.24 | % | |||||||||||||||||||||||
|
Variable
Rate
|
$ |
--
|
$ |
65
|
$ |
65
|
$ |
65
|
$ |
65
|
$ |
65
|
$ |
6,525
|
$ |
6,850
|
$ |
6,792
|
|||||||||||||||||||
|
Average
Interest
Rate
|
--
|
7.19 | % | 7.27 | % | 7.41 | % | 7.52 | % | 7.60 | % | 7.34 | % | 7.34 | % | ||||||||||||||||||||||
|
Interest
Rate Instruments:
|
|||||||||||||||||||||||||||||||||||||
|
Variable
to Fixed Swaps
|
$ |
200
|
$ |
--
|
$ |
--
|
$ |
500
|
$ |
300
|
$ |
1,000
|
$ |
1,000
|
$ |
3,000
|
$ |
53
|
|||||||||||||||||||
|
Average
Pay
Rate
|
6.74 | % |
--
|
--
|
6.81 | % | 6.98 | % | 6.89 | % | 6.94 | % | 6.89 | % | |||||||||||||||||||||||
|
Average
Receive
Rate
|
7.34 | % |
--
|
--
|
7.42 | % | 7.45 | % | 7.58 | % | 7.65 | % | 7.55 | % | |||||||||||||||||||||||
The
notional amounts of interest rate instruments do not represent amounts exchanged
by the parties and, thus, are not a measure of our exposure to credit
loss. The amounts exchanged are determined by reference to the
notional amount and the other terms of the contracts. The estimated
fair value approximates the costs (proceeds) to settle the outstanding
contracts. Interest rates on variable debt are estimated using the
average implied forward London Interbank Offering Rate (LIBOR) rates for
the year of maturity based on the yield curve in effect at June 30,
2007.
At
June
30, 2007 and December 31, 2006, we had outstanding $3.0 billion and $1.7
billion, respectively, in notional amounts of interest rate
swaps. The notional amounts of interest rate instruments do not
represent amounts exchanged by the parties and, thus, are not a measure of
exposure to credit loss. The amounts exchanged are determined by
reference to the notional amount and the other terms of the
contracts.
Item
4. Controls
and Procedures.
As
of the
end of the period covered by this report, management, including our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness
of
the design and operation of our disclosure controls and procedures with respect
to the information generated for use in this quarterly report. The
evaluation was based in part upon reports and certifications provided by a
number of executives. Based upon, and as of the date of that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures were effective to provide reasonable
assurances that information required to be disclosed in the reports we file
or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Commission’s
rules and forms.
There
was
no change in our internal control over financial reporting during the quarter
ended June 30, 2007 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance of achieving
the
desired control objectives and management necessarily was required to apply
its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based upon the above evaluation, Charter’s management
believes that its controls provide such reasonable assurances.
30
PART
II. OTHER INFORMATION.
Item
1. Legal
Proceedings.
We
are a
defendant or co-defendant in several unrelated lawsuits claiming infringement
of
various patents relating to various aspects of our businesses. Other
industry participants are also defendants in certain of these cases, and, in
many cases, we expect that any potential liability would be the responsibility
of our equipment vendors pursuant to applicable contractual indemnification
provisions. In the event that a court ultimately determines that we infringe
on
any intellectual property rights, we may be subject to substantial damages
and/or an injunction that could require us or our vendors to modify certain
products and services we offer to our subscribers. While we believe
the lawsuits are without merit and intend to defend the actions vigorously,
the
lawsuits could be material to our consolidated results of operations of any
one
period, and no assurance can be given that any adverse outcome would not be
material to our consolidated financial condition, results of operations or
liquidity.
We
are a
party to other lawsuits and claims that arise in the ordinary course of
conducting our business. The ultimate outcome of these other legal
matters pending against us or our subsidiaries cannot be predicted, and although
such lawsuits and claims are not expected individually to have a material
adverse effect on our consolidated financial condition, results of operations
or
liquidity, such lawsuits could have, in the aggregate, a material adverse effect
on our consolidated financial condition, results of operations or
liquidity.
Item 1A. Risk Factors.
Our
Annual Report on Form 10-K for the year ended December 31, 2006 includes “Risk
Factors” under Item 1A of Part I. Except for the updated risk factors
described below, there have been no material changes from the risk factors
described in our Form 10-K. The information below updates, and should
be read in conjunction with, the risk factors and information disclosed in
our
Form 10-K.
Risks
Related to Significant Indebtedness of Us and Our
Subsidiaries
We
and our subsidiaries have a significant amount of debt and may incur significant
additional debt, including secured debt, in the future, which could adversely
affect our financial health and our ability to react to changes in our
business.
We
and
our subsidiaries have a significant amount of debt and may (subject to
applicable restrictions in their debt instruments) incur additional debt in
the
future. As of June 30, 2007, our total debt was approximately $19.6
billion, our shareholders’ deficit was approximately $6.8 billion and the
deficiency of earnings to cover fixed charges for the three and six months
ended
June 30, 2007 was $300 million and $610 million, respectively.
As
of
June 30, 2007, approximately $413 million aggregate principal amount of
Charter’s convertible notes were outstanding, which matures in
2009. We will need to raise additional capital and/or receive
distributions or payments from our subsidiaries in order to satisfy this debt
obligation. An additional $450 million aggregate principal amount of
Charter’s convertible notes are held by Charter Holdco.
Because
of our significant indebtedness, our ability to raise additional capital at
reasonable rates or at all is uncertain, and the ability of our subsidiaries
to
make distributions or payments to their parent companies is subject to
availability of funds and restrictions under our subsidiaries’ applicable debt
instruments and under applicable law. If we need to raise additional
capital through the issuance of equity or find it necessary to engage in a
recapitalization or other similar transaction, our shareholders could suffer
significant dilution, and in the case of a recapitalization or other similar
transaction, our noteholders might not receive principal and interest payments
to which they are contractually entitled.
Our
significant amount of debt could have other important
consequences. For example, the debt will or could:
|
|
·
|
require
us to dedicate a significant portion of our cash flow from operating
activities to make payments on our debt, which will reduce our funds
available for working capital, capital expenditures and other general
corporate expenses;
|
|
|
·
|
limit
our flexibility in planning for, or reacting to, changes in our business,
the cable and telecommunications industries and the economy at
large;
|
31
|
|
·
|
place
us at a disadvantage as compared to our competitors that have
proportionately less debt;
|
|
|
·
|
make
us vulnerable to interest rate increases, because approximately
20% of our
borrowings are, and will continue to be, subject to variable rates
of
interest;
|
|
|
·
|
expose
us to increased interest expense as we refinance existing lower
interest
rate instruments;
|
|
|
·
|
adversely
affect our relationship with customers and
suppliers;
|
|
|
·
|
limit
our ability to borrow additional funds in the future, due to applicable
financial and restrictive covenants in our
debt;
|
|
|
·
|
make
it more difficult for us to satisfy our obligations to the holders
of our
notes and for our subsidiaries to satisfy their obligations to
their
lenders under their credit facilities and to their noteholders;
and
|
|
|
·
|
limit
future increases in the value, or cause a decline in the value
of our
equity, which could limit our ability to raise additional capital
by
issuing equity.
|
A
default
by one of our subsidiaries under its debt obligations could result in the
acceleration of those obligations, which in turn could trigger cross defaults
under other agreements governing our long-term indebtedness. In
addition, the secured lenders under our credit facilities and the holders of
the
Charter Operating senior second-lien notes could foreclose on their collateral,
which includes equity interest in our subsidiaries, and exercise other rights
of
secured creditors. Any default under those credit facilities or the
indentures governing our convertible notes or our subsidiaries’ debt could
adversely affect our growth, our financial condition, our results of operations,
and our ability to make payments on our convertible notes, our credit
facilities, and other debt of our subsidiaries, and could force us to seek
the
protection of the bankruptcy laws. We and our subsidiaries may incur
significant additional debt in the future. If current debt amounts
increase, the related risks that we now face will intensify.
We
may not be able to access funds under the Charter Operating credit facilities
if
we fail to satisfy the covenant restrictions in such credit facilities, which
could adversely affect our financial condition and our ability to conduct our
business.
Our
subsidiaries have historically relied on access to credit facilities in order
to
fund operations and to service parent company debt, and we expect such reliance
to continue in the future. Our total potential borrowing availability
under our revolving credit facility was approximately $1.4 billion as of June
30, 2007, none of which is limited by covenant restrictions. There
can be no assurance that our actual availability under our credit facilities
will not be limited by covenant restrictions in the future.
One
of
the conditions to the availability of funding under our credit facilities is
the
absence of a default under such facilities, including as a result of any failure
to comply with the covenants under the facilities. Among other
covenants, the Charter Operating credit facilities require us to maintain
specific leverage ratios. The Charter Operating credit facilities
also provide that Charter Operating has to obtain an unqualified audit opinion
from its independent accountants for each fiscal year. There can be
no assurance that Charter Operating will be able to continue to comply with
these or any other of the covenants under the credit facilities.
An
event
of default under the credit facilities or indentures, if not waived, could
result in the acceleration of those debt obligations and, consequently, could
trigger cross defaults under other agreements governing our long-term
indebtedness. In addition, the secured lenders under the Charter
Operating credit facilities and the holders of the Charter Operating senior
second-lien notes could foreclose on their collateral, which includes equity
interest in our subsidiaries, and exercise other rights of secured
creditors. Any default under those credit facilities or the
indentures governing our convertible notes or our subsidiaries’ debt could
adversely affect our growth, our financial condition, our results of operations,
and our ability to make payments on our convertible notes, our credit
facilities, and other debt of our subsidiaries, and could force us to seek
the
protection of the bankruptcy laws, which could materially adversely impact
our
ability to operate our business and to make payments under our debt
instruments.
We
depend on generating sufficient cash flow and having access to additional
external liquidity sources to fund our debt obligations, capital expenditures,
and ongoing operations.
Our
ability to service our debt and to fund our planned capital expenditures and
ongoing operations will depend on both our ability to generate cash flow and
our
access to additional external liquidity sources. Our ability to
generate cash flow is dependent on many factors, including:
32
|
·
|
competition
from other distributors, including incumbent telephone companies,
direct
broadcast satellite operators, wireless broadband providers and DSL
providers;
|
|
·
|
difficulties
in introducing and operating our telephone services, such as our
ability
to adequately meet customer expectations for the reliability of voice
services, and our ability to adequately meet demand for installations
and
customer service;
|
|
·
|
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 our customer base, particularly
in the
face of increasingly aggressive
competition;
|
|
·
|
our
ability to obtain programming at reasonable prices or to adequately
raise
prices to offset the effects of higher programming
costs;
|
|
·
|
general
business conditions, economic uncertainty or slowdown;
and
|
|
·
|
the
effects of governmental regulation, including but not limited to
local and
state franchise authorities, on our
business.
|
Some
of
these factors are beyond our control. If we are unable to generate
sufficient cash flow or access additional external liquidity sources, we may
not
be able to service and repay our debt, operate our business, respond to
competitive challenges, or fund our other liquidity and capital
needs. Although we and our subsidiaries have been able to raise funds
through issuances of debt in the past, we may not be able to access additional
sources of external liquidity on similar terms, if at all. We expect
that cash on hand, cash flows from operating activities, and the amounts
available under our credit facilities will be adequate to meet our cash needs
through 2008. We believe that cash flows from operating activities
and amounts available under our credit facilities may not be sufficient to
fund
our operations and satisfy our interest and principal repayment obligations
in
2009, and will not be sufficient to fund such needs in 2010 and
beyond. See “Part I. Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations —
Liquidity and Capital Resources.”
Because
of our holding company structure, our outstanding notes are structurally
subordinated in right of payment to all liabilities of our
subsidiaries. Restrictions in our subsidiaries’ debt instruments and
under applicable law limit their ability to provide funds to us or our various
debt issuers.
Charter’s
primary assets are its equity interests in its subsidiaries. Our
operating subsidiaries are separate and distinct legal entities and are not
obligated to make funds available to us for payments on our notes or other
obligations in the form of loans, distributions or otherwise. Our
subsidiaries’ ability to make distributions to us is subject to their compliance
with the terms of their credit facilities and indentures and restrictions under
applicable law. Under the Delaware limited liability company act, our
subsidiaries may only make distributions to us if they have “surplus” as defined
in the act. Under fraudulent transfer laws, our subsidiaries may not
make distributions to us or the applicable debt issuers to service debt
obligations if they are insolvent or are rendered insolvent
thereby. The measures of insolvency for purposes of these fraudulent
transfer laws vary depending upon the law applied in any proceeding to determine
whether a fraudulent transfer has occurred. Generally, however, an entity would
be considered insolvent if:
|
·
|
the
sum of its debts, including contingent liabilities, was greater than
the
fair saleable value of all its
assets;
|
|
·
|
the
present fair saleable value of its assets was less than the amount
that
would be required to pay its probable liability on its existing debts,
including contingent liabilities, as they became absolute and mature;
or
|
|
·
|
it
could not pay its debts as they became
due.
|
While
we
believe that our relevant subsidiaries currently have surplus and are not
insolvent, there can be no assurance that these subsidiaries will be permitted
to make distributions in the future in compliance with these restrictions in
amounts needed to service our indebtedness. Our direct or indirect
subsidiaries include the borrowers and guarantors under the Charter Operating
and CCO Holdings credit facilities. Several of our subsidiaries are
also obligors and guarantors under other senior high yield notes. Our
convertible notes are structurally subordinated in right of payment to all
of
the debt and other liabilities of our subsidiaries. As of June 30,
2007, our total debt was approximately $19.6 billion, of which approximately
$19.2 billion was structurally senior to our convertible notes.
In
the
event of bankruptcy, liquidation or dissolution of one or more of our
subsidiaries, that subsidiary’s assets would first be applied to satisfy its own
obligations, and following such payments, such subsidiary may not have
sufficient assets remaining to make payments to us as an equity holder or
otherwise. In that event:
33
|
|
·
|
the
lenders under Charter Operating’s credit facilities whose interests are
secured by substantially all of our operating assets, will have the
right
to be paid in full before us from any of our subsidiaries’ assets;
and
|
|
|
·
|
the
holders of preferred membership interests in our subsidiary, CC VIII,
would have a claim on a portion of its assets that may reduce the
amounts
available for repayment to holders of our outstanding
notes.
|
Risks
Related to Our Business
We
operate in a very competitive business environment, which affects our ability
to
attract and retain customers and can adversely affect our business and
operations
The
industry in which we operate is highly competitive and has become more so in
recent years. In some instances, we compete against companies with
fewer regulatory burdens, easier access to financing, greater personnel
resources, greater brand name recognition, and long-established relationships
with regulatory authorities and customers. Increasing consolidation
in the cable industry and the repeal of certain ownership rules may provide
additional benefits to certain of our competitors, either through access to
financing, resources, or efficiencies of scale.
Our
principal competitors for video services throughout our territory are direct
broadcast satellite operators (“DBS”). The two largest DBS providers
are The DIRECTV Group, Inc. and Echostar Communications,
Inc. Competition from DBS, including intensive marketing efforts with
aggressive pricing and exclusive programming has had an adverse impact on our
ability to retain customers. DBS has grown rapidly over the last several years.
The cable industry, including us, has lost a significant number of video
customers to DBS competition, and we face serious challenges in this area in
the
future. In some areas, DBS operators have entered into co-marketing
arrangements with other of our competitors to offer service bundles combining
video services provided by the DBS operator and digital subscriber line Internet
services (“DSL”) along with traditional telephone service offered by the
telephone companies. These service bundles substantially resemble our
bundles. We believe that competition from DBS service providers may
present greater challenges in areas of lower population density, and that our
systems service a higher concentration of such areas than those of certain
other
major cable service providers.
Local
telephone companies and electric utilities can offer video and other services
in
competition with us and they increasingly may do so in the
future. Two major local telephone companies, AT&T and Verizon,
have both announced that they are making upgrades of their
networks. Some upgraded portions of these networks are or will be
capable of carrying two-way video services that are comparable to ours,
high-speed data services that operate at speeds as high or higher than those
we
make available to customers in these areas, and digital voice services that
are
similar to ours. In addition, these companies continue to offer their
traditional telephone services as well as bundles that include wireless voice
services provided by affiliated companies. Based on internal
estimates, we believe that AT&T’s and Verizon’s upgrades have been completed
in systems representing approximately 6% to 7% of our homes passed as of June
30, 2007, an increase from an estimated 2% at March 31, 2007. Additional
upgrades in markets in which we operate are expected. In areas where
they have launched video services, these parties are aggressively marketing
video, voice and data bundles at entry level prices similar to those we use
to
market our bundles.
The
existence of more than one cable system operating in the same territory is
referred to as an overbuild. Overbuilds could adversely affect our
growth, financial condition, and results of operations, by creating or
increasing competition. Based on internal estimates, as of June 30,
2007, we are aware of traditional overbuild situations impacting approximately
8% of our estimated homes passed, and potential traditional overbuild situations
in areas servicing approximately an additional 1% of our estimated homes
passed. Additional overbuild situations may occur in other
systems.
With
respect to our Internet access services, we face competition, including
intensive marketing efforts and aggressive pricing, from telephone companies
and
other providers of DSL. DSL service is competitive with high-speed
Internet service over cable systems. In addition, DBS providers have
entered into joint marketing arrangements with Internet access providers to
offer bundled video and Internet service, which competes with our ability to
provide bundled services to our customers. Moreover, as we expand our
telephone offerings, we will face considerable competition from established
telephone companies and other carriers.
34
In
order
to attract new customers, from time to time we make promotional offers,
including offers of temporarily reduced price or free service. These
promotional programs result in significant advertising, programming and
operating expenses, and also require us to make capital expenditures to acquire
customer premise equipment. Customers who subscribe to our services
as a result of these offerings may not remain customers for any significant
period of time following the end of the promotional period. A failure
to retain existing customers and customers added through promotional offerings
or to collect the amounts they owe us could have a material adverse effect
on
our business and financial results.
Mergers,
joint ventures, and alliances among franchised, wireless, or private cable
operators, DBS providers, local exchange carriers, and others, may provide
additional benefits to some of our competitors, either through access to
financing, resources, or efficiencies of scale, or the ability to provide
multiple services in direct competition with us.
In
addition to the various competitive factors discussed above, our business
is
subject to risks relating to increasing competition for the leisure and
entertainment time of consumers. Our business competes with all other sources
of
entertainment and information delivery, including broadcast television, movies,
live events, radio broadcasts, home video products, console games, print
media,
and the Internet. Technological advancements, such as
video-on-demand, new video formats, and Internet streaming and downloading,
have
increased the number of entertainment and information delivery choices available
to consumers, and intensified the challenges posed by audience fragmentation.
The increasing number of choices available to audiences could negatively
impact
not only consumer demand for our products and services, but also advertisers’
willingness to purchase advertising from us. If we do not respond
appropriately to further increases in the leisure and entertainment choices
available to consumers, our competitive position could deteriorate, and our
financial results could suffer.
We
cannot
assure you that our cable systems will allow us to compete
effectively. Additionally, as we expand our offerings to include
other telecommunications services, and to introduce new and enhanced services,
we will be subject to competition from other providers of the services we
offer. We cannot predict the extent to which competition may affect
our business and operations in the future.
Risks
Related to Regulatory and Legislative Matters
Our
cable system franchises are non-exclusive. Accordingly, local franchising
authorities can grant additional franchises and create competition in market
areas where none existed previously, resulting in overbuilds, which could
adversely affect results of operations.
Our
cable
system franchises are non-exclusive. Consequently, local franchising
authorities can grant additional franchises to competitors in the same
geographic area or operate their own cable systems. In addition,
certain telephone companies are seeking authority to operate in communities
without first obtaining a local franchise. As a result, competing
operators may build systems in areas in which we hold franchises. In some cases,
municipal utilities may legally compete with us without obtaining a franchise
from the local franchising authority.
Legislative
proposals have been introduced in many state legislatures that would greatly
streamline cable franchising. This legislation is intended to
facilitate entry by new competitors, particularly local telephone
companies. Such legislation has passed in numerous states, including
states where we have significant operations. Although most of these
states have provided some regulatory relief for incumbent cable operators,
some
of these proposals are viewed as being more favorable to new entrants due to
a
number of factors, including efforts to withhold streamlined cable franchising
from incumbents until after the expiration of their existing franchises, and
the
potential for new entrants to serve only higher-income areas of a particular
community. To the extent we are not able to avail ourselves of this
streamlined franchising process, we may continue to be subject to more onerous
franchise requirements at the local level than new entrants. In March 2007,
the
FCC released a ruling designed to streamline competitive cable
franchising. Among other things, the FCC prohibited local franchising
authorities from imposing “unreasonable” build-out requirements and established
a mechanism whereby competing providers can secure “interim authority” to offer
cable service if the local franchising authority has not acted on a franchise
application within 90 days (in the case of competitors with existing right
of
way authority) or 180 days (in the case of competitors without existing right
of
way authority). Local regulators have appealed the FCC’s
ruling.
35
We
may be required to provide access to our network to other Internet service
providers, which could significantly increase our competition and adversely
affect our ability to provide new products and
services.
A
number
of companies, including independent Internet service providers, or ISPs, have
requested local authorities and the FCC to require cable operators to provide
non-discriminatory access to cable’s broadband infrastructure, so that these
companies may deliver Internet services directly to customers over cable
facilities. In a 2005 ruling, commonly referred to as Brand
X, the Supreme Court upheld an FCC decision making it less likely that
any
nondiscriminatory “open access” requirements (which are generally associated
with common carrier regulation of “telecommunications services”) will be imposed
on the cable industry by local, state or federal authorities. The
Supreme Court held that the FCC was correct in classifying cable provided
Internet service as an “information service,” rather than a “telecommunications
service.” Notwithstanding Brand X, there has been continued
advocacy by certain Internet content providers and consumer groups for new
federal laws or regulations to adopt so-called “net neutrality” principles
limiting the ability of broadband network owners (like Charter) to manage and
control their own networks. The proposals might prevent network
owners, for example, from charging bandwidth intensive content providers, such
as certain online gaming, music, and video service providers, an additional
fee
to ensure quality delivery of the services to consumers. If we were
required to allocate a portion of our bandwidth capacity to other Internet
service providers, or were prohibited from charging heavy bandwidth intensive
services a fee for use of our networks, we believe that it could impair our
ability to use our bandwidth in ways that would generate maximum
revenues. In April 2007, the FCC issued a notice of inquiry regarding
the marketing practices of broadband providers as a precursor to considering
the
need for any FCC regulation of internet service providers.
Changes
in channel carriage regulations could impose significant additional costs on
us.
Cable
operators also face significant regulation of their channel
carriage. We can be required to devote substantial capacity to the
carriage of programming that we might not carry voluntarily, including certain
local broadcast signals, local public, educational and government access
programming, and unaffiliated commercial leased access
programming. This carriage burden could increase in the future,
particularly if we are required to carry both an analog and digital versions
of
local broadcast signals (dual carriage) or to carry multiple program streams
included with a single digital broadcast transmission (multicast
carriage). Additional government-mandated broadcast carriage
obligations could disrupt existing programming commitments, interfere with
our
preferred use of limited channel capacity, and limit our ability to offer
services that would maximize our revenue potential. The FCC recently
initiated a new rulemaking to explore the cable industry’s carriage obligations
once the broadcast industry transition from analog to digital transmission
is
completed in February 2009. The FCC is considering new carriage
obligations in an effort to facilitate that transition that could increase
the
capacity cable operators must devote to the retransmission of broadcast
signals.
Item
4. Submission of Matters
to a Vote of Security Holders.
The
annual meeting of shareholders of Charter Communications, Inc. was held on
June
12, 2007. Of the total 408,616,474 shares of Class A common stock issued,
outstanding and eligible to be voted at the meeting, 364,693,586 shares,
representing the same number of votes, were represented in person or by proxy
at
the meeting. Of the total 50,000 shares of Class B common stock issued,
outstanding and eligible to be voted at the meeting, 50,000 shares, representing
3,391,820,310 votes, were represented in person or by proxy at the meeting.
Three matters were submitted to a vote of the shareholders at the
meeting.
ELECTION
OF ONE CLASS A/CLASS B DIRECTOR. The holders of the Class A common stock
and the Class B common stock voting together elected Robert P. May as the
Class A/Class B director, to hold office for a term of one year. The
voting results are set forth below:
|
NOMINEE
|
FOR
|
WITHHELD
|
BROKER
NON-VOTE
|
|||||||||
|
Robert
P. May
|
3,751,644,025
|
4,869,871
|
N/A
|
|||||||||
36
ELECTION
OF ELEVEN CLASS B DIRECTORS. The holder of the Class B common stock elected
eleven Class B directors to the Board of Directors, each to hold office for
a term of one year. The voting results are set forth below:
|
NOMINEE
|
FOR
|
WITHHELD
|
||||||
|
Paul
G. Allen
|
3,391,820,310
|
0
|
||||||
|
W.
Lance Conn
|
3,391,820,310
|
0
|
||||||
|
Nathaniel
A. Davis
|
3,391,820,310
|
0
|
||||||
|
Jonathan
L. Dolgen
|
3,391,820,310
|
0
|
||||||
|
Rajive
Johri
|
3,391,820,310
|
0
|
||||||
|
David
C. Merritt
|
3,391,820,310
|
0
|
||||||
| Marc B. Nathanson |
3,391,820,310
|
0
|
||||||
| Jo Allen Patton |
3,391,820,310
|
0
|
||||||
| Neil Smit |
3,391,820,310
|
0
|
||||||
| John H. Tory |
3,391,820,310
|
0
|
||||||
| Larry W. Wangberg |
3,391,820,310
|
0
|
||||||
RATIFICATION
OF KPMG LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. The holders
of
the Class A common stock and the Class B common stock voting together
ratified KPMG LLP as Charter Communications, Inc.’s independent registered
public accounting firm for the year ended December 31, 2007. The voting
results are set forth below:
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
BROKER
NON-VOTE
|
||||||
|
3,753,652,733
|
|
|
2,573,249
|
|
|
|
287,914
|
|
|
|
N/A
|
|
Under
the
Certificate of Incorporation and Bylaws of Charter Communications, Inc. for
purposes of determining whether votes have been cast, abstentions and broker
“non-votes” are not counted and therefore do not have an effect on the
proposals
Item
5. Other
Information.
Charter
entered into amended and restated employment agreements ("New Agreements")
as of
August 1, 2007, with J. T. Fisher, Executive Vice President and Chief Financial
Officer; Michael J. Lovett, Executive Vice President and Chief Operating
Officer; Grier C. Raclin, Executive Vice President, General Counsel and
Corporate Secretary; and Robert A. Quigley, Executive Vice President and Chief
Marketing Officer, all Named Executive Officers ("NEO") of
Charter. These New Agreements replace the existing employment
agreements for each of the individuals. In addition, Charter will
enter into an Addendum to Employment Agreement (the "Addendum") as of August
1,
2007, with Neil Smit, President and Chief Executive Officer, who is also a
NEO. The following is a brief description of the New Agreements and
the general terms of the Addendum. The full text of each of the New
Agreements and the Addendum have been filed as exhibits to this Form
10-Q.
The
New
Agreements are for terms of between two and three years, automatically renewable
for a one-year period unless either party gives written notice not later than
90
days prior to the termination of the agreement. The New Agreements
set forth annual base salary amounts, target bonus amounts as a percentage
of
annual base salary under Charter's Executive Bonus Plan and special equity
grants to each NEO. The specific amounts for each NEO are set forth
in the table below. The New Agreements also provide that the NEOs
shall be entitled to receive such benefits and perquisites that are generally
provided to senior executives of a comparable level at Charter and to
participate in the 2005 Executive Cash Award Plan (the "Cash Award
Plan"). The New Agreement of Mr. Lovett provides that Mr. Lovett will
receive a one time additional contribution to the Cash Award Plan equal to
1.5
times base salary.
The
New
Agreements provide that, in the event that the Executive is terminated by
Charter without "Cause'' or the Executive elects to terminate the New Agreement
for "Good Reason,'' as those terms are defined in the New Agreements, the
Executive will receive the severance payment set forth in the table below in
52
bi-weekly installments; a lump sum payment equal to payments due under COBRA
for
at least 24 months; and the vesting of options and restricted stock
for as long as severance payments are made, subject to acceleration
if a "Change of Control" (as such term is defined in the New
Agreements) occurs during the severance period (in Mr. Lovett's case all
options, performance units, shares and restricted shares also accelerate upon
Termination by the Company without Cause or by the Executive for Good
Reason) and subject to the
37
restrictions
contained in Section 409A of the Internal Revenue Code. In the event
of termination by reason of "Disability," as that term is defined in the New
Agreements, or death, Charter shall pay in a lump sum payment all unpaid salary
and earned bonus, as well as the pro rata portion of the bonus for the
year of termination, payable when other senior executives bonuses are
paid. The New Agreements contain a two-year non-compete provision and
a two-year non-solicitation clause.
The
Addendum provides that Mr. Smit will receive certain awards of equity of Charter
under Charter's 2001 Stock Incentive Plan, an additional amount of severance
pay
than as set forth in his employment agreement, and that Mr. Smit will
participate in the Cash Award Plan, resulting in $1.44 million being credited
to
his account under the plan.
The
following table sets forth a summary of amounts contained in each of the New
Agreements and the Addendum:
|
Name
|
Term
ofAgreement
|
Base
Salary ($)
|
Bonus
Target
(%
of Base Salary)
|
Special
Equity Grant
|
Severance
Pay ($)
|
|
Neil
Smit,
President
and Chief Executive
Officer
|
No
change
|
No
change
|
No
change
|
Restricted
Stock – 600,000 shares
2007
Performance Units – 600,000
|
(Base
salary+ Target Bonus) x 3
|
|
J.
T. Fisher
Executive
Vice President and
Chief
Financial Officer
|
2
years,
9
months
|
515,000
|
70
|
Restricted
Stock – 50,000 shares
2007
Performance Units – 50,000
|
(Base
Salary+ Target Bonus) x 2
|
|
Michael
J. Lovett
Executive
Vice President and
Chief
Operating Officer
|
3
years
|
731,150
|
100
|
Restricted
Stock – 553,643 shares
2007
Performance Units – 553,643
|
(Base
Salary+ Target Bonus) x 2.5
|
|
Robert
A. Quigley
Executive
Vice President and
Chief
Marketing Officer
|
2
years,
3
months
|
470,025
|
60
|
Restricted
Stock – 150,000 and 75,000 shares
2007
Performance Units – 150,000
|
(Base
Salary+ Target Bonus) x 2
|
|
Grier
C. Raclin
Executive
Vice President,
General
Counsel and
Corporate
Secretary
|
2
years,
9
months
|
470,025
|
60
|
Restricted
Stock – 150,000 shares
2007
Performance Units – 150,000
|
(Base
Salary+ Target Bonus) x 2
|
Item
6. Exhibits.
The
index
to the exhibits begins on page E-1 of this quarterly report.
38
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, Charter
Communications, Inc. has duly caused this quarterly report to be signed on
its
behalf by the undersigned, thereunto duly authorized.
CHARTER
COMMUNICATIONS, INC.,
Registrant
|
Dated:
August 2, 2007
|
By:
/s/ Kevin D. Howard
|
|
|
Name:
|
Kevin
D. Howard
|
|
|
Title:
|
Vice
President and
|
|
|
Chief
Accounting Officer
|
||
S-1
|
Exhibit
Number
|
Description
of Document
|
|
|
3.1(a)
|
Restated
Certificate of Incorporation of Charter Communications, Inc. (Originally
incorporated July 22, 1999) (incorporated by reference to Exhibit
3.1 to
Amendment No. 3 to the registration statement on Form S-1 of Charter
Communications, Inc. filed on October 18, 1999 (File No.
333-83887)).
|
|
|
3.1(b)
|
Certificate
of Amendment of Restated Certificate of Incorporation of Charter
Communications, Inc. filed May 10, 2001 (incorporated by reference
to
Exhibit 3.1(b) to the annual report on Form 10-K filed by Charter
Communications, Inc. on March 29, 2002 (File No.
000-27927)).
|
|
|
3.2
|
Amended
and Restated By-laws of Charter Communications, Inc. as of October
30,
2006 (incorporated by reference to Exhibit 3.1 to the quarterly report
on
Form 10-Q of Charter Communications, Inc. filed on October 31, 2006
(File
No. 000-27927)).
|
|
|
10.1+*
|
Addendum
to the Employment Agreement between Neil Smit and Charter Communications,
Inc., dated as of August 1, 2007.
|
|
|
10.2+*
|
Amended
and Restated Employment Agreement between Jeffrey T. Fisher and Charter
Communications, Inc., dated as of August 1, 2007.
|
|
|
10.3+*
|
Amended
and Restated Employment Agreement between Michael J. Lovett and Charter
Communications, Inc., dated as of August 1, 2007.
|
|
|
10.4+*
|
Amended
and Restated Employment Agreement between Robert A. Quigley and Charter
Communications, Inc., dated as of August 1, 2007.
|
|
|
10.5+*
|
Amended
and Restated Employment Agreement between Grier C. Raclin and Charter
Communications, Inc., dated as of August 1, 2007.
|
|
|
12.1*
|
Computation
of Ratio of Earnings to Fixed Charges.
|
|
|
31.1*
|
Certificate
of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a)
under
the Securities Exchange Act of 1934.
|
|
|
31.2*
|
Certificate
of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a)
under
the Securities Exchange Act of 1934.
|
|
|
32.1*
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 (Chief Executive
Officer).
|
|
|
32.2*
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 (Chief Financial
Officer).
|
*
Document attached
+
Management compensatory plan or arrangement
E-1
Exhibit
10.1
ADDENDUM
TO EMPLOYMENT AGREEMENT
THIS
ADDENDUM TO EMPLOYMENT AGREEMENT (this "Addendum") is entered
into as of August 1, 2007 by and between CHARTER COMMUNICATIONS,
INC., a Delaware corporation (together with its successors and assigns,
the "Company"), and Neil Smit, an individual (" Executive ") as an
amendment to that Employment Agreement by and between the Company and Executive,
dated as of August 9, 2005 (the “Agreement”).
W
I T N E S S E T H:
WHEREAS:
|
(1)
|
The
Company and Executive (each, a "Party") desire for Executive to enter
into
this Addendum to provide for certain terms and awards as Executive
continues to be employed by the Company as Chief Executive Officer
and
President subject to the terms and conditions set forth in this Addendum
and the Agreement; and
|
|
(2)
|
The
Company and Executive acknowledge that the equity awards provided
hereunder are not effective until both parties have executed and
delivered
this Addendum and that the awards and benefits provided for herein
provide
additional consideration to Executive for the restrictive covenants
placed
on Executive under the Agreement.
|
NOW,
THEREFORE, in consideration of the premises, and the promises and
agreements set forth below, the Parties, intending to be legally bound, agree
as
follows:
1.
Executive Cash Award Plan. Beginning on this date,
Executive will participate in the Charter Communications Inc. 2005 Executive
Cash Award Plan, as amended (the “Cash Award Plan”) for the term of the
Agreement on the same terms as are applicable generally to participants in
the
Cash Award Plan. An initial amount of 120% of Executive’s Base Salary
as of the date hereof (or $1,440,000) shall be initially credited on the date
hereof as a book entry to Executive's Plan Award Account under the Cash Award
Plan and Executive shall received further book entry credits in 2008 and 2009
under the terms of the Cash Award Plan.
2. Equity
Awards.
(a) In
addition to the restricted stock awards previously granted pursuant to the
terms
of the Agreement under the Company’s 2001 Stock Incentive Plan, as of the date
hereof, Executive shall be granted restricted stock awards
for 600,000 shares of Class A Common Stock and shall vest in equal annual
installments on each of the first three anniversaries of August 10, 2007
(subject to Executive's continued employment with the Company and except as
otherwise provided in the Agreement or in Exhibit C to the Agreement),
and shall be governed by a restricted stock agreement in substantially the
form
attached hereto as Exhibit C to the Agreement (the
"Addendum Restricted Stock Award").
(b) In
addition to the performance unit awards previously granted pursuant to the
terms
of the Agreement, as of the date hereof, Executive shall hereby be granted
600,000 performance units, subject to the terms and provisions of the Company’s
2001 Stock Incentive Plan (the "Addendum Performance Award"). The
Addendum Performance Award shall be earned based upon Company performance during
a one-year performance cycle for calendar year 2007, against objective
performance criteria established by the Compensation and Benefits Committee
for
other executives’ performance units granted in 2007. The number of
1
performance
shares earned by, and delivered to, Executive shall be determined by the
formula
established by the Compensation and Benefits Committee when the targets and
performance criteria were established for calendar year 2007), and with maximum
payout no greater than 200% of the (appropriately adjusted) amount of the
Addendum Performance Award. The degree to which performance targets
are attained (or surpassed) shall be determined by the Compensation and Benefits
Committee in March 2008, and freely tradable shares reflecting the performance
target attainment identified by the Committee (“Performance Shares”) shall (to
the extent earned) be delivered to Executive no later than March 15, 2010.
The
Addendum Performance Award shall be subject to the terms and conditions of
the
Agreement, this Addendum, the Company’s 2001 Stock Incentive Plan and a
performance share award agreement in substantially the form attached to the
Agreement as Exhibit D.
3. Termination
of Employment. (a) Section
3.3(a)(ii) is hereby amended in its entirety to read as follows:
“(ii) three
(3) times the Salary plus Target Bonus (125% of Salary) both as of the
Termination Date;”
(b) Section
3.3(a)(i) of the Agreement is hereby deleted in its entirety.
4. Miscellaneous.
(a) Except
as specifically amended or modified by this Addendum, the terms and provisions
of the Agreement remain in full force and effect. This Addendum and
the Agreement contain the entire agreement between the Parties with respect
to
its specific subject matter and supersedes all prior oral and written
communications, agreements and understandings between the Parties with respect
to the terms and conditions of Executive's employment.
(b) The
headings of the Sections contained in this Addendum are for convenience only
and
shall not be deemed to control or affect the meaning or construction of any
provision of this Addendum.
(c) This
Addendum may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Addendum and all of which, when taken
together, will be deemed to constitute one and the same agreement. This Addendum
may be executed by facsimile signatures.
IN
WITNESS WHEREOF, the Parties have executed and delivered this Agreement
as of the date above first written above.
CHARTER
COMMUNICATIONS, INC.
By:
/s/ Grier C. Raclin
Name:
Grier C. Raclin
Title: Executive
Vice President, General Counsel and Secretary
Executive
/s/
Neil
Smit
Neil
Smit
2
Exhibit
10.2
AMENDED
AND RESTATED EMPLOYMENT AGREEMENT
THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”),
dated and effective the 1st day of August 2007 (the “Effective
Date”) is made by and between CHARTER COMMUNICATIONS, INC., a Delaware
corporation (the “Company”), and Jeffrey T. Fisher, an adult resident of
Missouri (the “Executive”).
RECITALS:
WHEREAS,
the Executive and the Company have previously entered into that certain
Employment Agreement dated January 20, 2006 (the "Old Employment
Agreement") and the parties desire to amend and restate in its entirety the
Old Employment Agreement;
WHEREAS,
it is the desire of the Company to assure itself of the services of Executive
by
engaging Executive as its Executive Vice President and Chief Financial Officer
and the Executive desires to serve the Company on the terms herein
provided;
WHEREAS,
in connection with the entry into the Agreement, the Executive will
be
granted performance units and restricted shares of Company
Stock pursuant to the Company's 2001 Stock Incentive Plan,
as amended as of the date hereof (the “Special
Equity”);
WHEREAS,
Executive’s agreement to the terms and conditions of Sections 17 and 19
are a material and essential condition of Executive’s employment with the
Company hereafter under the terms of this Agreement;
NOW,
THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as
follows:
1. Certain
Definitions.
(a) “Allen”
shall mean Paul G. Allen (and his heirs or beneficiaries under his will(s),
trusts or other instruments of testamentary disposition), and any entity or
group over which Paul G. Allen has Control and that constitutes a Person as
defined herein. For the purposes of this definition, “Control”
means the power to direct the management and policies of an entity
or to appoint
or elect a majority of its governing board.
(b) “Annual
Base Salary” shall have the meaning set forth in Section 5.
(c) “Board”
shall mean the Board of Directors of the Company.
(d) “Bonus”
shall have the meaning set forth in Section 6.
(e) The Company
shall have “Cause” to terminate Executive’s employment hereunder upon
Executive’s:
(i) Executive’s
breach of a material obligation (which, if curable, is not cured within ten
business (10) days after Executive receives written notice of such breach)
Charter
- Approved Prototype July 31, 2007
1
or
representation under this Agreement
or breach of any fiduciary duty to the Company which, if curable, is not
cured
within ten business (10) days after Executive receives
written notice of such breach; or any act of fraud or knowing material
misrepresentation or concealment upon, to or from the Company or the
Board;
(ii) Executive’s
failure to adhere in any material respect to (i) the Company’s Code of Conduct
in effect from time to time and applicable to officers and/or employees
generally, or (ii) any written Company policy, if such policy is material to
the
effective performance by Executive of the Executive’s duties under this
Agreement, and if Executive has been given a reasonable opportunity to cure
this
failure to comply within a period of time which is reasonable under the
circumstances but not more than the thirty (30) day period after written notice
of such failure is provided to Executive; provided that if Executive
cures this failure to comply with such a policy and then fails again to comply
with the same policy, no further opportunity to cure that failure shall be
required;
(iii) Executive’s
misappropriation (or attempted misappropriation) of a material amount of the
Company’s funds or property;
(iv) Executive’s
conviction of, the entering of a guilty plea or plea of nolo contendere
or no contest (or the equivalent), or entering into any pretrial diversion
program or agreement or suspended imposition of sentence, with respect to either
a felony or a crime that adversely affects or could reasonably be expected
to
adversely affect the Company or its business reputation; or the institution
of
criminal charges against Executive, which are not dismissed within sixty (60)
days after institution, for fraud, embezzlement, any felony offense involving
dishonesty or constituting a breach of trust or moral turpitude;
(v) Executive’s
admission of liability of, or finding of liability, for a knowing and deliberate
violation of any “Securities Laws.” As used herein, the term
“Securities Laws” means any federal or state law, rule or regulation governing
generally the issuance or exchange of securities, including without limitation
the Securities Act of 1933, the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder;
(vi) conduct
by Executive in connection with Executive’s employment that constitutes gross
neglect of any material duty or responsibility, willful
misconduct, or recklessness which, if curable, is not cured within
ten business (10) days after Executive receives written notice of such
breach;
(vii) Executive’s
illegal possession or use of any controlled substance, or excessive use of
alcohol at a work function, in connection with Executive’s duties, or on Company
premises; “excessive” meaning either repeated unprofessional use or any single
event of consumption giving rise to significant intoxication or unprofessional
behavior;
(viii) willful
or grossly negligent commission of any other act or failure to act in connection
with the Executive’s duties as an executive of the Company which causes or
reasonably may be expected (as of the time of such occurrence) to cause
substantial economic injury to or substantial injury to the business reputation
of the Company or any
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subsidiary or affiliate of the Company, including, without limitation, any
material violation of the Foreign Corrupt Practices Act, as described herein
below.
If
Executive commits or is charged with committing any offense of the character
or
type specified in subparagraphs 1(e)(iv), (v) or (viii) above, then the Company
at its option may suspend the Executive with or without pay. If the
Executive subsequently is convicted of, pleads guilty or nolo
contendere (or equivalent plea) to, or enters into any type of suspended
imposition of sentence or pretrial diversion program with respect to, any such
offense (or any matter that gave rise to the suspension), the Executive shall
immediately repay any compensation paid in cash hereunder from the date of
the
suspension. Notwithstanding anything to the contrary in any stock
option or equity incentive plan or award agreement, all vesting and all lapsing
of restrictions on restricted shares shall be tolled during the period of
suspension and all unvested options and restricted shares for which the
restrictions have not lapsed shall terminate and not be exercisable by or issued
to Executive if during or after such suspension the Executive is convicted
of,
pleads guilty or nolo contendere (or equivalent plea) to, or enters
into any type of suspended imposition of sentence or pretrial diversion program
with respect to, any offense specified in subparagraphs 1(e)(iv), (v) or (viii)
above or any matter that gave rise to the suspension.
(f) “Change
of Control” shall be deemed to have occurred if:
(i) any
Person is or becomes a “beneficial owner” (as determined for purposes of
Regulation 13D-G, as currently in effect, of the Exchange Act), directly or
indirectly, of securities representing the Applicable Percentage (as defined
below) or more of the total voting power of all of the Company’s then
outstanding voting securities. For purposes of this Section 1(f), the
term “Person” shall not include: (A) the Company or any of
its subsidiaries, (B) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its subsidiaries, or
(C) an underwriter temporarily holding securities pursuant to an offering
of said securities, or (D) Allen. For purposes of this Agreement, in
the case of a recapitalization or other exchange involving the exchange of
Company voting stock for the Company's debt, the group of debtholders that
acquires such Company voting stock as the result of such recapitalization or
exchange shall not be treated as a single Person solely by reason of such
recapitalization or exchange; or
(ii) the
occurrence of a merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company
(a
“Business Combination”), in each case, unless following such Business
Combination: (A) all or substantially all of the individuals and
entities who were the “beneficial owners” (as determined for purposes of
Regulation 13D-G, as currently in effect, of the Exchange Act) of the
outstanding voting securities of the Company immediately prior to such Business
Combination beneficially own, directly or indirectly, securities representing
more than fifty percent (50%) of the total voting power of the then outstanding
voting securities of the entity resulting from such Business Combination (or
such assets as the case may be) or the parent of such entity in substantially
the same proportionate ownership as in effect immediately prior to the Business
Combination (the “Resulting Entity”); and (B) a majority of the members of
the board of directors or other governing body of the Resulting Entity were
members of the Board at the
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3
time of the execution of the initial agreement, or at the time of the action
of
the Board, providing for such Business Combination; or
(iii) the
consummation of a plan of complete liquidation or dissolution of the Company;
or
(iv) if
and when Allen shall no longer have the power to appoint a majority of the
Board, during any period of two (2) consecutive calendar years, individuals
who
either (A) at the beginning of such period are members of the Board ("Incumbent
Directors"), or (B) whose election to the Board during such period is approved
by a vote of the majority of those members of the Board who are Incumbent
Directors at the time of such approval, whereupon such individual so approved
shall be treated as an Incumbent Director with respect to future approvals,
cease for any reason to constitute a majority of the Board.
Notwithstanding
the foregoing subsections 1(f)(i) through (iii), a Change of Control shall
not include any transaction or series of transactions, including any
transactions described above if, following such transaction or transactions, (x)
Allen has the largest percentage ownership of the voting securities in the
Company or any successor or surviving corporation held by any Person (other
than any Person that includes Allen), provided such percentage ownership is
more
than twenty-five percent or (y) Allen has the power to appoint a majority of
the
members of the Board of Directors.
For
purposes of this definition, (A) at all times that Allen is or are the
“beneficial owner(s)” (as determined for purposes of Regulation 13D-G, as
currently in effect, of the Exchange Act) of securities representing in the
aggregate at least fifty percent (50%) of the total voting power of all of
the
Company’s then outstanding voting securities, “Applicable Percentage” means
fifty percent (50%); and (B) at all times that Allen is or are the beneficial
owner(s) of securities representing in the aggregate less than fifty percent
(50%) of the total voting power of all of the Company’s then outstanding voting
securities, “Applicable Percentage” means any percentage that is more than the
greater of (1) the percentage of the total voting power of all of the Company’s
then outstanding voting securities represented by securities beneficially owned
by Allen or (2) twenty-five percent (25%).
(g) “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to
time.
(h) “Committee”
shall mean either the Compensation and Benefits Committee of the Board, or
a
Subcommittee of such Committee duly appointed by the Board or the
Committee.
(i) “Company”
shall have the meaning set forth in the preamble hereto.
(j) “Company
Stock” shall mean the $.10 par value common stock of the Company.
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(k) “Date
of Termination” shall mean (i) if Executive’s employment is terminated by
Executive’s death, the date of Executive’s death and (ii) if Executive’s
employment is terminated pursuant to Section 14(a)(ii) – (vi), the date of
termination of employment, as defined in 409(A) regulations under the
Code.
(l) For
purposes of this Agreement, Executive will be deemed to have a “Disability” if,
due to illness, injury or a physical or medically recognized mental condition,
(a) Executive is unable to perform Executive’s duties under this Agreement with
reasonable accommodation for 120 consecutive days, or 180 days during any twelve
month period, as determined in accordance with this Section, or (b) Executive
is
considered disabled for purposes of receiving / qualifying for long term
disability benefits under any group long term disability insurance plan or
policy offered by Company in which Executive participates. The
Disability of Executive will be determined by a medical doctor selected by
written agreement of Company and Executive upon the request of either party
by
notice to the other, or (in the case of and with respect to any applicable
long
term disability insurance policy or plan) will be determined according to the
terms of the applicable long term disability insurance policy /
plan. If Company and Executive cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two
medical doctors will select a third medical doctor who will determine whether
Executive has a Disability. The determination of the medical doctor
selected under this Section will be binding on both
parties. Executive must submit to a reasonable number of examinations
by the medical doctor making the determination of Disability under this Section,
and to other specialists designated by such medical doctor, and Executive hereby
authorizes the disclosure and release to Company of such determination and
all
supporting medical records. If Executive is not legally competent,
Executive’s legal guardian or duly authorized attorney-in-fact will act in
Executive’s stead under this Section for the purposes of submitting Executive to
the examinations, and providing the authorization of disclosure, required under
this Section.
(m) “Executive”
shall have the meaning set forth in the preamble hereto.
(n) “Good
Reason” shall mean any of the events described herein that occur without
Executive's prior written consent: (i) any reduction in Executive’s Annual Base
Salary, Target Bonus Percentage, or title except as permitted hereunder, (ii)
any failure to pay Executive's compensation hereunder when due; (iii) any
material breach by the Company of a term hereof; (iv) relocation
of Executive’s primary workplace to a location that is more
than fifty (50) miles from the office where Executive is then
assigned to work as Executive’s principal office; (v) a transfer or reassignment
to another executive of material responsibilities that have been assigned to
Executive (and were not identified by the Company to be assigned only on an
interim basis at the time of assignment or thereafter) and generally are part
of
the responsibilities and functions assigned to a Chief Financial Officer of
a public corporation or (vi) any change in reporting structure such that
Executive no longer reports directly to the "Chief Executive Officer (or
equivalent position, if there is no Chief Executive Officer)" (in each case
“(i)” through “(vi)” only if Executive objects in writing within 30 days after
being informed of such events and unless Company retracts and/or rectifies
the
claimed Good Reason within 30 days following Company’s receipt of timely written
objection from Executive); (vii) if within six months after a Change of Control,
Executive has not received an offer from the surviving company to continue
in
his or her position immediately prior to such Change of Control under at least
the same terms and conditions
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(except
that the value of equity-based compensation after such Change of Control
need
only be commensurate with the value of equity-based compensation given to
executives with equivalent positions in the surviving company, if any)as
set
herein; (viii) the Company's decision not to renew this Agreement at the
end of
its term, or (ix) the failure of a successor to the business of the Company
to
assume the Company's obligations under this Agreement in the event of a Change
of Control during its term.
(o) “Notice
of Termination” shall have the meaning set forth in Section 14(b).
(p) “Options”
shall have the meaning set forth in Section 7
(q) “Performance
Unit” and “Performance Shares” shall have the meaning set forth in Section 9
hereof.
(r) “Person”
shall have the meaning set forth in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934.
(s) “Plan”
shall mean the 2001 Stock Incentive Plan as amended by the Company from time
to
time.
(s) “Restricted
Shares” shall have the meaning set forth in Section 8.
(t) “Term”
shall have the meaning set forth in Section 2.
(u) "Voluntary"
and "Voluntarily" in connection with Executive's termination of employment
shall
mean a termination of employment resulting from the initiative of the Executive,
excluding a termination of employment attributable to Executive's death or
Disability. A resignation by Executive that is in response to a
communicated intent by the Company to discharge Executive other than for Cause
is not considered to be "Voluntary" and shall be considered to be a termination
by the Company for the purposes of this Agreement.
2.
Employment
Term. The
Company hereby employs the Executive, and the Executive hereby accepts his
employment, under the terms and conditions hereof, for the period (the
“Term”) beginning on the Effective Date hereof and terminating upon the
earlier of (i) April 30, 2010 (the “Initial Term”) and (ii) the Date
of Termination as defined in Section 1(k), and, if not terminated earlier,
will
be automatically renewed at the end of its Initial Term and on each anniversary
thereafter for a period of one (1) year unless either party shall give written
notice of cancellation to the other party not later than ninety (90) days prior
to the end of the Initial Term or anniversaries thereof.
3. Position
and Duties. Executive
shall serve as Executive Vice President and Chief Financial
Officer reporting to the Chief Executive Officer, with such
responsibilities, duties and authority as are customary for such role,
including, but not limited to, overall management responsibility for financial
reporting in the Company. Executive shall devote all necessary
business time and attention, and employ Executive’s reasonable best efforts,
toward the fulfillment and execution of all assigned duties, and the
satisfaction of defined annual and/or longer-term performance
criteria.
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4. Place
of Performance. In connection with Executive’s
employment during the Term, Executive's initial primary workplace shall be
the
Company’s offices in or near St. Louis, MO except for necessary travel on
the Company’s business.
5. Annual
Base Salary. During the
Term, Executive shall receive a base salary at a rate not less than
$515,000.00 per annum (the “Annual Base Salary”), less standard
deductions, paid in accordance with the Company’s general payroll practices for
executives, but no less frequently than monthly. The Annual Base
Salary shall compensate Executive for any official position or directorship
of a
subsidiary or affiliate that Executive is asked to hold in the Company or its
subsidiaries or affiliates as a part of Executive’s
employment responsibilities. No less frequently than annually
during the Term, the Committee, on advice of the Company’s Chief Executive
Officer, shall review the rate of Annual Base Salary payable to Executive,
and
may, in its discretion, increase the rate of Annual Base Salary payable
hereunder; provided, however, that any increased rate shall thereafter
be the rate of “Annual Base Salary” hereunder.
6. Bonus. Except
as otherwise provided for herein, for each fiscal year or other period
consistent with the Company’s then-applicable normal employment practices during
which Executive is employed hereunder on the last day (the “Bonus Year”),
Executive shall be eligible to receive a bonus in an amount up to 70 % of
Executive’s Annual Base Salary (the “Bonus” and bonuses at such
percentage of Annual Base Salary being the “Target Bonus”) pursuant to,
and as set forth in, the terms of the Executive Bonus Plan as such Plan may
be
amended from time to time, plus such other bonus payments, if any, as shall
be
determined by the Committee in its sole discretion, with such Bonus being paid
on or before February 28 of the year next following the Bonus Year, or as soon
as is administratively practicable thereafter (e.g., after the public disclosure
of the Company’s financial results for the prior year on SEC Form 10-K or on
such replacement form as the SEC shall determine, for those years as the
Company’s securities are traded publicly, and the Company’s annual financial
results are reported to the shareholders, for those (if any) years as the
Company’s securities are not traded publicly).
7.
Stock Options. The Company has previously
granted to Executive options to purchase shares of Company Stock as set forth
in
Exhibit A hereto, and may, in the Committee’s discretion, grant to Executive
additional options to purchase shares of Company Stock (all of such options,
collectively, the “Options”) pursuant to the terms of the Plan, any
successor plan and an associated Stock Option Agreement.
8.
Restricted Shares. The Company has previously
granted to Executive Restricted Shares of Company Stock as set forth in Exhibit
A hereto, and may, in the Committee’s discretion, grant to Executive Restricted
Shares (collectively, the “Restricted Shares”), which shall be subject to
restrictions on their sale as set forth in the Plan and an associated Restricted
Shares Grant Letter.
9.
Performance Shares Units. The Company
has previously granted to Executive Performance Share Units of which some have
been converted into Performance Shares (which are not aggregated in the forgoing
description of Restricted Shares) as set forth in Exhibit A hereto, and may,
in
the Committee’s discretion, grant to Executive further Performance Share Units
(collectively, the “Performance Units”), which shall be subject to
restrictions on their sale as set forth in the Plan and an associated
Performance Unit Grant Letter.
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10.
Executive Cash Bonus Plan. Executive
currently is a participant in the Company’s 2005 Executive Cash Award Plan with
a Plan Award (as defined in such Plan) as set forth in Exhibit B and shall
remain a participant in such Plan under the terms therefore for the term of
this
Agreement.
11.
Benefits. Executive shall be entitled
to receive such benefits and to participate in such employee group benefit
plans, including life, health and disability insurance policies, and financial
planning services, and other perquisites and plans as are generally provided
by
the Company to its senior executives of comparable level and responsibility
in
accordance with the plans, practices and programs of the Company, as amended
from time to time.
12. Expenses. The
Company shall reimburse Executive for all reasonable and necessary expenses
incurred by Executive in connection with the performance of Executive’s duties
as an employee of the Company in accordance with the Company’s generally
applicable policies and procedures. Such reimbursement is subject to
the submission to the Company by Executive of appropriate documentation and/or
vouchers in accordance with the customary procedures of the Company for expense
reimbursement, as such procedures may be revised by the Company from time to
time hereafter.
13.
Vacations. Executive shall be entitled
to paid vacation in accordance with the Company’s vacation policy as in effect
from time to time provided that, in no event shall Executive be
entitled to less than three (3) weeks vacation per calendar
year. Executive shall also be entitled to paid holidays and personal
days in accordance with the Company’s practice with respect to same as in effect
from time to time.
14.
Termination.
(a) Executive’s
employment hereunder may be terminated by the Company, on the one hand, or
Executive, on the other hand, as applicable, without any breach of this
Agreement, under the following circumstances:
(i) Death. Executive’s
employment hereunder shall automatically terminate upon Executive’s
death.
(ii)
Disability. If Executive has incurred a
Disability, the Company may give Executive written notice of its intention
to
terminate Executive’s employment. In such event, Executive’s
employment with the Company shall terminate effective on the 14th day after
delivery of such notice to Executive, provided that within the 14 days
after such delivery, Executive shall not have returned to full-time performance
of Executive’s duties. Executive may provide notice to the Company of
Executive's resignation on account of a bona fide Disability at any
time.
(iii) Cause. The
Company may terminate Executive’s employment hereunder for Cause effectively
immediately upon delivery of notice to Executive, taking into account any
procedural requirements set forth under Section 1(e) above.
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(iv) Good
Reason. Executive may terminate Executive’s employment herein for
Good Reason upon (i) satisfaction of any advance notice and other procedural
requirements set forth under Section 1(n) above for any termination pursuant
to
Section 1(n)(i) through (vi) or (ii) at least 30 days’ advance written notice by
the Executive for any termination pursuant to Section 1(n)(vii) through
(ix).
(v) Without
Cause. The Company may terminate Executive’s employment hereunder
without Cause upon at least 30 days’ advance written notice to the
Executive.
(vi) Resignation
Without Good Reason. Executive may resign Executive’s employment
without Good Reason upon at least fourteen (14) days’ written notice to the
Company.
(b) Notice
of Termination. Any termination of Executive’s employment by the
Company or by Executive under this Section 14 (other than pursuant to Sections
14(a)(i)) shall be communicated by a written notice (the “Notice of
Termination”) to the other party hereto, indicating the specific termination
provision in this Agreement relied upon, setting forth in reasonable detail
any
facts and circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so indicated, and specifying a Date
of Termination which notice shall be delivered within the applicable time
periods set forth in subsections 14(a)(ii)-(vi) above ( the “Notice
Period”); provided that the Company may pay to
Executive all Annual Base Salary, benefits and other rights due to Executive
during such Notice Period instead of employing Executive during such Notice
Period.
(c) Resignation
from Representational Capacities. Executive hereby acknowledges
and agrees that upon Executive's termination of employment with the Company
for
whatever reason, [s]he shall be deemed to have, and shall have in fact,
effectively resigned from all executive, director or other positions with the
Company or its affiliates at the time of such termination of employment, and
shall return all property owned by the Company and in Executive’s possession,
including all hardware, files and documents, at that time.
(d) Termination
in Connection with Change in Control. If Executive’s employment
is terminated by the Company without Cause either upon or within thirty days
before or thirteen (13) months after a Change of Control, or prior to a Change
in Control at the request of a prospective purchaser whose proposed purchase
would constitute a Change in Control upon its completion, such termination
shall
be deemed to have occurred immediately before such Change in Control for
purposes of this Agreement and the Plan.
15. Termination
Pay
(a) Effective
upon the termination of Executive’s employment, Company will be obligated to pay
Executive (or, in the event of Executive’s death, the Executive’s designated
beneficiary as defined below) only such compensation as is provided in this
Section 15, except to the extent otherwise provided for in any Company stock
incentive, stock option or cash award plan (including, among others, the Plan),
approved by the Board. For purposes of this Section 15, Executive’s
designated beneficiary will be such individual beneficiary or trust, located
at
such address, as Executive may designate by notice to Company from time to
time
or, if Executive fails to
9
give
notice to Company of such a beneficiary, Executive’s
estate. Notwithstanding the preceding sentence, Company will have no
duty, in any circumstances, to attempt to open an estate on behalf of Executive,
to determine whether any beneficiary designated by Executive is alive or to
ascertain the address of any such beneficiary, to determine the existence of
any
trust, to determine whether any person purporting to act as Executive’s personal
representative (or the trustee of a trust established by Executive) is duly
authorized to act in that capacity, or to locate or attempt to locate any
beneficiary, personal representative, or trustee.
(b) Termination
by Executive for Good Reason or by Company without Cause.
If prior to expiration of the Term, Executive terminates his or her
employment for Good Reason, or if the Company terminates Executive’s
employment other than for Cause or Executive’s death or Disability, Executive
will be entitled to receive, subject to the conditions of this Agreement, the
following:
(i) (A)
all Annual Base Salary and Bonus duly payable under the applicable plan for
performance periods ending prior to the Date of Termination, but unpaid as
of
the Date of Termination, plus (B) in consideration for Executive’s obligations
set forth in Section 19 hereof, an amount equal to two (2) times the Executive’s
then-current rate of Annual Base Salary and Target Bonus, which total sum shall
be payable following the Date of Termination in fifty-two (52) equal bi-weekly
installments in accordance with the Company’s normal payroll practices
provided that, if a Change of Control occurs (or is deemed pursuant to
Sec. 14(d) hereof to have occurred after such termination) during such
twenty-four (24) month period (and such Change of Control qualifies either
as a
“change in the ownership or effective control” of the Company or a “change in
the ownership of a substantial portion of the assets” of the Company as such
terms are defined under Section 409A of the Code), any amounts remaining
payable to Executive hereunder shall be paid in a single lump sum immediately
upon such Change of Control.
(ii) if
Executive’s employment is terminated by the Company without Cause either
upon or within thirty days before or thirteen (13) months after a Change of
Control, or prior to a Change in Control at the request of a prospective
purchaser whose proposed purchase would constitute a Change in Control upon
its
completion, the Company shall treat as earned all unvested Performance Units
for
which the performance term has not expired as of such Change of Control at
the
rate calculated pursuant to the Plan and the applicable Grant Letter, and shall
immediately convert those Units into Restricted Shares and accelerate as of
the
Date of Termination the removal of restrictions on such shares.
(iii) all
reasonable expenses Executive has incurred in the pursuit of Executive’s duties
under this Agreement through the Date of Termination which are payable under
and
in accordance with this Agreement, which amount will be paid within thirty
(30)
days after the submission by Executive of properly completed reimbursement
requests on the Company’s standard forms;
(iv) a
lump sum payment (net after deduction of taxes and other required withholdings)
equal to twenty-four (24) times the monthly cost, at the time Executive’s
employment terminated, for Executive to receive under COBRA the paid coverage
for
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health,
dental and vision benefits then being provided for Executive at the Company’s
cost at the time Executive’s employment terminated. This amount will
be paid at the same
time the payment is made under Section 15(b)(i) and will not take into
account future increases in costs during the applicable time period;
and
(v) notwithstanding
anything to the contrary in any award agreement, Executive shall be deemed
to be
actively employed during the twenty-four (24) month period following termination
of employment for purposes of vesting of all stock options, performance units
and restricted stock; provided that if a Change of Control
occurs (or is deemed pursuant to Sec. 14(d) hereof to have occurred after such
termination) within such period, all remaining stock options that would
have vested in the twenty-four (24) month period shall vest, and all remaining
restricted stock and performance units whose restrictions would have lapsed
in
the twenty-four (24) month period shall have their restrictions
lapse immediately upon such Change of Control; provided, however, that with
respect to any equity-based compensation awards subject to Section 409A of
the
Code (as determined by independent tax counsel retained by the Company), vesting
and/or the lapse of restrictions will only be accelerated if such Change of
Control qualifies either as a “change in the ownership or effective control” of
the Company or a “change in the ownership of a substantial portion of the
assets” of the Company as such terms are defined under Section 409A of the Code,
or the first subsequent time at which such distribution may be made in
compliance with Section 409A of the Code; and
(vi)
pay the cost of up to twelve (12) months, as required, of executive-level
out-placement services (which provides as part of the outplacement the use
of an
office and secretarial support as near as reasonably practicable to Executive’s
residence).
provided,
however, any of the benefits described in Section 15(b)(i) through (vi)
that are due to be paid or awarded during the first six (6) months after the
Date of Termination shall, to the extent required to avoid the tax consequences
of Section 409A of the Code as determined by independent tax counsel, be
suspended and paid after the six (6) month anniversary of Executive’s Date of
Termination.
(c) The
Executive shall not be required to mitigate the amount of any payments provided
in Section 15, by seeking other employment or otherwise, nor shall the amount
of
any payment provided for in this Section 15 be reduced by any compensation
earned by Executive as a result of employment by another company or business,
or
by profits earned by Employee from any other source at any time before or after
the date of Termination, so long as Executive is not in breach of the
Agreement.
(d) Termination
by Executive without Good Reason or by Company for Cause. If
prior to the expiration of the Term or thereafter, Executive Voluntarily
terminates Executive’s employment prior to expiration of the Term without Good
Reason or if Company terminates this Agreement for Cause, Executive will be
entitled to receive Executive’s then-existing Annual Base Salary only through
the date such termination is effective and will be reimbursed for all reasonable
expenses Executive has incurred in the pursuit of Executive’s duties under this
Agreement through the date of termination which are payable under and in
accordance with this Agreement; any
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11
unvested
options and shares of restricted stock shall terminate as of the date of
termination unless otherwise provided for in any applicable plan or award
agreement; and Executive shall be entitled to no other compensation, bonus,
payments or benefits except as expressly provided in this
paragraph.
(e) Termination
upon Disability or Death. If Executive’s employment shall
terminate by reason of Executive’s Disability (pursuant to Section 14(a)(ii)) or
death (pursuant to Section 14(a)(i)), the Company shall pay to Executive, in
a
lump sum cash payment as soon as practicable following the Date of Termination,
all unpaid Annual Base Salary and Bonus previously earned for a performance
period ending prior to the Date of Termination, but unpaid as of the Date of
Termination, and the pro rata portion of their Bonus for such year
(when and as paid to other senior executives of the Company) for the Performance
Period in which the termination occurred. In the case of Disability,
if there is a period of time during which Executive is not being paid Annual
Base Salary and not receiving long-term disability insurance payments, the
Company shall make interim payments equal to such unpaid disability insurance
payments to Executive until commencement of disability insurance payments;
provided that, to the extent required to avoid the tax consequences of
Section 409A of the Code, as determined by independent tax counsel, the first
payment shall cover all payments scheduled to be made to Executive during the
first six (6) months after the date Executive’s employment terminates, and the
first such payment shall be delayed until the day that is six (6) months after
the date Executive’s employment terminates.
(f) Benefits.
Except as otherwise required by law, Executive’s accrual of, and participation
in plans providing for, the Benefits will cease at the effective Date of the
Termination of employment.
(g) Conditions
To Payments. To be eligible to receive (and continue to receive) and retain
the payments and benefits described in Sections 15(b)(i) and 15(e), Executive
must comply with the provisions of Sections 17, 18 and 19. In
addition, to be eligible to receive (and continue to receive) and retain the
payments and benefits described in Sections 15(b) and 15(e) Executive (or
Executive’s executor and personal representatives in case of death) must first
execute and deliver to Company, and comply with, an agreement, in form and
substance reasonably satisfactory to Company, effectively releasing and giving
up all claims Executive may have against Company or any of its subsidiaries
or
affiliates (and each of their respective controlling shareholders, employees,
directors, officers, plans, fiduciaries, insurers and agents) arising out of
or
based upon any facts or conduct occurring prior to that date. The agreement
will
be prepared by Company, will be based upon the standard form (if any) then
being
utilized by Company for executive separations when severance is being paid,
and
will be provided to Executive at the time Executive’s employment is terminated
or as soon as administratively practicable thereafter (not to exceed five (5)
business days). The agreement will require Executive to consult with
Company representatives, and voluntarily appear as a witness for trial or
deposition (and to prepare for any such testimony) in connection with, any
claim
which may be asserted by or against Company, any investigation or administrative
proceeding, any matter relating to a franchise, or any business matter
concerning Company or any of its transactions or operations. A copy
of the standard form release being used by Company as of the date of this
agreement for executive separations when severance is being paid is attached
to
this Agreement as Exhibit C. It is understood that the final
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12
document may not contain provisions specific to the release of a federal
age
discrimination claim if Executive is not at least forty (40) years of age,
and
may be changed as Company’s
chief legal counsel considers necessary and appropriate to enforce the same,
including provisions to comply with changes in applicable laws and recent
court
decisions. Payments
under and/or benefits provided by Section 15 will not be made unless and
until
Executive executes and delivers that agreement to Company within twenty-one
(21)
days after delivery
of the document (or such lesser time as Company’s chief legal counsel may
specify in the document) and all conditions to the effectiveness of that
agreement and the releases
contemplated thereby have been satisfied (including without limitation the
expiration of any applicable revocation period without revoking
acceptance).
(h) Survival. The
expiration or termination of the Term shall not impair the rights or obligations
of any party hereto which shall have accrued hereunder prior to
such
expiration, subject to the terms of any agreement containing a general
release provided by Executive.
16. Excess
Parachute Payment.
(a) Anything
in this Agreement or the Plan to the contrary notwithstanding, to the extent
that any payment, distribution or acceleration of vesting to or for the benefit
of Executive by the Company (within the meaning of Section 280G of the Code
and
the regulations thereunder), whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the "Total
Payments") is or will be subject to the excise tax imposed under Section 4999
of
the Code (the "Excise Tax"), then the Total Payments shall be reduced (but
not
below zero) to the Safe Harbor Amount (as defined below) if and to the extent
that a reduction in the Total Payments would result in Executive retaining
a
larger amount, on an after-tax basis (taking into account federal, state and
local income and employment taxes and the Excise Tax), than if Executive
received the entire amount of such Total Payments in accordance with their
existing terms (taking into account federal, state, and local income and
employment taxes and the Excise Tax). For purposes of this
Agreement, the term “Safe Harbor Amount” means the largest portion of the Total
Payments that would result in no portion of the Total Payments being subject
to
the Excise Tax. Unless Executive shall have given prior written
notice specifying a different order to the Company to effectuate the foregoing,
the Company shall reduce or eliminate the Total Payments, by first reducing
or
eliminating the portion of the Total Payments which are payable in cash and
then
by reducing or eliminating non-cash payments in such order as Executive shall
determine; provided that Executive may not so elect to the extent that, in
the
determination of the Determining Party (as defined herein), such election would
cause Executive to be subject to the Excise Tax. Any notice given by
Executive pursuant to the preceding sentence shall take precedence over the
provisions of any other plan, arrangement or agreement governing Executive's
rights and entitlements to any benefits or compensation.
(b) The
determination of whether the Total Payments shall be reduced as provided in
Section 16(a) and the amount of such reduction shall be made at the Company's
expense by an accounting firm selected by Company from among the ten largest
accounting firms in the United States or by qualified independent tax counsel
(the “Determining Party”); provided that Executive shall be given
advance notice of the Determining Party selected by the Company, and shall
have
the opportunity to reject to the selection, within two business days of
being notified of the selection,
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13
on
the
basis of that Determining Party’s having a conflict of interest or other
reasonable basis, in which case the Company shall select an
alternative auditing firm among the ten largest accounting firms in
the United States or alternative independent qualified tax counsel, which shall
become the Determining Party. Such Determining Party shall provide
its determination (the "Determination"), together with detailed supporting
calculations and documentation to the Company and Executive within ten (10)
days
of the termination of Executive’s employment or at such other time mutually
agreed by the Company and Executive. If the Determining Party
determines that no Excise Tax is payable by Executive with respect to the Total
Payments, it shall furnish Executive with an opinion reasonably acceptable
to
Executive that no Excise Tax will be imposed with respect to any such payments
and, absent manifest error, such Determination shall be binding, final and
conclusive upon the Company and Executive. If the Determining Party
determines that an Excise Tax would be payable, the Company shall have the
right
to accept the Determination as to the extent of the reduction, if any, pursuant
to Section 16(a), or to have such Determination reviewed by another accounting
firm selected by the Company, at the Company’s expense. If the two
accounting firms do not agree, a third accounting firm shall be jointly chosen
by the Executive Party and the Company, in which case the determination of
such
third accounting firm shall be binding, final and conclusive upon the Company
and Executive.
(c) If,
notwithstanding any reduction described in this Section 16, the IRS determines
that Executive is liable for the Excise Tax as a result of the receipt of any
of
the Total Payments or otherwise, then Executive shall be obligated to pay back
to the Company, within thirty (30) days after a final IRS determination or
in
the event that Executive challenges the final IRS determination, a final
judicial determination, a portion of the Total Payments equal to the “Repayment
Amount.” The Repayment Amount with respect to the payment of benefits
shall be the smallest such amount, if any, as shall be required to be paid
to
the Company so that Executive’s net after-tax proceeds with respect to the Total
Payments (after taking into account the payment of the Excise Tax and all other
applicable taxes imposed on the Payment) shall be maximized. The
Repayment Amount shall be zero if a Repayment Amount of more than zero would
not
result in Executive’s net after-tax proceeds with respect to the Total Payments
being maximized. If the Excise Tax is not eliminated pursuant to this
paragraph, the Executive shall pay the Excise Tax.
(d) Notwithstanding
any other provision of this Section 16, if (i) there is a reduction in the
Total
Payments as described in this Section 16, (ii) the IRS later determines that
Executive is liable for the Excise Tax, the payment of which would result in
the
maximization of Executive’s net after-tax proceeds (calculated as if Executive’s
benefits had not previously been reduced), and (iii) Executive pays the
Excise Tax, then the Company shall pay to Executive those payments or benefits
which were reduced pursuant to this Section 16 as soon as administratively
possible after Executive pays the Excise Tax so that Executive’s net after-tax
proceeds with respect to the Total Payments are maximized.
17. Competition/Confidentiality.
(a) Acknowledgments
by Executive. Executive acknowledges that (a) during the Term and
as a part of Executive’s employment, Executive has been and will be afforded
access to Confidential Information (as defined below); (b) public disclosure
of
such Confidential Information could have an adverse effect on the Company and
its business; (c) because Executive
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14
possesses
substantial technical expertise and skill with respect to the Company’s
business, Company desires to obtain exclusive ownership of each invention
by
Executive while Executive is employed by the Company, and Company will be
at a
substantial competitive disadvantage if it fails to acquire exclusive ownership
of each such invention by Executive; and (d) the provisions of this Section
17
are reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide Company with exclusive ownership
of all
inventions and works made or created by Executive.
(b) Confidential
Information. (i) The Executive acknowledges that during the Term
Executive will have access to and may obtain, develop, or learn of Confidential
Information (as defined below) under and pursuant to a relationship of trust
and
confidence. The Executive shall hold such Confidential Information in
strictest confidence and never at any time, during or after Executive’s
employment terminates, directly or indirectly use for Executive’s own benefit or
otherwise (except in connection with the performance of any duties as an
employee hereunder) any Confidential Information, or divulge, reveal, disclose
or communicate any Confidential Information to any unauthorized person or entity
in any manner whatsoever.
(ii) As
used in this Agreement, the term “Confidential Information” shall
include, but not be limited to, any of the following information relating to
Company learned by the Executive during the Term or as a result of Executive’s
employment with Company:
(A) information
regarding the Company’s business proposals, manner of the Company’s operations,
and methods of selling or pricing any products or services;
(B) the
identity of persons or entities actually conducting or considering conducting
business with the Company, and any information in any form relating to such
persons or entities and their relationship or dealings with the Company or
its
affiliates;
(C) any
trade secret or confidential information of or concerning any business operation
or business relationship;
(D) computer
databases, software programs and information relating to the nature of the
hardware or software and how said hardware or software is used in combination
or
alone;
(E) information
concerning Company personnel, confidential financial information, customer
or
customer prospect information, information concerning subscribers, subscriber
and customer lists and data, methods and formulas for estimating costs and
setting prices, engineering design standards, testing procedures, research
results (such as marketing surveys, programming trials or product trials),
cost
data (such as billing, equipment and programming cost projection models),
compensation information and models, business or marketing plans or strategies,
deal or business terms, budgets, vendor names, programming operations, product
names, information on proposed acquisitions or dispositions, actual performance
compared to budgeted performance, long-range plans, internal financial
information (including but not limited to financial and operating results for
certain offices, divisions, departments, and key market areas that are not
disclosed to the public in such form), results of
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internal
analyses, computer programs and programming information, techniques and designs,
and trade secrets;
(F) information
concerning the Company’s employees, officers, directors and shareholders;
and
(G) any
other trade secret or information of a confidential or proprietary
nature.
(iii) Executive
shall not make or use any notes or memoranda relating to any Confidential
Information except for uses reasonably expected by Executive to be for the
benefit of the Company, and will, at Company’s request, return each original and
every copy of any and all notes, memoranda, correspondence, diagrams or other
records, in written or other form, that Executive may at any time have within
his possession or control that contain any Confidential
Information.
(iv) Notwithstanding
the foregoing, Confidential Information shall not include information which
has
come within the public domain through no fault of or action by Executive or
which has become rightfully available to Executive on a non-confidential basis
from any third party, the disclosure of which to Executive does not violate
any contractual or legal obligation such third party has to the Company or
its
affiliates with respect to such Confidential Information. None of the
foregoing obligations and restrictions applies to any part of the Confidential
Information that Executive demonstrates was or became generally available to
the
public other than as a result of a disclosure by Executive or by any other
person bound by a confidentiality obligation to the Company in respect of such
Confidential Information.
(v) Executive
will not remove from the Company’s premises (except to the extent such removal
is for purposes of the performance of Executive’s duties at home or while
traveling, or except as otherwise specifically authorized by Company) any
Company document, record, notebook, plan, model, component, device, or computer
software or code, whether embodied in a disk or in any other form (collectively,
the “Proprietary Items”). Executive recognizes that, as
between Company and Executive, all of the Proprietary Items, whether or not
developed by Executive, are the exclusive property of the
Company. Upon termination of Executive’s employment by either party,
or upon the request of Company during the Term, Executive will return to Company
all of the Proprietary Items in Executive’s possession or subject to Executive’s
control, including all equipment (e.g., laptop computers, cell phone,
portable e-mail devices, etc.), documents, files and data, and Executive shall
not retain any copies, abstracts, sketches, or other physical embodiment of
any
such Proprietary Items.
18. Proprietary
Developments.
(a) Any
and all inventions, products, discoveries, improvements, processes, methods,
computer software programs, models, techniques, or formulae (collectively,
hereinafter referred to as “Developments”), made, conceived, developed,
or created by Executive (alone or in conjunction with others, during regular
work hours or otherwise) during Executive’s employment, which may be
directly or indirectly useful in, or relate to, the business conducted or to
be
conducted by the Company will be promptly disclosed by Executive to
Company and shall be Company’s exclusive property. The term
“Developments” shall not be deemed to include
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16
inventions,
products, discoveries, improvements, processes, methods, computer software
programs, models, techniques, or formulae which were in the possession of
Executive prior to the Term. Executive hereby transfers and assigns
to Company all proprietary rights which Executive may have or acquire in
any
Developments and Executive waives any other special right which the Executive
may have or accrue therein. Executive will execute any documents and
to take any actions that may be required, in the reasonable determination
of
Company’s counsel, to effect and confirm such assignment, transfer and waiver,
to direct the issuance of patents, trademarks, or copyrights to Company with
respect to such Developments as are to be Company’s exclusive property or to
vest in Company title to such Developments; provided, however, that the expense
of securing any patent, trademark or copyright shall be borne by Company.
The
parties agree that Developments shall constitute Confidential
Information.
(b) “Work
Made for Hire.” Any work performed by Executive during
Executive’s employment with Company shall be considered a “Work Made for
Hire” as defined in the U.S. Copyright laws, and shall be owned by and for
the express benefit of Company. In the event it should be established
that such work does not qualify as a Work Made for Hire, Executive agrees to
and
does hereby assign to Company all of Executive’s right, title, and interest in
such work product including, but not limited to, all copyrights and other
proprietary rights.
19. Non-Competition
and Non-Interference.
(a) Acknowledgments
by Executive. Executive acknowledges and agrees that: (a) the
services to be performed by Executive under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Company
competes with other businesses that are or could be located in any part of
the
United States; and (c) the provisions of this Section 19 are reasonable and
necessary to protect the Company’s business and lawful protectable interests,
and do not impair Executive’s ability to earn a living.
(b) Covenants
of Executive. For purposes of this Section 19, the term
“Restricted Period” shall mean the period commencing as of the date of
this Agreement and terminating on the second anniversary (or, in the case of
Section 19(b)(i), the first anniversary), of the date Executive’s employment
terminated provided that the “Restricted Period” also shall encompass
any period of time from whichever anniversary date is applicable until and
ending on the last date Executive is to be paid any payment under Section 15
hereof. In consideration of the acknowledgments by Executive, and in
consideration of the compensation and benefits to be paid or provided to
Executive by Company, Executive covenants and agrees that during the Restricted
Period, the Executive will not, directly or indirectly, for Executive’s own
benefit or for the benefit of any other person or entity other than the
Company:
(i) in
the United States or any other country or territory where the Company then
conducts its business: engage in, operate, finance, control or be employed
by a
“Competitive Business” (defined below); serve as an officer or director of a
Competitive Business (regardless of where Executive then lives or conducts
such
activities); perform any work as an employee, consultant (other than as a member
of a professional consultancy, law firm, accounting firm or similar professional
enterprise that has been retained by the Competitive Business and where
Executive has no direct role in such professional consultancy and maintains
the
confidentiality of
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all
information acquired by Executive during his or her employment with the
Company), contractor, or in any other capacity with, a Competitive Business;
directly or indirectly invest or own any interest in a Competitive Business
(regardless of where Executive then lives or conducts such activities); or
directly or indirectly provide any services or advice to a any business, person
or entity who or which is engaged in a Competitive Business (other than as
a
member of a professional consultancy, law firm, accounting firm or similar
professional enterprise that has been retained by the Competitive Business
and
where Executive has no direct role in such professional consultancy and
maintains the confidentiality of all information acquired by Executive during
his or her employment with the Company). A “Competitive
Business” is any business, person or entity who or which, anywhere within
that part of the United States, or that part of any other country or territory,
where the Company conducts business; owns or operates a cable television system;
provides direct television or any satellite-based, telephone system-based,
internet based or wireless system for delivering television, music or other
entertainment programming (other than as an ancillary service, such as cellular
telephone providers); provides telephony services using any wired connection
or
fixed (as opposed to mobile) wireless application; provides data or internet
access services; or offers, provides, markets or sells any service or product
of
a type that is offered or marketed by or directly competitive with a service
or
product offered or marketed by the Company at the time Executive’s employment
terminates; or who or which in any case is preparing or planning to do so.
The
provisions of this Section 19 shall not be construed or applied (i) so as to
prohibit Executive from owning not more than five percent (5%) of any class
of
securities that is publicly traded on any national or regional securities
exchange, as long as Executive’s investment is passive and Executive does not
lend or provide any services or advice to such business or otherwise violate
the
terms of this Agreement in connection with such investment; or (ii) so as to
prohibit Executive from working as an employee in the cable television business
for a company/business that owns or operates cable television franchises (by
way
of current example only, Time Warner, Cablevision, Cox or Comcast), provided
that the company/business is not providing cable services in any political
subdivision/ geographic area where the Company has a franchise or provides
cable
services (other than nominal overlaps of service areas) and the company/business
is otherwise not engaged in a Competitive Business, and provided Executive
does
not otherwise violate the terms of this Agreement in connection with that
work;
(ii) contact,
solicit or provide any service to any person or entity that was a customer
franchisee, or prospective customer of the Company at any time during
Executive’s employment (a prospective customer being one to whom the Company had
made a business proposal within twelve (12) months prior to the time Executive’s
employment terminated); or directly solicit or encourage any customer,
franchisee or subscriber of the Company to purchase any service or product
of a
type offered by or competitive with any product or service provided by the
Company, or to reduce the amount or level of business purchased by such
customer, franchisee or subscriber from the Company; or take away or procure
for
the benefit of any competitor of the Company, any business of a type provided
by
or competitive with a product or service offered by the Company; or
(iii) solicit
or recruit for employment, any person or persons who are employed by Company
or
any of its subsidiaries or affiliates, or who were so employed at any time
within a period of six (6) months immediately prior to the date Executive’s
employment terminated, or
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otherwise
interfere with the relationship between any such person and the Company; nor
will the Executive assist anyone else in recruiting any such employee to work
for another company or business or discuss with any such person his or her
leaving the employ of the Company or engaging in a business activity in
competition with the Company. This provision shall not apply to secretarial,
clerical, custodial or maintenance employees.
If
Executive violates any covenant contained in this Section 19, then the term
of
the covenants in this Section shall be extended by the period of time Executive
was in violation of the same.
(c) Provisions
Pertaining to the Covenants. Executive recognizes that the
existing business of the Company extends to various locations and areas
throughout the United States and may extend hereafter to other countries and
territories and agrees that the scope of Section 19 shall extend to any part
of
the United States, and any other country or territory, where the Company
operates or conducts business, or has concrete plans to do so at the time
Executive’s employment terminates. It is agreed that the Executive’s
services hereunder are special, unique, unusual and extraordinary giving them
peculiar value, the loss of which cannot be reasonably or adequately compensated
for by damages, and in the event of the Executive’s breach of this Section,
Company shall be entitled to equitable relief by way of injunction or otherwise
in addition to the cessation of payments and benefits hereunder. If
any provision of Sections 17, 18 or 19 of this Agreement is deemed to be
unenforceable by a court (whether because of the subject matter of the
provision, the duration of a restriction, the geographic or other scope of
a
restriction or otherwise), that provision shall not be rendered void but the
parties instead agree that the court shall amend and alter such provision to
such lesser degree, time, scope, extent and/or territory as will grant Company
the maximum restriction on Executive’s activities permitted by applicable law in
such circumstances. Company’s failure to exercise its rights to enforce the
provisions of this Agreement shall not be affected by the existence or non
existence of any other similar agreement for anyone else employed by Company
or
by Company’s failure to exercise any of its rights under any such
agreement.
(d) Notices. In
order to preserve Company’s rights under this Agreement, Company is authorized
to advise any potential or future employer, any third party with whom Executive
may become employed or enter into any business or contractual relationship
with,
and any third party whom Executive may contact for any such purpose, of the
existence of this Agreement and its terms, and Company shall not be
liable for doing so.
(e) Injunctive
Relief and Additional Remedy. Executive acknowledges that the
injury that would be suffered by Company as a result of a breach of the
provisions of this Agreement (including any provision of Sections 17, 18 and
19)
would be irreparable and that an award of monetary damages to Company for such
a
breach would be an inadequate remedy. Consequently, Company will have the
right, in addition to any other rights it may have, to obtain injunctive relief
to restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and Company will not be obligated to post
bond
or other security in seeking such relief. Without limiting Company’s
rights under this Section or any other remedies of Company, if Executive
breaches any of the provisions of Sections 17, 18 or 19, Company will have
the
right to cease making any payments otherwise due to Executive under this
Agreement.
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(f) Covenants
of Sections 17, 18 and 19 are Essential and Independent
Covenants. The covenants by Executive in Sections 17, 18 and 19
are essential elements of this Agreement, and without Executive’s agreement to
comply with such covenants, Company would not have entered into this Agreement
or employed Executive. Company and Executive have independently
consulted their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific
regard to the nature of the business conducted by
Company. Executive’s covenants in Sections 17, 18 and 19 are
independent covenants and the existence of any claim by Executive against
Company, under this Agreement or otherwise, will not excuse Executive’s breach
of any covenant in Section 17, 18 or 19. If Executive’s employment hereunder is
terminated, this Agreement will continue in full force and effect as is
necessary or appropriate to enforce the covenants and agreements of Executive
in
Sections 17, 18 and 19. The Company’s right to enforce the covenants
in Sections 17, 18 and 19 shall not be adversely affected or limited by the
Company’s failure to have an agreement with another employee with provisions at
least as restrictive as those contained in Sections 17, 18 or 19 , or by the
Company’s failure or inability to enforce (or agreement not to enforce) in full
the provisions of any other or similar agreement containing one or more
restrictions of the type specified in Sections 17, 18 and 19 of this
Agreement.
20. Executive’s
Representations And Further
Agreements.
(a) Executive
represents, warrants and covenants to Company that:
(i) Neither
the execution and delivery of this Agreement by Executive nor the performance
of
any of Executive’s duties hereunder in accordance with the Agreement will
violate, conflict with or result in the breach of any order, judgment,
employment contract, agreement not to compete or other agreement or arrangement
to which Executive is a party or is subject;
(ii) On
or prior to the date hereof, Executive has furnished to Company true
and complete copies of all judgments, orders, written employment contracts,
agreements not to compete, and other agreements or arrangements restricting
Executive’s employment or business pursuits, that have current application to
Executive;
(iii) Executive
is knowledgeable and sophisticated as to business matters, including the subject
matter of this Agreement, and that prior to assenting to the terms of this
Agreement, or giving the representations and warranties herein, Executive has
been given a reasonable time to review it and has consulted with counsel of
Executive’s choice; and
(iv) Executive
has not provided, nor been requested by Company to provide, to Company, any
confidential or non public document or information of a former employer that
constitutes or contains any protected trade secret, and will not use any
protected trade secrets in connection with the Executive’s
employment.
(b) During
and subsequent to expiration of the Term, the Executive will cooperate with
Company, and furnish any and all complete and truthful information, testimony
or
affidavits in connection with any matter that arose during the Executive’s
employment, that in any way relates to the business or operations of the Company
or any of its parent or subsidiary corporations or affiliates, or of which
the
Executive may have any knowledge or involvement; and will consult
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with
and
provide information to Company and its representatives concerning such
matters. Executive shall fully cooperate with Company in the
protection and enforcement of any intellectual property rights that relate
to
services performed by Executive for Company, whether under the terms of
this Agreement or prior to the execution of this Agreement. This
shall include without limitation executing, acknowledging, and delivering to
Company all documents or papers that may be necessary to enable Company to
publish or protect such intellectual property rights. Subsequent to
the Term, the parties will make their best efforts to have such cooperation
performed at reasonable times and places and in a manner as not to unreasonably
interfere with any other employment in which Executive may then be
engaged. Nothing in this Agreement shall be construed or interpreted
as requiring the Executive to provide any testimony, sworn statement or
declaration that is not complete and truthful. If Company requires
the Executive to travel outside the metropolitan area in the United States
where
the Executive then resides to provide any testimony or otherwise provide any
such assistance, then Company will reimburse the Executive for any reasonable,
ordinary and necessary travel and lodging expenses incurred by Executive to
do
so provided the Executive submits all documentation required under Company’s
standard travel expense reimbursement policies and as otherwise may be required
to satisfy any requirements under applicable tax laws for Company to deduct
those expenses. Nothing in this Agreement shall be construed or interpreted
as
requiring the Executive to provide any testimony or affidavit that is not
complete and truthful.
21. Mutual
Non-Disparagement. Neither
the Company nor Executive shall make any oral or written statement about the
other party which is intended or reasonably likely to disparage the other party,
or otherwise degrade the other party’s reputation in the business or legal
community or in the telecommunications industry.
22. Foreign
Corrupt Practices Act. Executive
agrees to comply in all material respects with the applicable provisions of
the
U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”), as amended, which
provides generally that: under no circumstances will foreign officials,
representatives, political parties or holders of public offices be offered,
promised or paid any money, remuneration, things of value, or provided any
other
benefit, direct or indirect, in connection with obtaining or maintaining
contracts or orders hereunder. When any representative, employee, agent,
or other individual or organization associated with Executive is required to
perform any obligation related to or in connection with this Agreement, the
substance of this section shall be imposed upon such person and included in
any
agreement between Executive and any such person. Failure by Executive
to comply with the provisions of the FCPA shall constitute a material breach
of
this Agreement and shall entitle the Company to terminate Executive’s employment
for Cause.
23. Purchases
and Sales of the Company’s
Securities. Executive
has read and agrees to comply in all respects with the Company’s Policy
Regarding the Purchase and Sale of the Company’s Securities by Employees, as
such Policy may be amended from time to time. Specifically, and
without limitation, Executive agrees that Executive shall not purchase or sell
stock in the Company at any time (a) that Executive possesses material
non-public information about the Company or any of its businesses; and
(b) during any “Trading Blackout Period” as may be determined by the
Company as set forth in the Policy from time to time.
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24. Indemnification. (a) If
Executive is made a party or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter, a "proceeding"), by reason of
the
fact that he or she is or was a director or an officer of the Corporation or
is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan (hereinafter, a "Covered Person"), whether the basis of such proceeding
is
alleged action in an official capacity as a director, officer, employee or
agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists
or
may hereafter be amended, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such Covered Person
in
connection therewith; provided, however, that, except as provided in
Section 24(c) hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such Covered Person in
connection with a proceeding (or part thereof) initiated by such Covered Person
only if such proceeding (or part thereof) was authorized by the
Board.
(b)
The
Corporation shall
pay the expenses (including attorneys' fees) incurred by Executive in defending
any such proceeding in advance of its final disposition (hereinafter, an
"advancement of expenses"), provided, however, that, if the Delaware
General Corporation Law so requires, an advancement of expenses incurred by
Executive in his or her capacity as such shall be made only upon delivery to
the
Corporation of an undertaking (hereinafter, an "Undertaking"), by or on behalf
of such Executive, to repay all amounts so advanced if it shall ultimately
be
determined by final judicial decision from which there is no further right
to
appeal (hereinafter, a "Final Adjudication") that Executive was not entitled
to
be indemnified for such expenses under this Section 24 or
otherwise. The rights to indemnification and to the advancement of
expenses conferred in Subsections 24(a) and (b) hereof shall be contract
rights and such rights shall continue even after Executive ceases to be employed
by the Company and shall inure to the benefit of Executive’s heirs, executors
and administrators.
(c)
If a claim under Section 24(a) or (b) hereof is not paid in full by
the Company within sixty (60) days after a written claim therefore has been
received by the Company, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty (20) days,
Executive may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim. If Executive is successful in whole
or in part in any such suit, or in a suit brought by the Company to recover
an
advancement of expenses pursuant to the terms of an Undertaking, Executive
shall
be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by Executive to enforce a right to
indemnification hereunder (but not in a suit brought by Executive to enforce
a
right to an advancement of expenses) it shall be a defense that, and
(ii) any suit brought by the Company to recover an advancement of expenses
pursuant to the terms of an Undertaking, the Company shall be entitled to
recover such expenses upon a final adjudication that, Executive has not met
the
applicable standard for indemnification set forth in the Delaware General
Corporation Law. To the fullest extent permitted by law, neither the
failure of the Company (including its disinterested directors, committee
thereof, independent legal counsel or its stockholders) to have made a
determination
Charter
- Approved Prototype July 31, 2007
22
prior
to
the commencement of such suit that indemnification of Executive is proper
in the
circumstances because the Executive has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the Company (including its disinterested directors, committee thereof,
independent legal counsel or its stockholders) that Executive has not met
such
applicable standard of conduct, shall create a presumption that Executive
has
not met the applicable standard of conduct or, in the case of such a suit
brought by Executive, be a defense to such suit. In any suit brought
by Executive to enforce a right to indemnification or to an advancement of
expenses hereunder, or brought by the Company to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that
Executive is not entitled to be indemnified, or to such advancement of expenses,
under this Section 24 or otherwise shall, to the extent permitted by law,
be on
the Company.
(d)
The
rights to
indemnification and to the advancement of expenses conferred in this Section
24
shall not be exclusive of any other right of indemnification which Executive
or
any other person may have or hereafter acquire by any statute, the Corporation's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
(e) The
Company may maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the Delaware General
Corporation Law.
25. Withholding. Anything
to the contrary notwithstanding, all payments required to be made by Company
hereunder to Executive or his estate or beneficiary shall be subject
to the withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold pursuant
to applicable law or regulation.
26. Notices. Any
written notice required by this Agreement will be deemed provided and delivered
to the intended recipient when (a) delivered in person by hand; or (b) three
days after being sent via U.S. certified mail, return receipt requested; or
(c)
the day after being sent via by overnight courier, in each case when such notice
is properly addressed to the following address and with all postage and similar
fees having been paid in advance:
|
|
If
to the Company:
|
Charter
Communications, Inc.
|
|
|
Attn.:
Human Resources
|
|
|
12405
Powerscourt Drive
|
| St. Louis, MO 63131 |
|
|
If
to the Executive:
|
12405
Powerscourt Drive
|
|
|
St.
Louis, MO 63131
|
Charter
- Approved Prototype July 31, 2007
23
Either
party may change the address to which notices, requests, demands and other
communications to such party shall be delivered personally or mailed by giving
written notice to the other party in the manner described above.
27. Binding
Effect. This
Agreement shall be for the benefit of and binding upon the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and, where applicable, assigns.
28. Entire
Agreement. As
of the Effective Date, the Employee and the Company hereby irrevocably agree
that the Old Employment Agreement is hereby terminated in its entirety, and
neither party thereto shall have any rights or obligations under the Old
Employment Agreement, including but not limited to, in the case of the Employee,
any right to any severance payment or benefit. This Agreement
constitutes the entire agreement between the listed parties with respect to
the
subject matter described in this Agreement and supersedes all prior agreements,
understandings and arrangements, both oral and written, between the parties
with
respect to such subject matter, except to the extent said agreements,
understandings and arrangements are referenced or referred to in this
Agreement. This Agreement may not be modified, amended, altered or
rescinded in any manner, except by written instrument signed by both of the
parties hereto; provided, however, that the waiver by either party of a breach
or compliance with any provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or compliance. Except to the
extent the terms hereof are explicitly and directly inconsistent with the
terms of the Plan, nothing herein shall be deemed to override or replace the
terms of the Plan, including but not limited to sections 6.4, 9.4 and 10.4
thereof.
29. Severability. In
case any one or more of the provisions of this Agreement shall be held by any
court of competent jurisdiction or any arbitrator selected in accordance with
the terms hereof to be illegal, invalid or unenforceable in any respect, such
provision shall have no force and effect, but such holding shall not affect
the
legality, validity or enforceability of any other provision of this Agreement
provided that the provisions held illegal, invalid or unenforceable does not
reflect or manifest a fundamental benefit bargained for by a party
hereto.
30. Assignment. Subject
to the Executive’s right to terminate in the event of a Change of Control
hereunder, this Agreement can be assigned by the Company only to a company
that
controls, is controlled by, or is under common control with the Company and
which assumes all of the Company’s obligations hereunder. The duties
and covenants of Executive under this Agreement, being personal, may not be
assigned or delegated except that Executive may assign payments due hereunder
to
a trust established for the benefit of Executive’s family or to Executive’s
estate or to any partnership or trust entered into by Executive and/or
Executive’s immediate family members (meaning, Executive’s spouse and lineal
descendants). This agreement shall be binding in all respects on
permissible assignees.
31. Notification. In
order to preserve the Company’s rights under this Agreement, the Company is
authorized to advise any third party with whom Executive may become employed
or
enter into any business or contractual relationship with, or whom Executive
may
contact for any
Charter
- Approved Prototype July 31, 2007
24
such
purpose, of the existence of this Agreement and its terms, and the Company
shall
not be liable for doing so.
32. Choice
of Law/Jurisdiction This Agreement is deemed to be accepted and
entered into in St. Louis County, Missouri. Executive and the Company intend
and
hereby acknowledge that jurisdiction over disputes with regard to this
Agreement, and over all aspects of the relationship between the parties hereto,
shall be governed by the laws of the State of Missouri without giving effect
to
its rules governing conflicts of laws. Executive agrees that in any
suit to enforce this Agreement, or as to any dispute that arises between the
Company and the Executive regarding or relating to this Agreement and/or any
aspect of Executive’s employment relationship with Company, venue and
jurisdiction are proper in the County of St. Louis, and (if federal jurisdiction
exists) the United States District Court for the Eastern Division of Missouri
in
St. Louis, and Executive waives all objections to jurisdiction and venue in
any
such forum and any defense that such forum is not the most convenient
forum.
33. Section
Headings. The
section headings contained in this Agreement are for reference purposes only
and
shall not affect in any manner the meaning or interpretation of this
Agreement.
34. Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original, but all of which taken together shall constitute one and
the
same instrument.
[remainder
of page intentionally left blank]
Charter
- Approved Prototype July 31, 2007
25
IN
WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
Charter
Communications, Inc.
By:
/s/ Neil
Smit
Name:
Neil Smit
Title:
President and Chief Executive Officer
EXECUTIVE
/s/
Jeffrey T.
Fisher
Name: Jeffrey
T. Fisher
Address: _________________________
Charter
- Approved Prototype July 31, 2007
26
Charter
Communications
Grant
Summary Report
Exhibit
A
Activity
as of 6/25/2007
|
Grant
Date
|
Grant
Type
|
Grant
Price
|
Granted
|
Exercised
|
Canceled
|
Subject
to Repurchase
|
Outstanding
|
Vested
|
Outstanding
Exercisable
|
||||||||||||||||||||||||
|
2001
Non-Qualified Stock Option
|
|||||||||||||||||||||||||||||||||
|
Jeffrey
T. Fisher
|
|||||||||||||||||||||||||||||||||
|
1/20/2006
|
Non-Qualified
|
$ |
1.19
|
1,000,000
|
250,000
|
0
|
0
|
750,000
|
250,000
|
0
|
|||||||||||||||||||||||
|
2/6/2006
|
Restricted
|
$ |
0.00
|
50,000
|
16,667
|
0
|
0
|
33,333
|
16,667
|
0
|
|||||||||||||||||||||||
|
3/10/2006
|
Restricted
|
$ |
0.00
|
83,700
|
0
|
0
|
0
|
83,700
|
0
|
0
|
|||||||||||||||||||||||
|
3/10/2006
|
Restricted
|
$ |
0.00
|
50,220
|
0
|
0
|
0
|
50,220
|
0
|
0
|
|||||||||||||||||||||||
|
3/10/2006
|
Non-Qualified
|
$ |
1.00
|
145,800
|
36,450
|
0
|
0
|
109,350
|
36,450
|
0
|
|||||||||||||||||||||||
|
3/9/2007
|
Non-Qualified
|
$ |
2.835
|
57,300
|
0
|
0
|
0
|
57,300
|
0
|
0
|
|||||||||||||||||||||||
|
3/9/2007
|
Restricted
|
$ |
0.00
|
133,741
|
0
|
0
|
0
|
133,741
|
0
|
0
|
|||||||||||||||||||||||
|
Optionee
Total
|
1,520,761
|
303,117
|
0
|
0
|
1,217,644
|
303,117
|
0
|
||||||||||||||||||||||||||
|
Plan
Total
|
1,520,761
|
303,117
|
0
|
0
|
1,217,644
|
303,117
|
0
|
||||||||||||||||||||||||||
Charter
- Approved Prototype July 31, 2007
27
Exhibit
B
Executive
Cash Award Plan
Charter
- Approved Prototype July 31, 2007
28
Exhibit
10.3
AMENDED
AND RESTATED EMPLOYMENT AGREEMENT
THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”),
dated and effective the 1st day of August 2007 (the “Effective
Date”) is made by and between CHARTER COMMUNICATIONS, INC., a Delaware
corporation (the “Company”), and Michael J. Lovett, an adult resident of
Missouri (the “Executive”).
RECITALS:
WHEREAS,
the Executive and the Company have previously entered into that certain
Employment Agreement dated February 28, 2006 (the "Old Employment
Agreement") and the parties desire to amend and restate in its entirety the
Old Employment Agreement;
WHEREAS,
it is the desire of the Company to assure itself of the services of Executive
by
engaging Executive as its Executive Vice President and Chief Operating Officer
and the Executive desires to serve the Company on the terms herein
provided;
WHEREAS,
in connection with the entry into the Agreement, the Executive will
be
granted performance units and restricted shares of Company
Stock pursuant to the Company's 2001 Stock Incentive Plan,
as amended as of the date hereof (the “Special
Equity”);
WHEREAS,
Executive’s agreement to the terms and conditions of Sections 17 and 19
are a material and essential condition of Executive’s employment with the
Company hereafter under the terms of this Agreement;
NOW,
THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as
follows:
1. Certain
Definitions.
(a) “Allen”
shall mean Paul G. Allen (and his heirs or beneficiaries under his will(s),
trusts or other instruments of testamentary disposition), and any entity or
group over which Paul G. Allen has Control and that constitutes a Person as
defined herein. For the purposes of this definition, “Control”
means the power to direct the management and policies of an entity
or to appoint
or elect a majority of its governing board.
(b) “Annual
Base Salary” shall have the meaning set forth in Section 5.
(c) “Board”
shall mean the Board of Directors of the Company.
(d) “Bonus”
shall have the meaning set forth in Section 6.
Charter
–Approved Prototype August 1,
2007
1
(e) The
Company shall have “Cause” to terminate Executive’s employment hereunder upon
Executive’s:
(i) Executive’s
breach of a material obligation (which, if curable, is not cured within ten
business (10) days after Executive receives written notice of such breach)
or
representation under this Agreement or breach of any fiduciary duty to the
Company which, if curable, is not cured within ten business (10) days after
Executive receives written notice of such breach; or any act of fraud or knowing
material misrepresentation or concealment upon, to or from the Company or the
Board;
(ii) Executive’s
failure to adhere in any material respect to (i) the Company’s Code of Conduct
in effect from time to time and applicable to officers and/or employees
generally, or (ii) any written Company policy, if such policy is material to
the
effective performance by Executive of the Executive’s duties under this
Agreement, and if Executive has been given a reasonable opportunity to cure
this
failure to comply within a period of time which is reasonable under the
circumstances but not more than the thirty (30) day period after written notice
of such failure is provided to Executive; provided that if Executive
cures this failure to comply with such a policy and then fails again to comply
with the same policy, no further opportunity to cure that failure shall be
required;
(iii) Executive’s
misappropriation (or attempted misappropriation) of a material amount of the
Company’s funds or property;
(iv) Executive’s
conviction of, the entering of a guilty plea or plea of nolo contendere
or no contest (or the equivalent), or entering into any pretrial diversion
program or agreement or suspended imposition of sentence, with respect to either
a felony or a crime that adversely affects or could reasonably be expected
to
adversely affect the Company or its business reputation; or the institution
of
criminal charges against Executive, which are not dismissed within sixty (60)
days after institution, for fraud, embezzlement, any felony offense involving
dishonesty or constituting a breach of trust or moral turpitude;
(v) Executive’s
admission of liability of, or finding of liability, for a knowing and deliberate
violation of any “Securities Laws.” As used herein, the term
“Securities Laws” means any federal or state law, rule or regulation governing
generally the issuance or exchange of securities, including without limitation
the Securities Act of 1933, the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder;
(vi) conduct
by Executive in connection with Executive’s employment that constitutes gross
neglect of any material duty or responsibility, willful
misconduct, or recklessness which, if curable, is not cured within
ten business (10) days after Executive receives written notice of such
breach;
(vii) Executive’s
illegal possession or use of any controlled substance, or excessive use of
alcohol at a work function, in connection with Executive’s duties, or
on
Charter
–Approved Prototype August 1,
2007
2
Company
premises; “excessive” meaning either repeated
unprofessional use or any single event of consumption giving rise to significant
intoxication or unprofessional behavior;
(viii)
willful
or grossly negligent commission of any other act or failure to act in connection
with the Executive’s duties as an executive of the Company which causes or
reasonably may be expected (as of the time of such occurrence) to cause
substantial economic injury to or substantial injury to the business reputation
of the Company or any subsidiary or affiliate of the Company, including, without
limitation, any material violation of the Foreign Corrupt Practices Act, as
described herein below.
If
Executive
commits or is charged with committing any offense of the character or type
specified in subparagraphs 1(e)(iv), (v) or (viii) above, then the Company
at
its option may suspend the Executive with or without pay. If the
Executive subsequently is convicted of, pleads guilty or nolo
contendere (or equivalent plea) to, or enters into any type of suspended
imposition of sentence or pretrial diversion program with respect to, any such
offense (or any matter that gave rise to the suspension), the Executive shall
immediately repay any compensation paid in cash hereunder from the date of
the
suspension. Notwithstanding anything to the contrary in any stock
option or equity incentive plan or award agreement, all vesting and all lapsing
of restrictions on restricted shares shall be tolled during the period of
suspension and all unvested options and restricted shares for which the
restrictions have not lapsed shall terminate and not be exercisable by or issued
to Executive if during or after such suspension the Executive is convicted
of,
pleads guilty or nolo contendere (or equivalent plea) to, or enters
into any type of suspended imposition of sentence or pretrial diversion program
with respect to, any offense specified in subparagraphs 1(e)(iv), (v) or (viii)
above or any matter that gave rise to the suspension.
(f) For
purposes of this Agreement,
“Change in Control” shall mean the occurrence of any of the following
events:
(i) any
“person” as such term is used in Section 13(d) of the Securities Exchange Act of
1934, or group of persons, excluding Allen and his affiliates, becomes (directly
or indirectly) a “beneficial owner” as such term is used as of the
Effective Date in Rule 13d-3 promulgated under that Act, of a percentage of
the
voting securities of the Company (measured either by number of voting securities
or by voting power) that is larger than the percentage (if any) of the voting
securities of the Company (measured in the same fashion) that Allen and his
affiliates beneficially own (directly or indirectly) at such time;
(ii) if
and when Allen shall no longer have the power to appoint a majority of the
Board, a majority of the Board consists of individuals other than “Incumbent
Directors,” which term means the members of the Board on the Effective Date;
provided that any individual becoming a director subsequent to such date whose
election or nomination for election was supported (other than in connection
with
any actual or threatened proxy contest) by two-thirds of the directors who
then
comprised the Incumbent Directors shall be considered to be an Incumbent
Director; or
Charter
–Approved Prototype August 1,
2007
3
(iii) (x)
the Company combines with another entity and is the surviving entity, or (y)
all
or substantially all of the assets or business of the Company is disposed of
pursuant to a sale, merger, consolidation, liquidation, dissolution or other
transaction or series of transactions (collectively, a “Triggering Event”),
unless Allen and his affiliates own, directly or indirectly, by reason of their
ownership of voting securities of the Company immediately prior to such
Triggering Event, more of the voting securities than any other shareholder
(measured both by number of voting securities and by voting power) of (q) in
the
case of a combination in which the Company is the surviving entity, the
surviving entity, and (r) in any other case, the entity (if any) that
succeeds to all or substantially all of the Company’s business and
assets.
(g) “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to
time.
(h) “Committee”
shall mean either the Compensation and Benefits Committee of the Board, or
a
Subcommittee of such Committee duly appointed by the Board or the
Committee.
(i) “Company”
shall have the meaning set forth in the preamble hereto.
(j) “Company
Stock” shall mean the $.10 par value common stock of the Company.
(k) “Date
of Termination” shall mean (i) if Executive’s employment is terminated by
Executive’s death, the date of Executive’s death and (ii) if Executive’s
employment is terminated pursuant to Section 14(a)(ii) – (vi), the date of
termination of employment, as defined in 409(A) regulations under the
Code.
(l) For
purposes of this Agreement, Executive will be deemed to have a “Disability” if,
due to illness, injury or a physical or medically recognized mental condition,
(a) Executive is unable to perform Executive’s duties under this Agreement with
reasonable accommodation for 120 consecutive days, or 180 days during any twelve
month period, as determined in accordance with this Section, or (b) Executive
is
considered disabled for purposes of receiving / qualifying for long term
disability benefits under any group long term disability insurance plan or
policy offered by Company in which Executive participates. The
Disability of Executive will be determined by a medical doctor selected by
written agreement of Company and Executive upon the request of either party
by
notice to the other, or (in the case of and with respect to any applicable
long
term disability insurance policy or plan) will be determined according to the
terms of the applicable long term disability insurance policy /
plan. If Company and Executive cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether Executive
has a Disability. The determination of the medical doctor selected
under this Section will be binding on both parties. Executive must
submit to a reasonable number of examinations by the medical doctor making
the
determination of Disability under this Section, and to other specialists
designated by such medical doctor, and Executive hereby authorizes the
disclosure and release to Company of such determination and all supporting
medical records. If Executive is not legally
Charter
–Approved Prototype August 1,
2007
4
competent,
Executive’s legal guardian or duly
authorized attorney-in-fact will act in Executive’s stead under this Section for
the purposes of submitting Executive to the examinations, and providing the
authorization of disclosure, required under this Section.
(m) “Executive”
shall have the meaning set forth in the preamble hereto.
(n) “Good
Reason” shall mean any of the events described herein that occur without
Executive's prior written consent: (i) any reduction in Executive’s Annual Base
Salary, Target Bonus Percentage, or title except as permitted hereunder, (ii)
any failure to pay Executive's compensation hereunder when due; (iii) any
material breach by the Company of a term hereof; (iv) relocation
of Executive’s primary workplace to a location that is more
than fifty (50) miles from the office where Executive is then
assigned to work as Executive’s principal office; (v) a transfer or reassignment
to another executive of material responsibilities that have been assigned to
Executive (and were not identified by the Company to be assigned only on an
interim basis at the time of assignment or thereafter) and generally are part
of
the responsibilities and functions assigned to a Chief Operating Officer of
a
public corporation or (vi) any change in reporting structure such that Executive
no longer reports directly to the "Chief Executive Officer (or equivalent
position, if there is no Chief Executive Officer)" (in each case “(i)” through
“(vi)” only if Executive objects in writing within 30 days after being informed
of such events and unless Company retracts and/or rectifies the claimed Good
Reason within 30 days following Company’s receipt of timely written objection
from Executive); (vii) if within six months after a Change in Control, Executive
has not received an offer from the surviving company to continue in his or
her
position immediately prior to such Change in Control under at least the
same terms and conditions (except that the value of equity-based compensation
after such Change in Control need only be commensurate with the value of
equity-based compensation given to executives with equivalent positions in
the
surviving company, if any)as set herein; (viii) the Company's decision not
to
renew this Agreement at the end of its term, (ix) the failure of a successor
to
the business of the Company to assume the Company's obligations under this
Agreement in the event of a Change in Control during its term; or (x) the
expiration of six months after a Change in Control (it being intended hereby
that Executive can resign in his discretion for any reason within 30 days after
six months have expired after a Change in Control and such resignation shall
be
treated as having been for Good Reason hereunder).
(o) “Notice
of Termination” shall have the meaning set forth in Section 14(b).
(p) “Options”
shall have the meaning set forth in Section 7
(q) “Performance
Unit” and “Performance Shares” shall have the meaning set forth in Section 9
hereof.
(r) “Person”
shall have the meaning set forth in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934.
(s) “Plan”
shall mean the 2001 Stock Incentive Plan as amended by the Company from time
to
time.
Charter
–Approved Prototype August 1,
2007
5
(s) “Restricted
Shares” shall have the meaning set forth in Section 8.
(t) “Term”
shall have the meaning set forth in Section 2.
(u) "Voluntary"
and "Voluntarily" in connection with Executive's termination of employment
shall
mean a termination of employment resulting from the initiative of the Executive,
excluding a termination of employment attributable to Executive's death or
Disability. A resignation by Executive that is in response to a communicated
intent by the Company to discharge Executive other than for Cause is not
considered to be "Voluntary" and shall be considered to be a termination by
the
Company for the purposes of this Agreement.
2. Employment
Term. The
Company hereby employs the Executive, and the Executive hereby accepts his
employment, under the terms and conditions hereof, for the period (the
“Term”) beginning on the Effective Date hereof and terminating upon the
earlier of (i) July 31, 2010 (the “Initial Term”) and (ii) the Date of
Termination as defined in Section 1(k), and, if not terminated earlier, will
be
automatically renewed at the end of its Initial Term and on each anniversary
thereafter for a period of one (1) year unless either party shall give written
notice of cancellation to the other party not later than ninety (90) days prior
to the end of the Initial Term or anniversaries thereof.
3. Position
and Duties. Executive
shall serve as Executive Vice President and Chief Operating Officer reporting
to
the Chief Executive Officer, with such responsibilities, duties and
authority as are customary for such role, including, but not limited to, overall
management responsibility for the operations of the
Company. Executive shall devote all necessary business time and
attention, and employ Executive’s reasonable best efforts, toward the
fulfillment and execution of all assigned duties, and the satisfaction of
defined annual and/or longer-term performance criteria.
4. Place
of Performance. In connection
with Executive’s employment during the Term, Executive's initial primary
workplace shall be the Company’s offices in or near St. Louis, MO. except for
necessary travel on the Company’s business.
5. Annual
Base Salary. During
the Term, Executive shall receive a base salary at a rate not less than
$731,150.00 per annum (the “Annual Base Salary”), less standard
deductions, paid in accordance with the Company’s general payroll practices for
executives, but no less frequently than monthly. The Annual Base
Salary shall compensate Executive for any official position or directorship
of a
subsidiary or affiliate that Executive is asked to hold in the Company or its
subsidiaries or affiliates as a part of Executive’s employment
responsibilities. No less frequently than annually during the Term,
the Committee, on advice of the Company’s Chief Executive Officer, shall review
the rate of Annual Base Salary payable to Executive, and may, in its discretion,
increase the rate of Annual Base Salary payable hereunder; provided,
however, that any increased rate shall thereafter be the rate of “Annual
Base Salary” hereunder.
6. Bonus. Except
as otherwise provided for herein, for each fiscal year or other period
consistent with the Company’s then-applicable normal employment practices during
which Executive is employed hereunder on the last day (the “Bonus Year”),
Executive shall be eligible to
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receive
a bonus in an amount up to 100% of
Executive’s Annual Base Salary (the “Bonus” and bonuses at such
percentage of Annual Base Salary being the “Target Bonus”) pursuant to,
and as set forth in, the terms of the Executive Bonus Plan as such Plan may
be
amended from time to time, plus such other bonus payments, if any, as shall
be
determined by the Committee in its sole discretion, with such Bonus being paid
on or before February 28 of the year next following the Bonus Year, or as soon
as is administratively practicable thereafter (e.g., after the public disclosure
of the Company’s financial results for the prior year on SEC Form 10-K or on
such replacement form as the SEC shall determine, for those years as the
Company’s securities are traded publicly, and the Company’s annual financial
results are reported to the shareholders, for those (if any) years as the
Company’s securities are not traded publicly).
7. Stock
Options. The Company has previously granted to Executive
options to purchase shares of Company Stock as set forth in Exhibit A hereto,
and may, in the Committee’s discretion, grant to Executive additional options to
purchase shares of Company Stock (all of such options, collectively, the
“Options”) pursuant to the terms of the Plan, any successor plan and an
associated Stock Option Agreement.
8. Restricted
Shares. The Company has previously granted to Executive
Restricted Shares of Company Stock as set forth in Exhibit A hereto, and may,
in
the Committee’s discretion, grant to Executive Restricted Shares (collectively,
the “Restricted Shares”), which shall be subject to restrictions on their
sale as set forth in the Plan and an associated Restricted Shares Grant
Letter.
9. Performance
Shares Units. The Company has previously granted to
Executive Performance Share Units of which some have been converted into
Performance Shares (which are not aggregated in the forgoing description of
Restricted Shares) as set forth in Exhibit A hereto, and may, in the Committee’s
discretion, grant to Executive further Performance Share Units (collectively,
the “Performance Units”), which shall be subject to restrictions on their
sale as set forth in the Plan and an associated Performance Unit Grant
Letter.
10. Executive
Cash Bonus Plan. Executive currently is a participant in
the Company’s 2005 Executive Cash Award Plan with a Plan Award (as defined in
such Plan) as set forth in Exhibit B and shall remain a participant in such
Plan
under the terms therefore for the term of this Agreement.
11. Benefits. Executive
shall be entitled to receive such benefits and to participate in such employee
group benefit plans, including life, health and disability insurance policies,
and financial planning services, and other perquisites and plans as are
generally provided by the Company to its senior executives of comparable level
and responsibility in accordance with the plans, practices and programs of
the
Company, as amended from time to time.
12. Expenses. The
Company shall reimburse Executive for all reasonable and necessary expenses
incurred by Executive in connection with the performance of Executive’s duties
as an employee of the Company in accordance with the Company’s generally
applicable policies and procedures. Such reimbursement is subject to
the submission to the Company by Executive of appropriate documentation and/or
vouchers in accordance with the customary
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procedures
of the Company for expense reimbursement, as such procedures may be revised
by
the Company from time to time hereafter.
13. Vacations. Executive
shall be entitled to paid vacation in accordance with the Company’s vacation
policy as in effect from time to time provided that, in no event shall
Executive be entitled to less than three (3) weeks vacation per calendar
year. Executive shall also be entitled to paid holidays and personal
days in accordance with the Company’s practice with respect to same as in effect
from time to time.
14. Termination.
(a) Executive’s
employment hereunder may be terminated by the Company, on the one hand, or
Executive, on the other hand, as applicable, without any breach of this
Agreement, under the following circumstances:
(i) Death. Executive’s
employment hereunder shall automatically terminate upon Executive’s
death.
(ii) Disability. If
Executive has incurred a Disability, the Company may give Executive written
notice of its intention to terminate Executive’s employment. In such
event, Executive’s employment with the Company shall terminate effective on the
14th day after delivery of such notice to Executive, provided that
within the 14 days after such delivery, Executive shall not have returned to
full-time performance of Executive’s duties. Executive may provide
notice to the Company of Executive's resignation on account of a bona fide
Disability at any time.
(iii) Cause. The
Company may terminate Executive’s employment hereunder for Cause effectively
immediately upon delivery of notice to Executive, taking into account any
procedural requirements set forth under Section 1(e) above.
(iv)
Good Reason. Executive may terminate Executive’s employment
herein for Good Reason upon (i) satisfaction of any advance notice and other
procedural requirements set forth under Section 1(n) above for any termination
pursuant to Section 1(n)(i) through (vi) or (ii) at least 30 days’ advance
written notice by the Executive for any termination pursuant to Section
1(n)(vii) through (x).
(v) Without
Cause. The Company may terminate Executive’s employment hereunder
without Cause upon at least 30 days’ advance written notice to the
Executive.
(vi)
Resignation Without Good Reason. Executive may resign
Executive’s employment without Good Reason upon at least fourteen (14) days’
written notice to the Company.
(b) Notice
of Termination. Any termination of Executive’s employment by the
Company or by Executive under this Section 14 (other than pursuant to Sections
14(a)(i)) shall be communicated by a written notice (the “Notice of
Termination”) to the other party hereto, indicating the specific termination
provision in this Agreement relied upon, setting forth in
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reasonable
detail any facts and circumstances claimed
to provide a basis for termination of Executive’s employment under the provision
so indicated, and specifying a Date of Termination which notice shall be
delivered within the applicable time periods set forth in subsections
14(a)(ii)-(vi) above ( the “Notice Period”);
provided that the Company may pay to Executive all Annual
Base Salary, benefits and other rights due to Executive during such Notice
Period instead of employing Executive during such Notice Period.
(c) Resignation
from Representational Capacities. Executive hereby acknowledges
and agrees that upon Executive's termination of employment with the Company
for
whatever reason, [s]he shall be deemed to have, and shall have in fact,
effectively resigned from all executive, director or other positions with the
Company or its affiliates at the time of such termination of employment, and
shall return all property owned by the Company and in Executive’s possession,
including all hardware, files and documents, at that time.
(d) Termination
in Connection with Change in Control. If Executive’s employment
is terminated by the Company without Cause either upon or within thirty days
before or thirteen (13) months after a Change in Control, or prior to a Change
in Control at the request of a prospective purchaser whose proposed purchase
would constitute a Change in Control upon its completion, such termination
shall
be deemed to have occurred immediately before such Change in Control for
purposes of this Agreement and the Plan.
15. Termination
Pay
(a) Effective
upon the termination of Executive’s employment, Company will be obligated to pay
Executive (or, in the event of Executive’s death, the Executive’s designated
beneficiary as defined below) only such compensation as is provided in this
Section 15, except to the extent otherwise provided for in any Company stock
incentive, stock option or cash award plan (including, among others, the Plan),
approved by the Board. For purposes of this Section 15, Executive’s
designated beneficiary will be such individual beneficiary or trust, located
at
such address, as Executive may designate by notice to Company from time to
time
or, if Executive fails to give notice to Company of such a beneficiary,
Executive’s estate. Notwithstanding the preceding sentence, Company
will have no duty, in any circumstances, to attempt to open an estate on behalf
of Executive, to determine whether any beneficiary designated by Executive
is alive or to ascertain the address of any such beneficiary, to determine
the
existence of any trust, to determine whether any person purporting to act as
Executive’s personal representative (or the trustee of a trust established by
Executive) is duly authorized to act in that capacity, or to locate or attempt
to locate any beneficiary, personal representative, or trustee.
(b) Termination
by Executive for Good Reason or by Company without
Cause. If prior to expiration of the Term, Executive
terminates his or her employment for Good Reason, or if the Company
terminates Executive’s employment other than for Cause or Executive’s death or
Disability, Executive will be entitled to receive, subject to the conditions
of
this Agreement, the following:
(i) (A) all Annual
Base Salary and Bonus duly payable under the applicable plan for performance
periods ending prior to the Date of Termination, but unpaid as of the
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Date
of Termination, plus (B) in consideration for
Executive’s obligations set forth in Section 19 hereof, an amount equal to two
and one half (2.5) times the Executive’s then-current rate of Annual Base Salary
and Target Bonus, which total sum shall be payable following the Date of
Termination in fifty-two (52) equal bi-weekly installments in accordance with
the Company’s normal payroll practices provided that, if a Change in
Control occurs (or is deemed pursuant to Sec. 14(d) hereof to have occurred
after such termination) during such thirty (30) month period (and such Change
in
Control qualifies either as a “change in the ownership or effective control” of
the Company or a “change in the ownership of a substantial portion of the
assets” of the Company as such terms are defined under Section 409A of the
Code), any amounts remaining payable to Executive hereunder shall be paid
in a single lump sum immediately upon such Change in Control.
(ii) if Executive’s
employment is terminated by the Company without Cause either upon or
within thirty days before or thirteen (13) months after a Change in Control,
or
prior to a Change in Control at the request of a prospective purchaser whose
proposed purchase would constitute a Change in Control upon its completion,
the
Company shall treat as earned all unvested Performance Units for which the
performance term has not expired as of such Change in Control at the rate
calculated pursuant to the Plan and the applicable Grant Letter, and shall
immediately convert those Units into Restricted Shares and accelerate as of
the
Date of Termination the removal of restrictions on such shares.
(iii) all reasonable expenses
Executive has incurred in the pursuit of Executive’s duties under this Agreement
through the Date of Termination which are payable under and in accordance
with
this Agreement, which amount will be paid within thirty (30) days after the
submission by Executive of properly completed reimbursement requests on the
Company’s standard forms;
(iv) a lump sum payment (net after deduction
of taxes and other required withholdings) equal to thirty (30) times the
monthly
cost, at the time Executive’s employment terminated, for Executive to receive
under COBRA the paid coverage for health, dental and vision benefits then
being
provided for Executive at the Company’s cost at the time Executive’s employment
terminated. This amount will be paid at the same time the payment is
made under Section 15(b)(i) and will not take into account future increases
in
costs during the applicable time period; and
(v) Stock Options Granted as of
the Effective Date. Notwithstanding anything to the contrary in any
award agreement, all Stock Options granted to Executive as of the Effective
Date
shall vest and become immediately exercisable, as of the termination date,
upon
the occurrence of the conditions set forth in Section 15(b);
(vi) Restricted Shares Granted as
of the Effective Date. Notwithstanding anything to the contrary in
any award agreement, all Restricted Shares granted to Executive as of the
Effective Date shall vest, and all restrictions thereon shall lapse, as of
the
termination date, upon the occurrence of the conditions set forth in Section
15(b);
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(vii) Performance Shares/Units Granted
as of the Effective Date. Notwithstanding anything to the contrary in
any award agreement, the Executive shall be entitled to full vesting and
nonforfeitability, as of the termination date, of any right to receive
Performance Shares in satisfaction of the Performance Units, with the number
(if
any), and the timing of delivery of Shares determined as if the Executive’s
employment with the Company had continued indefinitely, upon occurrence of
the
conditions set forth in Section 15(b);
(viii) “Special” and Future Grants of Equity
Awards. Notwithstanding anything to the contrary in any award
agreement, Executive shall be deemed to be actively employed during the
thirty (30) month period following termination of employment for purposes
of vesting of all “special” and future grants of stock options, performance
units and restricted stock; provided that if a Change in
Control occurs (or is deemed pursuant to Sec. 14(d) hereof to have occurred
after such termination) within such period, all remaining stock options
that would have vested in the thirty (30) month period shall vest, and all
remaining restricted stock and performance units whose restrictions would have
lapsed in the thirty (30) month period shall have their restrictions
lapse immediately upon such Change in Control; provided, however, that with
respect to any equity-based compensation awards subject to Section 409A of
the
Code (as determined by independent tax counsel retained by the Company), vesting
and/or the lapse of restrictions will only be accelerated if such Change in
Control qualifies either as a “change in the ownership or effective control” of
the Company or a “change in the ownership of a substantial portion of the
assets” of the Company as such terms are defined under Section 409A of the Code,
or the first subsequent time at which such distribution may be made in
compliance with Section 409A of the Code; and
(ix) pay the cost of
up to twelve (12) months, as required, of executive-level out-placement
services (which provides as part of the outplacement the use of an office and
secretarial support as near as reasonably practicable to Executive’s
residence).
provided,
however, any of the benefits described in Section 15(b)(i) through (ix)
that are due to be paid or awarded during the first six (6) months after the
Date of Termination shall, to the extent required to avoid the tax consequences
of Section 409A of the Code as determined by independent tax counsel, be
suspended and paid after the six (6) month anniversary of Executive’s Date of
Termination.
(c) The
Executive shall not be required to mitigate the amount of any payments provided
in Section 15, by seeking other employment or otherwise, nor shall the amount
of
any payment provided for in this Section 15 be reduced by any compensation
earned by Executive as a result of employment by another company or business,
or
by profits earned by Employee from any other source at any time before or after
the date of Termination, so long as Executive is not in breach of the
Agreement.
(d) Termination
by Executive without Good Reason or by Company for Cause. If
prior to the expiration of the Term or thereafter, Executive Voluntarily
terminates Executive’s employment prior to expiration of the Term without Good
Reason or if Company terminates this
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Agreement
for Cause, Executive will be entitled to
receive Executive’s then-existing Annual Base Salary only through the date such
termination is effective and will be reimbursed for all reasonable expenses
Executive has incurred in the pursuit of Executive’s duties under this Agreement
through the date of termination which are payable under and in accordance with
this Agreement; any unvested options and shares of restricted stock shall
terminate as of the date of termination unless otherwise provided for in any
applicable plan or award agreement; and Executive shall be entitled to no other
compensation, bonus, payments or benefits except as expressly provided in this
paragraph.
(e) Termination
upon Disability or Death. If Executive’s employment shall
terminate by reason of Executive’s Disability (pursuant to Section 14(a)(ii)) or
death (pursuant to Section 14(a)(i)), the Company shall pay to Executive, in
a
lump sum cash payment as soon as practicable following the Date of Termination,
all unpaid Annual Base Salary and Bonus previously earned for a performance
period ending prior to the Date of Termination, but unpaid as of the Date of
Termination, and the pro rata portion of their Bonus for such
year (when and as paid to other senior executives of the Company) for the
Performance Period in which the termination occurred. In the case of
Disability, if there is a period of time during which Executive is not being
paid Annual Base Salary and not receiving long-term disability insurance
payments, the Company shall make interim payments equal to such unpaid
disability insurance payments to Executive until commencement of disability
insurance payments; provided that, to the extent required to avoid the
tax consequences of Section 409A of the Code, as determined by independent
tax
counsel, the first payment shall cover all payments scheduled to be made to
Executive during the first six (6) months after the date Executive’s employment
terminates, and the first such payment shall be delayed until the day that
is
six (6) months after the date Executive’s employment terminates.
(f) Benefits.
Except as otherwise required by law, Executive’s accrual of, and participation
in plans providing for, the Benefits will cease at the effective Date of the
Termination of employment.
(g) Conditions
To Payments. To be eligible to receive (and continue to receive) and retain
the payments and benefits described in Sections 15(b)(i) and 15(e), Executive
must comply with the provisions of Sections 17, 18 and 19. In
addition, to be eligible to receive (and continue to receive) and retain the
payments and benefits described in Sections 15(b) and 15(e) Executive (or
Executive’s executor and personal representatives in case of death) must first
execute and deliver to Company, and comply with, an agreement, in form and
substance reasonably satisfactory to Company, effectively releasing and giving
up all claims Executive may have against Company or any of its subsidiaries
or
affiliates (and each of their respective controlling shareholders, employees,
directors, officers, plans, fiduciaries, insurers and agents) arising out of
or
based upon any facts or conduct occurring prior to that date. The agreement
will
be prepared by Company, will be based upon the standard form (if any) then
being
utilized by Company for executive separations when severance is being paid,
and
will be provided to Executive at the time Executive’s employment is terminated
or as soon as administratively practicable thereafter (not to exceed five (5)
business days). The agreement will require Executive to consult with
Company representatives, and voluntarily appear as a witness for trial or
deposition (and to prepare for any such testimony) in connection with, any
claim
which may be asserted by or against Company, any
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investigation
or administrative proceeding, any
matter relating to a franchise, or any business matter concerning Company or
any
of its transactions or operations. A copy of the standard form
release being used by Company as of the date of this agreement for executive
separations when severance is being paid is attached to this Agreement as
Exhibit C. It is understood that the final document may not contain
provisions specific to the release of a federal age discrimination claim if
Executive is not at least forty (40) years of age, and may be changed as
Company’s chief legal counsel considers necessary and appropriate to enforce the
same, including provisions to comply with changes in applicable laws and recent
court decisions. Payments under and/or benefits provided by Section
15 will not be made unless and until Executive executes and delivers that
agreement to Company within twenty-one (21) days after delivery of
the document (or such lesser time as Company’s chief legal counsel may
specify in the document) and all conditions to the effectiveness of that
agreement and the releases contemplated thereby have been satisfied (including
without limitation the expiration of any applicable revocation period
without revoking acceptance).
(h) Survival. The
expiration or termination of the Term shall not impair the rights or obligations
of any party hereto which shall have accrued hereunder prior to such expiration,
subject to the terms of any agreement containing a general release provided
by
Executive.
16. Excess
Parachute Payment.
(a) Anything in this
Agreement or the Plan to the contrary notwithstanding, to the extent that any
payment, distribution or acceleration of vesting to or for the benefit of
Executive by the Company (within the meaning of Section 280G of the Code and
the
regulations thereunder), whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise (the "Total Payments")
is or will be subject to the excise tax imposed under Section 4999 of the Code
(the "Excise Tax"), then the Total Payments shall be reduced (but not below
zero) to the Safe Harbor Amount (as defined below) if and to the extent that
a
reduction in the Total Payments would result in Executive retaining a larger
amount, on an after-tax basis (taking into account federal, state and local
income and employment taxes and the Excise Tax), than if Executive received
the
entire amount of such Total Payments in accordance with their existing terms
(taking into account federal, state, and local income and employment taxes
and
the Excise Tax). For purposes of this Agreement, the term
“Safe Harbor Amount” means the largest portion of the Total Payments that would
result in no portion of the Total Payments being subject to the Excise
Tax. Unless Executive shall have given prior written notice
specifying a different order to the Company to effectuate the foregoing, the
Company shall reduce or eliminate the Total Payments, by first reducing or
eliminating the portion of the Total Payments which are payable in cash and
then
by reducing or eliminating non-cash payments in such order as Executive shall
determine; provided that Executive may not so elect to the extent that, in
the
determination of the Determining Party (as defined herein), such election would
cause Executive to be subject to the Excise Tax. Any notice given by
Executive pursuant to the preceding sentence shall take precedence over the
provisions of any other plan, arrangement or agreement governing Executive's
rights and entitlements to any benefits or compensation.
(b)
The determination of whether the Total Payments shall be reduced as provided
in
Section 16(a) and the amount of such reduction shall be made at the Company's
expense by an
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accounting
firm selected by Company from among the
ten largest accounting firms in the United States or by qualified independent
tax counsel (the “Determining Party”); provided that Executive shall be
given advance notice of the Determining Party selected by the Company, and
shall
have the opportunity to reject to the selection, within two business days
of being notified of the selection, on the basis of that Determining Party’s
having a conflict of interest or other reasonable basis, in which case the
Company shall select an alternative auditing firm among the
ten largest accounting firms in the United States or alternative
independent qualified tax counsel, which shall become the Determining
Party. Such Determining Party shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and Executive within ten (10) days of the
termination of Executive’s employment or at such other time mutually agreed by
the Company and Executive. If the Determining Party determines that
no Excise Tax is payable by Executive with respect to the Total Payments, it
shall furnish Executive with an opinion reasonably acceptable to Executive
that
no Excise Tax will be imposed with respect to any such payments and, absent
manifest error, such Determination shall be binding, final and conclusive upon
the Company and Executive. If the Determining Party determines that
an Excise Tax would be payable, the Company shall have the right to accept
the
Determination as to the extent of the reduction, if any, pursuant to Section
16(a), or to have such Determination reviewed by another accounting firm
selected by the Company, at the Company’s expense. If the two
accounting firms do not agree, a third accounting firm shall be jointly chosen
by the Executive Party and the Company, in which case the determination of
such
third accounting firm shall be binding, final and conclusive upon the Company
and Executive.
(c) If,
notwithstanding any reduction described in this Section 16, the IRS determines
that Executive is liable for the Excise Tax as a result of the receipt of any
of
the Total Payments or otherwise, then Executive shall be obligated to pay back
to the Company, within thirty (30) days after a final IRS determination or
in
the event that Executive challenges the final IRS determination, a final
judicial determination, a portion of the Total Payments equal to the “Repayment
Amount.” The Repayment Amount with respect to the payment of benefits
shall be the smallest such amount, if any, as shall be required to be paid
to
the Company so that Executive’s net after-tax proceeds with respect to the Total
Payments (after taking into account the payment of the Excise Tax and all other
applicable taxes imposed on the Payment) shall be maximized. The
Repayment Amount shall be zero if a Repayment Amount of more than zero would
not
result in Executive’s net after-tax proceeds with respect to the Total Payments
being maximized. If the Excise Tax is not eliminated pursuant to this
paragraph, the Executive shall pay the Excise Tax.
(d) Notwithstanding
any other provision of this Section 16, if (i) there is a reduction in the
Total
Payments as described in this Section 16, (ii) the IRS later determines that
Executive is liable for the Excise Tax, the payment of which would result in
the
maximization of Executive’s net after-tax proceeds (calculated as if Executive’s
benefits had not previously been reduced), and (iii) Executive pays the
Excise Tax, then the Company shall pay to Executive those payments or benefits
which were reduced pursuant to this Section 16 as soon as administratively
possible after Executive pays the Excise Tax so that Executive’s net after-tax
proceeds with respect to the Total Payments are maximized.
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17. Competition/Confidentiality.
(a) Acknowledgments
by Executive. Executive acknowledges that (a) during the Term and
as a part of Executive’s employment, Executive has been and will be afforded
access to Confidential Information (as defined below); (b) public disclosure
of
such Confidential Information could have an adverse effect on the Company and
its business; (c) because Executive possesses substantial technical expertise
and skill with respect to the Company’s business, Company desires to obtain
exclusive ownership of each invention by Executive while Executive is employed
by the Company, and Company will be at a substantial competitive disadvantage
if
it fails to acquire exclusive ownership of each such invention by Executive;
and
(d) the provisions of this Section 17 are reasonable and necessary to prevent
the improper use or disclosure of Confidential Information and to provide
Company with exclusive ownership of all inventions and works made or created
by
Executive.
(b) Confidential
Information. (i) The Executive acknowledges that during the Term
Executive will have access to and may obtain, develop, or learn of Confidential
Information (as defined below) under and pursuant to a relationship of trust
and
confidence. The Executive shall hold such Confidential Information in
strictest confidence and never at any time, during or after Executive’s
employment terminates, directly or indirectly use for Executive’s own benefit or
otherwise (except in connection with the performance of any duties as an
employee hereunder) any Confidential Information, or divulge, reveal, disclose
or communicate any Confidential Information to any unauthorized person or entity
in any manner whatsoever.
(ii) As
used in this Agreement, the term “Confidential Information” shall
include, but not be limited to, any of the following information relating to
Company learned by the Executive during the Term or as a result of Executive’s
employment with Company:
(A) information
regarding the Company’s business proposals, manner of the Company’s operations,
and methods of selling or pricing any products or services;
(B) the
identity of persons or entities actually conducting or considering conducting
business with the Company, and any information in any form relating to such
persons or entities and their relationship or dealings with the Company or
its
affiliates;
(C) any
trade secret or confidential information of or concerning any business operation
or business relationship;
(D) computer
databases, software programs and information relating to the nature of the
hardware or software and how said hardware or software is used in combination
or
alone;
(E) information
concerning Company personnel, confidential financial information, customer
or
customer prospect information, information concerning subscribers, subscriber
and customer lists and data, methods and formulas for estimating costs and
setting prices, engineering design standards, testing procedures, research
results (such as marketing surveys, programming trials or product trials),
cost
data (such as billing, equipment and
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programming
cost projection models), compensation information and models, business or
marketing plans or strategies, deal or business terms, budgets, vendor names,
programming operations, product names, information on proposed acquisitions
or
dispositions, actual performance compared to budgeted performance, long-range
plans, internal financial information (including but not limited to financial
and operating results for certain offices, divisions, departments, and key
market areas that are not disclosed to the public in such form), results of
internal analyses, computer programs and programming information, techniques
and
designs, and trade secrets;
(F) information
concerning the Company’s employees, officers, directors and shareholders;
and
(G) any
other trade secret or information of a confidential or proprietary
nature.
(iii) Executive
shall not make or use any notes or memoranda relating to any Confidential
Information except for uses reasonably expected by Executive to be for the
benefit of the Company, and will, at Company’s request, return each original and
every copy of any and all notes, memoranda, correspondence, diagrams or other
records, in written or other form, that Executive may at any time have within
his possession or control that contain any Confidential
Information.
(iv) Notwithstanding
the foregoing, Confidential Information shall not include information which
has
come within the public domain through no fault of or action by Executive or
which has become rightfully available to Executive on a non-confidential basis
from any third party, the disclosure of which to Executive does not violate
any
contractual or legal obligation such third party has to the Company or its
affiliates with respect to such Confidential Information. None of the
foregoing obligations and restrictions applies to any part of the Confidential
Information that Executive demonstrates was or became generally available to
the
public other than as a result of a disclosure by Executive or by any other
person bound by a confidentiality obligation to the Company in respect of such
Confidential Information.
(v) Executive
will not remove from the Company’s premises (except to the extent such removal
is for purposes of the performance of Executive’s duties at home or while
traveling, or except as otherwise specifically authorized by Company) any
Company document, record, notebook, plan, model, component, device, or computer
software or code, whether embodied in a disk or in any other form (collectively,
the “Proprietary Items”). Executive recognizes that, as
between Company and Executive, all of the Proprietary Items, whether or not
developed by Executive, are the exclusive property of the
Company. Upon termination of Executive’s employment by either party,
or upon the request of Company during the Term, Executive will return to Company
all of the Proprietary Items in Executive’s possession or subject to Executive’s
control, including all equipment (e.g., laptop computers, cell phone,
portable e-mail devices, etc.), documents, files and data, and Executive shall
not retain any copies, abstracts, sketches, or other physical embodiment of
any
such Proprietary Items.
Charter
–Approved Prototype August 1,
2007
16
18. Proprietary
Developments.
(a) Any
and all inventions, products, discoveries, improvements, processes, methods,
computer software programs, models, techniques, or formulae (collectively,
hereinafter referred to as “Developments”), made, conceived, developed,
or created by Executive (alone or in conjunction with others, during regular
work hours or otherwise) during Executive’s employment, which may be
directly or indirectly useful in, or relate to, the business conducted or to
be
conducted by the Company will be promptly disclosed by Executive to
Company and shall be Company’s exclusive property. The term
“Developments” shall not be deemed to include inventions, products, discoveries,
improvements, processes, methods, computer software programs, models,
techniques, or formulae which were in the possession of Executive prior to
the
Term. Executive hereby transfers and assigns to Company all
proprietary rights which Executive may have or acquire in any Developments
and
Executive waives any other special right which the Executive may have or accrue
therein. Executive will execute any documents and to take any actions
that may be required, in the reasonable determination of Company’s counsel, to
effect and confirm such assignment, transfer and waiver, to direct the issuance
of patents, trademarks, or copyrights to Company with respect to such
Developments as are to be Company’s exclusive property or to vest in Company
title to such Developments; provided, however, that the expense of securing
any
patent, trademark or copyright shall be borne by Company. The parties agree
that
Developments shall constitute Confidential Information.
(b) “Work
Made for Hire.” Any work performed by Executive during
Executive’s employment with Company shall be considered a “Work Made for
Hire” as defined in the U.S. Copyright laws, and shall be owned by and for
the express benefit of Company. In the event it should be established
that such work does not qualify as a Work Made for Hire, Executive agrees to
and
does hereby assign to Company all of Executive’s right, title, and interest
in such work product including, but not limited to, all copyrights and other
proprietary rights.
19. Non-Competition
and Non-Interference.
(a) Acknowledgments
by Executive. Executive acknowledges and agrees that: (a) the
services to be performed by Executive under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Company
competes with other businesses that are or could be located in any part of
the
United States; and (c) the provisions of this Section 19 are reasonable and
necessary to protect the Company’s business and lawful protectable interests,
and do not impair Executive’s ability to earn a living.
(b) Covenants
of Executive. For purposes of this Section 19, the term
“Restricted Period” shall mean the period commencing as of the
date of this Agreement and terminating on the second anniversary (or, in the
case of Section 19(b)(i), the first anniversary), of the date Executive’s
employment terminated provided that the “Restricted Period” also shall
encompass any period of time from whichever anniversary date is applicable
until
and ending on the last date Executive is to be paid any payment under Section
15
hereof. In consideration of the acknowledgments by Executive, and in
consideration of the compensation and benefits to be paid or provided to
Executive by Company, Executive covenants and agrees that during the Restricted
Charter
–Approved Prototype August 1,
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17
Period,
the Executive will not, directly or indirectly, for Executive’s own benefit or
for the benefit of any other person or entity other than the
Company:
(i) in
the United States or any other country or territory where the Company then
conducts its business: engage in, operate, finance, control or be employed
by a
“Competitive Business” (defined below); serve as an officer or director of a
Competitive Business (regardless of where Executive then lives or conducts
such
activities); perform any work as an employee, consultant (other than as a member
of a professional consultancy, law firm, accounting firm or similar professional
enterprise that has been retained by the Competitive Business and where
Executive has no direct role in such professional consultancy and maintains
the
confidentiality of all information acquired by Executive during his or her
employment with the Company), contractor, or in any other capacity with, a
Competitive Business; directly or indirectly invest or own any interest in
a
Competitive Business (regardless of where Executive then lives or conducts
such
activities); or directly or indirectly provide any services or advice to a
any
business, person or entity who or which is engaged in a Competitive Business
(other than as a member of a professional consultancy, law firm, accounting
firm
or similar professional enterprise that has been retained by the Competitive
Business and where Executive has no direct role in such professional consultancy
and maintains the confidentiality of all information acquired by Executive
during his or her employment with the Company). A “Competitive
Business” is any business, person or entity who or which, anywhere
within that part of the United States, or that part of any other country or
territory, where the Company conducts business; owns or operates a cable
television system; provides direct television or any satellite-based, telephone
system-based, internet based or wireless system for delivering television,
music
or other entertainment programming (other than as an ancillary service, such
as
cellular telephone providers); provides telephony services using any wired
connection or fixed (as opposed to mobile) wireless application; provides data
or internet access services; or offers, provides, markets or sells any service
or product of a type that is offered or marketed by or directly competitive
with
a service or product offered or marketed by the Company at the time Executive’s
employment terminates; or who or which in any case is preparing or planning
to
do so. The provisions of this Section 19 shall not be construed or applied
(i)
so as to prohibit Executive from owning not more than five percent (5%) of
any
class of securities that is publicly traded on any national or regional
securities exchange, as long as Executive’s investment is passive and Executive
does not lend or provide any services or advice to such business or otherwise
violate the terms of this Agreement in connection with such investment; or
(ii)
so as to prohibit Executive from working as an employee in the cable television
business for a company/business that owns or operates cable television
franchises (by way of current example only, Time Warner, Cablevision, Cox or
Comcast), provided that the company/business is not providing cable
services in any political subdivision/ geographic area where the Company has
a
franchise or provides cable services (other than nominal overlaps of service
areas) and the company/business is otherwise not engaged in a Competitive
Business, and provided Executive does not otherwise violate the terms of this
Agreement in connection with that work;
(ii) contact,
solicit or provide any service to any person or entity that was a customer
franchisee, or prospective customer of the Company at any time during
Executive’s employment (a prospective customer being one to whom the Company had
made a business
Charter
–Approved Prototype August 1,
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18
proposal
within twelve (12) months prior to the time Executive’s employment terminated);
or directly solicit or encourage any customer, franchisee or subscriber of
the
Company to purchase any service or product of a type offered by or competitive
with any product or service provided by the Company, or to reduce the amount
or
level of business purchased by such customer, franchisee or subscriber from
the
Company; or take away or procure for the benefit of any competitor of the
Company, any business of a type provided by or competitive with a product or
service offered by the Company; or
(iii) solicit
or recruit for employment, any person or persons who are employed by Company
or
any of its subsidiaries or affiliates, or who were so employed at any time
within a period of six (6) months immediately prior to the date Executive’s
employment terminated, or otherwise interfere with the relationship between
any
such person and the Company; nor will the Executive assist anyone else in
recruiting any such employee to work for another company or business or
discuss with any such person his or her leaving the employ of the Company or
engaging in a business activity in competition with the Company. This provision
shall not apply to secretarial, clerical, custodial or maintenance
employees.
If
Executive violates any covenant contained in this Section 19, then the term
of
the covenants in this Section shall be extended by the period of time Executive
was in violation of the same.
(c) Provisions
Pertaining to the Covenants. Executive recognizes that the
existing business of the Company extends to various locations and areas
throughout the United States and may extend hereafter to other countries and
territories and agrees that the scope of Section 19 shall extend to any part
of
the United States, and any other country or territory, where the Company
operates or conducts business, or has concrete plans to do so at the time
Executive’s employment terminates. It is agreed that the
Executi
ve’s
services hereunder are special, unique, unusual and extraordinary giving them
peculiar value, the loss of which cannot be reasonably or adequately compensated
for by damages, and in the event of the Executive’s breach of this Section,
Company shall be entitled to equitable relief by way of injunction or otherwise
in addition to the cessation of payments and benefits hereunder. If
any provision of Sections 17, 18 or 19 of this Agreement is deemed to be
unenforceable by a court (whether because of the subject matter of the
provision, the duration of a restriction, the geographic or other scope of
a
restriction or otherwise), that provision shall not be rendered void but the
parties instead agree that the court shall amend and alter such provision to
such lesser degree, time, scope, extent and/or territory as will grant Company
the maximum restriction on Executive’s activities permitted by applicable law in
such circumstances. Company’s failure to exercise its rights to enforce the
provisions of this Agreement shall not be affected by the existence or non
existence of any other similar agreement for anyone else employed by Company
or
by Company’s failure to exercise any of its rights under any such
agreement.
(d) Notices. In
order to preserve Company’s rights under this Agreement, Company is authorized
to advise any potential or future employer, any third party with whom Executive
may become employed or enter into any business or contractual relationship
with,
and any third party whom Executive may contact for any such purpose, of the
existence of this Agreement and its terms, and Company shall not be
liable for doing so.
Charter
–Approved Prototype August 1,
2007
19
(e) Injunctive
Relief and Additional Remedy. Executive acknowledges that the
injury that would be suffered by Company as a result of a breach of the
provisions of this Agreement (including any provision of Sections 17, 18 and
19)
would be irreparable and that an award of monetary damages to Company for such
a
breach would be an inadequate remedy. Consequently, Company will have the
right, in addition to any other rights it may have, to obtain injunctive relief
to restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and Company will not be obligated to post
bond
or other security in seeking such relief. Without limiting Company’s
rights under this Section or any other remedies of Company, if Executive
breaches any of the provisions of Sections 17, 18 or 19, Company will have
the
right to cease making any payments otherwise due to Executive under this
Agreement.
(f) Covenants
of Sections 17, 18 and 19 are Essential and Independent
Covenants. The covenants by Executive in Sections 17, 18 and 19
are essential elements of this Agreement, and without Executive’s agreement to
comply with such covenants, Company would not have entered into this Agreement
or employed Executive. Company and Executive have independently
consulted their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific
regard to the nature of the business conducted by
Company. Executive’s covenants in Sections 17, 18 and 19 are
independent covenants and the existence of any claim by Executive against
Company, under this Agreement or otherwise, will not excuse Executive’s breach
of any covenant in Section 17, 18 or 19. If Executive’s employment hereunder is
terminated, this Agreement will continue in full force and effect as is
necessary or appropriate to enforce the covenants and agreements of Executive
in
Sections 17, 18 and 19. The Company’s right to enforce the
covenants in Sections 17, 18 and 19 shall not be adversely affected or limited
by the Company’s failure to have an agreement with another employee with
provisions at least as restrictive as those contained in Sections 17, 18 or
19 ,
or by the Company’s failure or inability to enforce (or agreement not to
enforce) in full the provisions of any other or similar agreement containing
one
or more restrictions of the type specified in Sections 17, 18 and 19 of this
Agreement.
20. Executive’s
Representations And Further
Agreements.
(a) Executive
represents, warrants and covenants to Company that:
(i) Neither
the execution and delivery of this Agreement by Executive nor the performance
of
any of Executive’s duties hereunder in accordance with the Agreement will
violate, conflict with or result in the breach of any order, judgment,
employment contract, agreement not to compete or other agreement or arrangement
to which Executive is a party or is subject;
(ii) On
or prior to the date hereof, Executive has furnished to Company true
and complete copies of all judgments, orders, written employment contracts,
agreements not to compete, and other agreements or arrangements restricting
Executive’s employment or business pursuits, that have current application
to Executive;
(iii) Executive
is knowledgeable and sophisticated as to business matters, including the subject
matter of this Agreement, and that prior to assenting to the terms of this
Charter
–Approved Prototype August 1,
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20
Agreement,
or giving the representations and warranties herein, Executive has been given
a
reasonable time to review it and has consulted with counsel of Executive’s
choice; and
(iv) Executive
has not provided, nor been requested by Company to provide, to Company, any
confidential or non public document or information of a former employer that
constitutes or contains any protected trade secret, and will not use any
protected trade secrets in connection with the Executive’s
employment.
(b) During
and subsequent to expiration of the Term, the Executive will cooperate with
Company, and furnish any and all complete and truthful information, testimony
or
affidavits in connection with any matter that arose during the Executive’s
employment, that in any way relates to the business or operations of the Company
or any of its parent or subsidiary corporations or affiliates, or of which
the
Executive may have any knowledge or involvement; and will consult with and
provide information to Company and its representatives concerning such
matters. Executive shall fully cooperate with Company in the
protection and enforcement of any intellectual property rights that relate
to
services performed by Executive for Company, whether under the terms of this
Agreement or prior to the execution of this Agreement. This shall
include without limitation executing, acknowledging, and delivering to Company
all documents or papers that may be necessary to enable Company to publish
or
protect such intellectual property rights. Subsequent to the Term,
the parties will make their best efforts to have such cooperation performed
at reasonable times and places and in a manner as not to unreasonably interfere
with any other employment in which Executive may then be
engaged. Nothing in this Agreement shall be construed or interpreted
as requiring the Executive to provide any testimony, sworn statement or
declaration that is not complete and truthful. If Company requires
the Executive to travel outside the metropolitan area in the United States
where
the Executive then resides to provide any testimony or otherwise provide any
such assistance, then Company will reimburse the Executive for any reasonable,
ordinary and necessary travel and lodging expenses incurred by Executive to
do
so provided the Executive submits all documentation required under Company’s
standard travel expense reimbursement policies and as otherwise may be required
to satisfy any requirements under applicable tax laws for Company to deduct
those expenses. Nothing in this Agreement shall be construed or interpreted
as
requiring the Executive to provide any testimony or affidavit that is not
complete and truthful.
21. Mutual
Non-Disparagement. Neither
the Company nor Executive shall make any oral or written statement about the
other party which is intended or reasonably likely to disparage the other party,
or otherwise degrade the other party’s reputation in the business or legal
community or in the telecommunications industry.
22. Foreign
Corrupt Practices Act. Executive
agrees to comply in all material respects with the applicable provisions of
the
U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”), as amended, which
provides generally that: under no circumstances will foreign officials,
representatives, political parties or holders of public offices be offered,
promised or paid any money, remuneration, things of value, or provided any
other
benefit, direct or indirect, in connection with obtaining or maintaining
contracts or orders hereunder. When any representative, employee,
agent, or other individual or organization associated with Executive is required
to perform any obligation related to or in connection with this Agreement,
the
substance of this
Charter
–Approved Prototype August 1,
2007
21
section
shall be imposed upon such person and included in any agreement between
Executive and any such person. Failure by Executive to comply with
the provisions of the FCPA shall constitute a material breach of this Agreement
and shall entitle the Company to terminate Executive’s employment for
Cause.
23. Purchases
and Sales of the Company’s
Securities. Executive
has read and agrees to comply in all respects with the Company’s Policy
Regarding the Purchase and Sale of the Company’s Securities by Employees, as
such Policy may be amended from time to time. Specifically, and
without limitation, Executive agrees that Executive shall not purchase or sell
stock in the Company at any time (a) that Executive possesses material
non-public information about the Company or any of its businesses; and (b)
during any “Trading Blackout Period” as may be determined by the Company as set
forth in the Policy from time to time.
24. Indemnification. (a) If
Executive is made a party or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter, a "proceeding"), by reason of
the
fact that he or she is or was a director or an officer of the Corporation or
is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan (hereinafter, a "Covered Person"), whether the basis of such proceeding
is
alleged action in an official capacity as a director, officer, employee or
agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists
or
may hereafter be amended, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such Covered Person
in
connection therewith; provided, however, that, except as provided in
Section 24(c) hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such Covered Person in
connection with a proceeding (or part thereof) initiated by such Covered Person
only if such proceeding (or part thereof) was authorized by the
Board.
(b) The
Corporation shall pay
the expenses (including attorneys' fees) incurred by Executive in defending
any
such proceeding in advance of its final disposition (hereinafter, an
"advancement of expenses"), provided, however, that, if the Delaware
General Corporation Law so requires, an advancement of expenses incurred by
Executive in his or her capacity as such shall be made only upon delivery to
the
Corporation of an undertaking (hereinafter, an "Undertaking"), by or on behalf
of such Executive, to repay all amounts so advanced if it shall ultimately
be
determined by final judicial decision from which there is no further right
to
appeal (hereinafter, a "Final Adjudication") that Executive was not entitled
to
be indemnified for such expenses under this Section 24 or
otherwise. The rights to indemnification and to the advancement of
expenses conferred in Subsections 24(a) and (b) hereof shall be contract
rights and such rights shall continue even after Executive ceases to be employed
by the Company and shall inure to the benefit of Executive’s heirs, executors
and administrators.
Charter
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2007
22
(c) If a claim under Section 24(a)
or (b) hereof is not paid in full by the Company within sixty (60) days
after a written claim therefore has been received by the Company, except in
the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, Executive may at any time thereafter
bring suit against the Company to recover the unpaid amount of the
claim. If Executive is successful in whole or in part in any such
suit, or in a suit brought by the Company to recover an advancement of expenses
pursuant to the terms of an Undertaking, Executive shall be entitled to be
paid
also the expense of prosecuting or defending such suit. In
(i) any suit brought by Executive to enforce a right to indemnification
hereunder (but not in a suit brought by Executive to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) any suit
brought by the Company to recover an advancement of expenses pursuant to the
terms of an Undertaking, the Company shall be entitled to recover such expenses
upon a final adjudication that, Executive has not met the applicable standard
for indemnification set forth in the Delaware General Corporation
Law. To the fullest extent permitted by law, neither the failure of
the Company (including its disinterested directors, committee thereof,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of Executive is
proper in the circumstances because the Executive has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor
an
actual determination by the Company (including its disinterested directors,
committee thereof, independent legal counsel or its stockholders) that Executive
has not met such applicable standard of conduct, shall create a presumption
that
Executive has not met the applicable standard of conduct or, in the case of
such
a suit brought by Executive, be a defense to such suit. In any suit
brought by Executive to enforce a right to indemnification or to an advancement
of expenses hereunder, or brought by the Company to recover an advancement
of
expenses pursuant to the terms of an undertaking, the burden of proving that
Executive is not entitled to be indemnified, or to such advancement of expenses,
under this Section 24 or otherwise shall, to the extent permitted by law, be
on
the Company.
(d) The
rights to
indemnification and to the advancement of expenses conferred in this Section
24
shall not be exclusive of any other right of indemnification which Executive
or
any other person may have or hereafter acquire by any statute, the Corporation's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
(e) The Company may maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent
of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Company would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
25. Withholding.
Anything to the contrary notwithstanding, all payments required to be made
by
Company hereunder to Executive or his estate or beneficiary shall be
subject to the withholding of such amounts, if any, relating to tax and other
payroll deductions as the Company may reasonably determine it should withhold
pursuant to applicable law or regulation.
Charter
–Approved Prototype August 1,
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23
26. Notices. Any
written notice required by this Agreement will be deemed provided and delivered
to the intended recipient when (a) delivered in person by hand; or (b) three
days after being sent via U.S. certified mail, return receipt requested; or
(c)
the day after being sent via by overnight courier, in each case when such notice
is properly addressed to the following address and with all postage and similar
fees having been paid in advance:
|
|
If
to the Company:
|
Charter
Communications, Inc.
|
|
|
Attn.:
Human Resources
|
|
|
12405
Powerscourt Drive
|
| St. Louis, MO 63131 |
|
|
If
to Executive:
|
12405
Powerscourt Drive
|
|
|
St.
Louis, MO 63131
|
Either
party may change the address to which notices, requests, demands and other
communications to such party shall be delivered personally or mailed by giving
written notice to the other party in the manner described above.
27. Binding
Effect. This
Agreement shall be for the benefit of and binding upon the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and, where applicable, assigns.
28. Entire
Agreement.
As of the Effective Date, the Employee and the Company hereby irrevocably
agree that the Old Employment Agreement is hereby terminated in its entirety,
and neither party thereto shall have any rights or obligations under the Old
Employment Agreement, including but not limited to, in the case of the Employee,
any right to any severance payment or benefit. This Agreement
constitutes the entire agreement between the listed parties with respect to
the
subject matter described in this Agreement and supersedes all prior agreements,
understandings and arrangements, both oral and written, between the parties
with
respect to such subject matter, except to the extent said agreements,
understandings and arrangements are referenced or referred to in this
Agreement. This Agreement may not be modified, amended, altered or
rescinded in any manner, except by written instrument signed by both of the
parties hereto; provided, however, that the waiver by either party of a breach
or compliance with any provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or compliance. Except to the
extent the terms hereof are explicitly and directly inconsistent with the
terms of the Plan, nothing herein shall be deemed to override or replace the
terms of the Plan, including but not limited to sections 6.4, 9.4 and 10.4
thereof.
29. Severability. In
case any one or more of the provisions of this Agreement shall be held by any
court of competent jurisdiction or any arbitrator selected in accordance with
the terms hereof to be illegal, invalid or unenforceable in any respect, such
provision shall have no force and effect, but such holding shall not affect
the
legality, validity or enforceability of any other provision of this Agreement
provided that the provisions held illegal, invalid or unenforceable does not
reflect or manifest a fundamental benefit bargained for by a party
hereto.
Charter
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2007
24
30. Assignment. Subject
to the Executive’s right to terminate in the event of a Change in Control
hereunder, this Agreement can be assigned by the Company only to a company
that
controls, is controlled by, or is under common control with the Company and
which assumes all of the Company’s obligations hereunder. The duties
and covenants of Executive under this Agreement, being personal, may not be
assigned or delegated except that Executive may assign payments due hereunder
to
a trust established for the benefit of Executive’s family or to Executive’s
estate or to any partnership or trust entered into by Executive and/or
Executive’s immediate family members (meaning, Executive’s spouse and lineal
descendants). This agreement shall be binding in all respects on
permissible assignees.
31. Notification. In
order to preserve the Company’s rights under this Agreement, the Company is
authorized to advise any third party with whom Executive may become employed
or
enter into any business or contractual relationship with, or whom Executive
may
contact for any such purpose, of the existence of this Agreement and its terms,
and the Company shall not be liable for doing so.
32. Choice
of Law/Jurisdiction This Agreement is deemed to be accepted and
entered into in St. Louis County, Missouri. Executive and the Company intend
and
hereby acknowledge that jurisdiction over disputes with regard to this
Agreement, and over all aspects of the relationship between the parties hereto,
shall be governed by the laws of the State of Missouri without giving effect
to
its rules governing conflicts of laws. Executive agrees that in any
suit to enforce this Agreement, or as to any dispute that arises between the
Company and the Executive regarding or relating to this Agreement and/or any
aspect of Executive’s employment relationship with Company, venue and
jurisdiction are proper in the County of St. Louis, and (if federal jurisdiction
exists) the United States District Court for the Eastern Division of Missouri
in
St. Louis, and Executive waives all objections to jurisdiction and venue in
any
such forum and any defense that such forum is not the most convenient
forum.
33. Section
Headings. The
section headings contained in this Agreement are for reference purposes only
and
shall not affect in any manner the meaning or interpretation of this
Agreement.
34. Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original, but all of which taken together shall constitute one and
the
same instrument.
[remainder
of page intentionally left blank]
Charter
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25
IN
WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
Charter
Communications, Inc.
By: /s/
Neil Smit
Name:
Neil Smit
Title:
President and Chief Executive Officer
EXECUTIVE
/s/
Michael Lovett
Name: Michael
J. Lovett
Address: _________________________
Charter
–Approved Prototype August 1,
2007
26
Charter
Communications
Grant
Summary Report
Exhibit
A
Activity
as of 6/25/2007
|
Grant
Date
|
Grant
Type
|
Grant
Price
|
Granted
|
Exercised
|
Canceled
|
Subject
to Repurchase
|
Outstanding
|
Vested
|
Outstanding
Exercisable
|
|
2001
Non-Qualified Stock Option
|
|||||||||
|
Michael
J. Lovett
|
|||||||||
|
7/23/2003
|
Non-Qualified
|
$5.06
|
100,000
|
0
|
0
|
0
|
100,000
|
75,000
|
75,000
|
|
1/27/2004
|
Non-Qualified
|
$5.17
|
77,500
|
0
|
0
|
0
|
77,500
|
58,125
|
58,125
|
|
1/27/2004
|
Restricted
|
$0.00
|
37,500
|
0
|
37,500
|
0
|
0
|
37,500
|
0
|
|
4/27/2004
|
Restricted
|
$0.00
|
10,000
|
0
|
10,000
|
0
|
0
|
10,000
|
0
|
|
4/27/2004
|
Non-Qualified
|
$4.555
|
12,500
|
0
|
0
|
0
|
12,500
|
9,375
|
9,375
|
|
10/26/2004
|
Non-Qualified
|
$2.865
|
82,000
|
0
|
0
|
0
|
82,000
|
41,000
|
41,000
|
|
10/26/2004
|
Restricted
|
$0.00
|
40,500
|
0
|
40,500
|
0
|
0
|
0
|
0
|
|
4/26/2005
|
Non-Qualified
|
$1,295
|
216,000
|
54,000
|
0
|
0
|
162,000
|
108,000
|
54,000
|
|
4/26/2005
|
Restricted
|
$0.00
|
129,600
|
0
|
17,820
|
0
|
111,780
|
0
|
0
|
|
4/26/2005
|
Restricted
|
$0.00
|
75,000
|
50,000
|
0
|
0
|
25,000
|
50,000
|
0
|
|
2/28/2006
|
Non-Qualified
|
$1.195
|
432,000
|
108,000
|
0
|
0
|
324,000
|
108,000
|
0
|
|
2/28/2006
|
Restricted
|
$0.00
|
150,000
|
50,000
|
0
|
0
|
100,000
|
50,000
|
0
|
|
2/28/2006
|
Restricted
|
$0.00
|
259,200
|
0
|
0
|
0
|
259,200
|
0
|
0
|
|
2/28/2006
|
Restricted
|
$0.00
|
155,520
|
0
|
0
|
0
|
155,520
|
0
|
0
|
|
3/9/2007
|
Restricted
|
$0.00
|
300,000
|
0
|
0
|
0
|
300,000
|
0
|
0
|
|
3/9/2007
|
Non-Qualified
|
$2.835
|
864,000
|
0
|
0
|
0
|
864,000
|
0
|
0
|
|
3/9/2007
|
Restricted
|
$0.00
|
518,400
|
0
|
0
|
0
|
518,400
|
0
|
0
|
|
Optionee
Total
|
3,459,720
|
262,000
|
105,820
|
0
|
3,091,900
|
547,000
|
237,500
|
||
|
Plan
Total
|
3,459,720
|
262,000
|
105,820
|
0
|
3,091,900
|
547,000
|
237,500
|
||
Charter
–Approved Prototype August 1,
2007
27
Exhibit
B
Executive
Cash Award Plan
Charter
–Approved Prototype August 1,
2007
28
Exhibit
10.4
AMENDED
AND RESTATED EMPLOYMENT AGREEMENT
THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”),
dated and effective the 1st day of August 2007 (the “Effective
Date”) is made by and between CHARTER COMMUNICATIONS, INC., a Delaware
corporation (the “Company”), and Grier Raclin, an adult resident of
Missouri (the “Executive”).
RECITALS:
WHEREAS,
the Executive and the Company have previously entered into that
certain
Employment Agreement dated October 10, 2005 (the "Old Employment
Agreement") and the parties desire to amend and restate in its entirety the
Old Employment Agreement;
WHEREAS,
it is the desire of the Company to assure itself of the services of Executive
by
engaging Executive as its Executive Vice President, General Counsel and
Secretary and the Executive desires to serve the Company on the terms herein
provided;
WHEREAS,
in connection with the entry into the Agreement, the Executive will
be
granted performance units and restricted shares of Company
Stock pursuant to the Company's 2001 Stock Incentive Plan,
as amended as of the date hereof (the “Special
Equity”);
WHEREAS,
Executive’s agreement to the terms and conditions of Sections 17 and 19
are a material and essential condition of Executive’s employment with the
Company hereafter under the terms of this Agreement;
NOW,
THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as
follows:
1. Certain
Definitions.
(a) “Allen”
shall mean Paul G. Allen (and his heirs or beneficiaries under his will(s),
trusts or other instruments of testamentary disposition), and any entity
or
group over which Paul G. Allen has Control and that constitutes a Person
as
defined herein. For the purposes of this definition, “Control”
means the power to direct the management and policies of an entity
or to appoint
or elect a majority of its governing board.
(b)
“Annual
Base Salary” shall have the meaning set forth in Section 5.
(c) “Board”
shall mean the Board of Directors of the Company.
(d) “Bonus”
shall have the meaning set forth in Section 6.
(e) The
Company shall have “Cause” to terminate Executive’s employment hereunder upon
Executive’s:
(i) Executive’s
breach of a material obligation (which, if curable, is not cured within ten
business (10) days after Executive receives written notice of such breach)
Charter
- Approved Prototype July 31, 2007
1
(i) or
representation under this Agreement or breach of any fiduciary duty to
the
Company which, if curable, is not cured within ten business (10) days
after
Executive receives written notice of such breach; or any act of fraud
or knowing
material misrepresentation or concealment upon, to or from the Company
or the
Board;
(ii) Executive’s
failure to adhere in any material respect to (i) the Company’s Code of Conduct
in effect from time to time and applicable to officers and/or employees
generally, or (ii) any written Company policy, if such policy is material
to the
effective performance by Executive of the Executive’s duties under this
Agreement, and if Executive has been given a reasonable opportunity to
cure this
failure to comply within a period of time which is reasonable under the
circumstances but not more than the thirty (30) day period after written
notice
of such failure is provided to Executive; provided that if Executive
cures this failure to comply with such a policy and then fails again
to comply
with the same policy, no further opportunity to cure that failure shall
be
required;
(iii) Executive’s
misappropriation (or attempted misappropriation) of a material amount
of the
Company’s funds or property;
(iv) Executive’s
conviction of, the entering of a guilty plea or plea of nolo contendere
or no contest (or the equivalent), or entering into any pretrial diversion
program or agreement or suspended imposition of sentence, with respect
to either
a felony or a crime that adversely affects or could reasonably be expected
to
adversely affect the Company or its business reputation; or the institution
of
criminal charges against Executive, which are not dismissed within sixty
(60)
days after institution, for fraud, embezzlement, any felony offense involving
dishonesty or constituting a breach of trust or moral turpitude;
(v) Executive’s
admission of liability of, or finding of liability, for a knowing and
deliberate
violation of any “Securities Laws.” As used herein, the term
“Securities Laws” means any federal or state law, rule or regulation governing
generally the issuance or exchange of securities, including without limitation
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
rules
and regulations promulgated thereunder;
(vi) conduct
by Executive in connection with Executive’s employment that constitutes gross
neglect of any material duty or responsibility, willful
misconduct, or recklessness which, if curable, is not cured within
ten business (10) days after Executive receives written notice of such
breach;
(vii) Executive’s
illegal possession or use of any controlled substance, or excessive
use of
alcohol at a work function, in connection with Executive’s duties, or on Company
premises; “excessive” meaning either repeated unprofessional use or any single
event of consumption giving rise to significant intoxication or unprofessional
behavior;
(viii) willful
or grossly negligent commission of any other act or failure to act
in connection
with the Executive’s duties as an executive of the Company which causes or
reasonably may be expected (as of the time of such occurrence) to
cause
substantial
Charter
- Approved Prototype July 31, 2007
2
economic injury to or substantial injury to the business reputation of
the
Company or any subsidiary or affiliate of the Company, including, without
limitation, any material
violation of the Foreign Corrupt Practices Act, as described herein
below.
If
Executive commits or is charged with committing any offense of the character
or
type specified in subparagraphs 1(e)(iv), (v) or (viii) above, then the Company
at its option may suspend the Executive with or without pay. If the
Executive subsequently is convicted of, pleads guilty or nolo
contendere (or equivalent plea) to, or enters into any type of suspended
imposition of sentence or pretrial diversion program with respect to, any
such
offense (or any matter that gave rise to the suspension), the Executive shall
immediately repay any compensation paid in cash hereunder from the date of
the
suspension. Notwithstanding anything to the contrary in any stock
option or equity incentive plan or award agreement, all vesting and all lapsing
of restrictions on restricted shares shall be tolled during the period of
suspension and all unvested options and restricted shares for which the
restrictions have not lapsed shall terminate and not be exercisable by or
issued
to Executive if during or after such suspension the Executive is convicted
of,
pleads guilty or nolo contendere (or equivalent plea) to, or enters
into any type of suspended imposition of sentence or pretrial diversion program
with respect to, any offense specified in subparagraphs 1(e)(iv), (v) or
(viii)
above or any matter that gave rise to the suspension.
(f) “Change of
Control” shall be deemed to have occurred if:
(i) any
Person is or becomes a “beneficial owner” (as determined for purposes of
Regulation 13D-G, as currently in effect, of the Exchange Act), directly
or
indirectly, of securities representing the Applicable Percentage (as defined
below) or more of the total voting power of all of the Company’s then
outstanding voting securities. For purposes of this Section 1(f), the
term “Person” shall not include: (A) the Company or any of
its subsidiaries, (B) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its subsidiaries, or
(C) an underwriter temporarily holding securities pursuant to an offering
of said securities, or (D) Allen. For purposes of this Agreement, in
the case of a recapitalization or other exchange involving the exchange
of
Company voting stock for the Company's debt, the group of debtholders that
acquires such Company voting stock as the result of such recapitalization
or
exchange shall not be treated as a single Person solely by reason of such
recapitalization or exchange; or
(ii) the occurrence
of a merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company
(a
“Business Combination”), in each case, unless following such Business
Combination: (A) all or substantially all of the individuals and
entities who were the “beneficial owners” (as determined for purposes of
Regulation 13D-G, as currently in effect, of the Exchange Act) of the
outstanding voting securities of the Company immediately prior to such
Business
Combination beneficially own, directly or indirectly, securities representing
more than fifty percent (50%) of the total voting power of the then outstanding
voting securities of the entity resulting from such Business Combination
(or
such assets as the case may be) or the parent of such entity in substantially
the same proportionate ownership as in effect immediately prior to the
Business
Combination (the “Resulting Entity”); and (B) a majority of the members of
the board of directors or other governing body of the Resulting Entity
were
members of the Board at the
Charter
- Approved Prototype July 31, 2007
3
time of the execution of the initial agreement, or at the time of the action
of
the Board, providing for such Business Combination; or
(iii) the
consummation of a plan of complete liquidation or dissolution of the
Company;
or
(iv) if
and when Allen shall no longer have the power to appoint a majority of
the
Board, during any period of two (2) consecutive calendar years, individuals
who
either (A) at the beginning of such period are members of the Board ("Incumbent
Directors"), or (B) whose election to the Board during such period is
approved
by a vote of the majority of those members of the Board who are Incumbent
Directors at the time of such approval, whereupon such individual so
approved
shall be treated as an Incumbent Director with respect to future approvals,
cease for any reason to constitute a majority of the Board.
Notwithstanding
the foregoing subsections 1(f)(i) through (iii), a Change of Control shall
not include any transaction or series of transactions, including any
transactions described above if, following such transaction or transactions,
(x)
Allen has the largest percentage ownership of the voting securities in
the
Company or any successor or surviving corporation held by any Person (other
than any Person that includes Allen), provided such percentage ownership
is more
than twenty-five percent or (y) Allen has the power to appoint a majority
of the
members of the Board of Directors.
For
purposes of this definition, (A) at all times that Allen is or are the
“beneficial owner(s)” (as determined for purposes of Regulation 13D-G, as
currently in effect, of the Exchange Act) of securities representing
in the
aggregate at least fifty percent (50%) of the total voting power of all
of the
Company’s then outstanding voting securities, “Applicable Percentage” means
fifty percent (50%); and (B) at all times that Allen is or are the beneficial
owner(s) of securities representing in the aggregate less than fifty
percent
(50%) of the total voting power of all of the Company’s then outstanding voting
securities, “Applicable Percentage” means any percentage that is more than
the greater of (1) the percentage of the total voting power of all of
the
Company’s then outstanding voting securities represented by securities
beneficially owned by Allen or (2) twenty-five percent (25%).
(g) “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to
time.
(h) “Committee”
shall mean either the Compensation and Benefits Committee of the Board,
or a
Subcommittee of such Committee duly appointed by the Board or the
Committee.
(i) “Company”
shall have the meaning set forth in the preamble hereto.
(j) “Company
Stock” shall mean the $.10 par value common stock of the Company.
Charter
- Approved Prototype July 31, 2007
4
(k) “Date
of Termination” shall mean (i) if Executive’s employment is terminated by
Executive’s death, the date of Executive’s death and (ii) if Executive’s
employment is terminated pursuant to Section 14(a)(ii) – (vi), the date of
termination of employment, as defined in 409(A) regulations under the
Code.
(l) For
purposes of this Agreement, Executive will be deemed to have a “Disability” if,
due to illness, injury or a physical or medically recognized mental condition,
(a) Executive is unable to perform Executive’s duties under this Agreement with
reasonable accommodation for 120 consecutive days, or 180 days during any
twelve
month period, as determined in accordance with this Section, or (b) Executive
is
considered disabled for purposes of receiving / qualifying for long term
disability benefits under any group long term disability insurance plan or
policy offered by Company in which Executive participates. The
Disability of Executive will be determined by a medical doctor selected by
written agreement of Company and Executive upon the request of either party
by
notice to the other, or (in the case of and with respect to any applicable
long
term disability insurance policy or plan) will be determined according to
the terms of the applicable long term disability insurance policy /
plan. If Company and Executive cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether Executive
has a Disability. The determination of the medical doctor selected
under this Section will be binding on both parties. Executive must
submit to a reasonable number of examinations by the medical doctor making
the
determination of Disability under this Section, and to other specialists
designated by such medical doctor, and Executive hereby authorizes the
disclosure and release to Company of such determination and all supporting
medical records. If Executive is not legally competent, Executive’s
legal guardian or duly authorized attorney-in-fact will act in Executive’s stead
under this Section for the purposes of submitting Executive to the examinations,
and providing the authorization of disclosure, required under this
Section.
(m) “Executive”
shall have the meaning set forth in the preamble hereto.
(n) “Good
Reason” shall mean any of the events described herein that occur without
Executive's prior written consent: (i) any reduction in Executive’s Annual Base
Salary, Target Bonus Percentage, or title except as permitted hereunder,
(ii)
any failure to pay Executive's compensation hereunder when due; (iii) any
material breach by the Company of a term hereof; (iv) relocation
of Executive’s primary workplace to a location that is more
than fifty (50) miles from the office where Executive is then
assigned to work as Executive’s principal office; (v) a transfer or reassignment
to another executive of material responsibilities that have been assigned
to
Executive (and were not identified by the Company to be assigned only on
an
interim basis at the time of assignment or thereafter) and generally are
part of
the responsibilities and functions assigned to a General Counsel and
Secretary of a public corporation or (vi) any change in reporting structure
such that Executive no longer reports directly to the "Chief Executive Officer
(or equivalent position, if there is no Chief Executive Officer)" (in each
case
“(i)” through “(vi)” only if Executive objects in writing within 30 days after
being informed of such events and unless Company retracts and/or rectifies
the
claimed Good Reason within 30 days following Company’s receipt of timely written
objection from Executive); (vii) if within six months after a Change of Control,
Executive has not received an offer from the surviving company to continue
in
his or her position immediately prior to such Change of Control under at
least
the same terms and conditions
Charter
- Approved Prototype July 31, 2007
5
(except
that the value of the equity-based compensation after such Change
of Control need only be commensurate with the value of equity-based compensation
given to executives with equivalent positions in the surviving company,
if
any)as set herein; (viii) the Company's decision not to renew this Agreement
at
the end of its term, or (ix) the failure of a successor to the business
of the
Company to assume the Company's obligations under this Agreement in the
event of
a Change of Control during its term.
(o) “Notice
of Termination” shall have the meaning set forth in Section 14(b).
(p) “Options”
shall have the meaning set forth in Section 7
(q) “Performance
Unit” and “Performance Shares” shall have the meaning set forth in Section 9
hereof.
(r) “Person”
shall have the meaning set forth in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934.
(s) “Plan”
shall mean the 2001 Stock Incentive Plan as amended by the Company from time
to
time.
(s) “Restricted
Shares” shall have the meaning set forth in Section 8.
(t) “Term”
shall have the meaning set forth in Section 2.
(u) "Voluntary"
and "Voluntarily" in connection with Executive's termination of employment
shall
mean a termination of employment resulting from the initiative of the Executive,
excluding a termination of employment attributable to Executive's death or
Disability. A resignation by Executive that is in response to a communicated
intent by the Company to discharge Executive other than for Cause is not
considered to be "Voluntary" and shall be considered to be a termination
by the
Company for the purposes of this Agreement.
2.
Employment Terms. The Company hereby employs the
Executive, and the Executive hereby accepts his employment, under the terms
and
conditions hereof, for the period (the "Term") beginning on the Effective
Date hereof and terminating upon the earlier of (i) April 30, 2010 (the
“Initial Term”) and (ii) the Date of Termination as defined in Section
1(k), and, if not terminated earlier, will be automatically renewed at the
end
of its Initial Term and on each anniversary thereafter for a period of one
(1)
year unless either party shall give written notice of cancellation to the
other
party not later than ninety (90) days prior to the end of the Initial Term
or
anniversaries thereof.
3. Position
and Duties. Executive
shall serve as Executive Vice President, General Counsel and
Secretary reporting to the Chief Executive Officer, with such
responsibilities, duties and authority as are customary for such role,
including, but not limited to, overall management responsibility for legal,
regulatory and governmental relations functions in the
Company. Executive shall devote all necessary business time and
attention, and employ Executive’s reasonable best efforts, toward the
fulfillment and execution of all assigned duties, and the satisfaction of
defined annual and/or longer-term performance criteria.
Charter
- Approved Prototype July 31, 2007
6
4. Place
of Performance. In connection with Executive’s
employment during the Term, Executive's initial primary workplace shall be
the
Company’s offices in or near St. Louis, MO. except for necessary travel on
the Company’s business.
5. Annual
Base Salary. During the
Term, Executive shall receive a base salary at a rate not less than
$470,025.00 per annum (the “Annual Base Salary”), less standard
deductions, paid in accordance with the Company’s general payroll practices for
executives, but no less frequently than monthly. The Annual Base
Salary shall compensate Executive for any official position or directorship
of a
subsidiary or affiliate that Executive is asked to hold in the Company or
its
subsidiaries or affiliates as a part of Executive’s employment
responsibilities. No less frequently than annually during the Term,
the Committee, on advice of the Company’s Chief Executive Officer, shall review
the rate of Annual Base Salary payable to Executive, and may, in its discretion,
increase the rate of Annual Base Salary payable hereunder; provided,
however, that any increased rate shall thereafter be the rate of “Annual
Base Salary” hereunder.
6. Bonus. Except
as otherwise provided for herein, for each fiscal year or other period
consistent with the Company’s then-applicable normal employment practices during
which Executive is employed hereunder on the last day (the “Bonus Year”),
Executive shall be eligible to receive a bonus in an amount up to 60 % of
Executive’s Annual Base Salary (the “Bonus” and bonuses at such
percentage of Annual Base Salary being the “Target Bonus”) pursuant to,
and as set forth in, the terms of the Executive Bonus Plan as such Plan may
be
amended from time to time, plus such other bonus payments, if any, as shall
be
determined by the Committee in its sole discretion, with such Bonus being
paid
on or before February 28 of the year next following the Bonus Year, or as
soon
as is administratively practicable thereafter (e.g., after the public disclosure
of the Company’s financial results for the prior year on SEC Form 10-K or on
such replacement form as the SEC shall determine, for those years as the
Company’s securities are traded publicly, and the Company’s annual financial
results are reported to the shareholders, for those (if any) years as the
Company’s securities are not traded publicly).
7. Stock
Options. The Company has previously granted to Executive
options to purchase shares of Company Stock as set forth in Exhibit A hereto,
and may, in the Committee’s discretion, grant to Executive additional options to
purchase shares of Company Stock (all of such options, collectively, the
“Options”) pursuant to the terms of the Plan, any successor plan and an
associated Stock Option Agreement.
8. Restricted
Shares. The Company has previously granted to Executive
Restricted Shares of Company Stock as set forth in Exhibit A hereto, and
may, in
the Committee’s discretion, grant to Executive Restricted Shares (collectively,
the “Restricted Shares”), which shall be subject to restrictions
on their sale as set forth in the Plan and an associated Restricted Shares Grant
Letter.
9. Performance
Shares Units. The Company has previously granted to
Executive Performance Share Units of which some have been converted into
Performance Shares (which are not aggregated in the forgoing description
of
Restricted Shares) as set forth in Exhibit A hereto, and may, in the Committee’s
discretion, grant to Executive further Performance Share Units (collectively,
the “Performance Units”), which shall be subject to restrictions on their
sale as set forth in the Plan and an associated Performance Unit Grant
Letter.
Charter
- Approved Prototype July 31, 2007
7
10. Executive
Cash Bonus Plan. Executive currently is a participant in
the Company’s 2005 Executive Cash Award Plan with a Plan Award (as defined in
such Plan) as set forth in Exhibit B and shall remain a participant in such
Plan
under the terms therefore for the term of this Agreement.
11. Benefits. Executive
shall be entitled to receive such benefits and to participate in such employee
group benefit plans, including life, health and disability insurance policies,
and financial planning services, and other perquisites and plans as are
generally provided by the Company to its senior executives of comparable
level
and responsibility in accordance with the plans, practices and programs of
the
Company, as amended from time to time.
12. Expenses. The
Company shall reimburse Executive for all reasonable and necessary expenses
incurred by Executive in connection with the performance of Executive’s duties
as an employee of the Company in accordance with the Company’s generally
applicable policies and procedures. Such reimbursement is subject to
the submission to the Company by Executive of appropriate
documentation and/or vouchers in accordance with the customary procedures
of the Company for expense reimbursement, as such procedures may be revised
by
the Company from time to time hereafter.
13. Vacations. Executive
shall be entitled to paid vacation in accordance with the Company’s vacation
policy as in effect from time to time provided that, in no event shall
Executive be entitled to less than three (3) weeks vacation per calendar
year. Executive shall also be entitled to paid holidays and personal
days in accordance with the Company’s practice with respect to same as in effect
from time to time.
14. Termination.
(a) Executive’s
employment hereunder may be terminated by the Company, on the one hand, or
Executive, on the other hand, as applicable, without any breach of this
Agreement, under the following circumstances:
(i) Death. Executive’s
employment hereunder shall automatically terminate upon Executive’s
death.
(ii)
Disability. If Executive has incurred a Disability, the
Company may give Executive written notice of its intention to terminate
Executive’s employment. In such event, Executive’s employment with
the Company shall terminate effective on the 14th day after delivery of such
notice to Executive, provided that within the 14 days after such
delivery, Executive shall not have returned to full-time performance of
Executive’s duties. Executive may provide notice to the Company of
Executive's resignation on account of a bona fide Disability at any
time.
(iii) Cause. The
Company may terminate Executive’s employment hereunder for Cause effectively
immediately upon delivery of notice to Executive, taking into account any
procedural requirements set forth under Section 1(e) above.
Charter
- Approved Prototype July 31, 2007
8
(iv) Good
Reason. Executive may terminate Executive’s employment herein for
Good Reason upon (i) satisfaction of any advance notice and other procedural
requirements set forth under Section 1(n) above for any termination pursuant
to
Section 1(n)(i) through (vi) or (ii) at least 30 days’ advance written notice by
the Executive for any termination pursuant to Section 1(n)(vii) through
(ix).
(v) Without
Cause. The Company may terminate Executive’s employment hereunder
without Cause upon at least 30 days’ advance written notice to the
Executive.
(vi) Resignation
Without Good Reason. Executive may resign Executive’s
employment without Good Reason upon at least fourteen (14) days’ written notice
to the Company.
(b) Notice
of Termination. Any termination of Executive’s employment by the
Company or by Executive under this Section 14 (other than pursuant to Sections
14(a)(i)) shall be communicated by a written notice (the “Notice of
Termination”) to the other party hereto, indicating the specific termination
provision in this Agreement relied upon, setting forth in reasonable detail
any
facts and circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so indicated, and specifying a Date
of Termination which notice shall be delivered within the applicable time
periods set forth in subsections 14(a)(ii)-(vi) above ( the “Notice
Period”); provided that the Company may pay to
Executive all Annual Base Salary, benefits and other rights due to Executive
during such Notice Period instead of employing Executive during such Notice
Period.
(c) Resignation
from Representational Capacities. Executive hereby acknowledges
and agrees that upon Executive's termination of employment with the Company
for
whatever reason, [s]he shall be deemed to have, and shall have in fact,
effectively resigned from all executive, director or other positions with
the
Company or its affiliates at the time of such termination of employment,
and
shall return all property owned by the Company and in Executive’s possession,
including all hardware, files and documents, at that time.
(d) Termination
in Connection with Change in Control. If Executive’s employment
is terminated by the Company without Cause either upon or within thirty days
before or thirteen (13) months after a Change of Control, or prior to a Change
in Control at the request of a prospective purchaser whose proposed purchase
would constitute a Change in Control upon its completion, such termination
shall
be deemed to have occurred immediately before such Change in Control for
purposes of this Agreement and the Plan.
15. Termination
Pay
(a) Effective
upon the termination of Executive’s employment, Company will be obligated to pay
Executive (or, in the event of Executive’s death, the Executive’s designated
beneficiary as defined below) only such compensation as is provided in this
Section 15, except to the extent otherwise provided for in any Company stock
incentive, stock option or cash award plan (including, among others, the
Plan),
approved by the Board. For purposes of this Section 15, Executive’s
designated beneficiary will be such individual beneficiary or trust, located
at
such
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address,
as Executive may designate by notice to Company from time to time or, if
Executive fails to give notice to Company of such a beneficiary, Executive’s
estate. Notwithstanding the preceding sentence, Company will have no
duty, in any circumstances, to attempt to open an estate on behalf of Executive,
to determine whether any beneficiary designated by Executive is alive or
to
ascertain the address of any such beneficiary, to determine the existence
of any
trust, to determine whether any person purporting to act as Executive’s personal
representative (or the trustee of a trust established by Executive) is
duly
authorized to act in that capacity, or to locate or attempt to locate any
beneficiary, personal representative, or trustee.
(b) Termination
by Executive for Good Reason or by Company without Cause.
If prior to expiration of the Term, Executive terminates his or her
employment for Good Reason, or if the Company terminates Executive’s
employment other than for Cause or Executive’s death or Disability, Executive
will be entitled to receive, subject to the conditions of this Agreement,
the
following:
(i) (A)
all Annual Base Salary and Bonus duly payable under the applicable plan for
performance periods ending prior to the Date of Termination, but unpaid as
of
the Date of Termination, plus (B) in consideration for Executive’s obligations
set forth in Section 19 hereof, an amount equal to two (2) times the Executive’s
then-current rate of Annual Base Salary and Target Bonus, which total sum
shall
be payable following the Date of Termination in fifty-two (52) equal bi-weekly
installments in accordance with the Company’s normal payroll practices
provided that, if a Change of Control occurs (or is deemed pursuant to
Sec. 14(d) hereof to have occurred after such termination) during such
twenty-four (24) month period (and such Change of Control qualifies either
as a
“change in the ownership or effective control” of the Company or a “change in
the ownership of a substantial portion of the assets” of the Company as such
terms are defined under Section 409A of the Code), any amounts remaining
payable to Executive hereunder shall be paid in a single lump sum immediately
upon such Change of Control.
(ii) if
Executive’s employment is terminated by the Company without Cause either
upon or within thirty days before or thirteen (13) months after a Change
of
Control, or prior to a Change in Control at the request of a prospective
purchaser whose proposed purchase would constitute a Change in Control upon
its
completion, the Company shall treat as earned all unvested Performance Units
for
which the performance term has not expired as of such Change of Control at
the
rate calculated pursuant to the Plan and the applicable Grant Letter, and
shall
immediately convert those Units into Restricted Shares and accelerate as
of the
Date of Termination the removal of restrictions on such shares.
(iii) all
reasonable expenses Executive has incurred in the pursuit of Executive’s duties
under this Agreement through the Date of Termination which are payable under
and
in accordance with this Agreement, which amount will be paid within thirty
(30)
days after the submission by Executive of properly completed reimbursement
requests on the Company’s standard forms;
(iv) a
lump sum payment (net after deduction of taxes and other required withholdings)
equal to twenty-four (24) times the monthly cost, at the time Executive’s
employment terminated, for Executive to receive under COBRA the paid coverage
for health, dental and vision benefits then being provided for Executive
at the
Company’s cost at the time Executive’s
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employment terminated, for Executive to receive under COBRA the paid coverage
for health, dental and vision benefits then being provided for Executive
at the
Company’s cost
at the time Executive’s employment terminated. This amount will
be paid at the same time the payment is made under Section 15(b)(i) and
will not
take into account future
increases in costs during the applicable time period; and
(v) notwithstanding
anything to the contrary in any award agreement, Executive shall be deemed
to be
actively employed during the twenty-four (24) month period following termination
of employment for purposes of vesting of all stock options, performance units
and restricted stock; provided that if a Change of
Control occurs (or is deemed pursuant to Sec. 14(d) hereof to have occurred
after such termination) within such period, all remaining stock options
that would have vested in the twenty-four (24) month period shall vest, and
all
remaining restricted stock and performance units whose restrictions would
have
lapsed in the twenty-four (24) month period shall have their restrictions
lapse immediately upon such Change of Control; provided, however, that with
respect to any equity-based compensation awards subject to Section 409A of
the
Code (as determined by independent tax counsel retained by the Company),
vesting
and/or the lapse of restrictions will only be accelerated if such Change
of
Control qualifies either as a “change in the ownership or effective control” of
the Company or a “change in the ownership of a substantial portion of the
assets” of the Company as such terms are defined under Section 409A of the Code,
or the first subsequent time at which such distribution may be made in
compliance with Section 409A of the Code; and
(vi) pay
the cost of up to twelve (12) months, as required, of executive-level
out-placement services (which provides as part of the outplacement the use
of an
office and secretarial support as near as reasonably practicable to Executive’s
residence).
provided,
however, any of the benefits described in Section 15(b)(i) through (vi)
that are due to be paid or awarded during the first six (6) months after
the
Date of Termination shall, to the extent required to avoid the tax consequences
of Section 409A of the Code as determined by independent tax counsel, be
suspended and paid after the six (6) month anniversary of Executive’s Date of
Termination.
(c) The
Executive shall not be required to mitigate the amount of any payments provided
in Section 15, by seeking other employment or otherwise, nor shall the amount
of
any payment provided for in this Section 15 be reduced by any compensation
earned by Executive as a result of employment by another company or business,
or
by profits earned by Employee from any other source at any time before or
after
the date of Termination, so long as Executive is not in breach of the
Agreement.
(d) Termination
by Executive without Good Reason or by Company for Cause. If
prior to the expiration of the Term or thereafter, Executive Voluntarily
terminates Executive’s employment prior to expiration of the Term without Good
Reason or if Company terminates this Agreement for Cause, Executive will
be
entitled to receive Executive’s then-existing Annual Base Salary only through
the date such termination is effective and will be reimbursed for all reasonable
expenses Executive has incurred in the pursuit of Executive’s duties under this
Agreement through
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11
the
date
of termination which are payable under and in accordance with this Agreement;
any unvested options and shares of restricted stock shall terminate as
of the
date of termination unless otherwise provided for in any applicable plan
or
award agreement; and Executive shall be entitled to no other compensation,
bonus, payments or benefits except as expressly provided in this
paragraph.
(e) Termination
upon Disability or Death. If Executive’s employment shall
terminate by reason of Executive’s Disability (pursuant to Section 14(a)(ii)) or
death (pursuant to Section 14(a)(i)), the Company shall pay to Executive,
in a
lump sum cash payment as soon as practicable following the Date of Termination,
all unpaid Annual Base Salary and Bonus previously earned for a performance
period ending prior to the Date of Termination, but unpaid as of the Date
of
Termination, and the pro rata portion of their Bonus for such year
(when and as paid to other senior executives of the Company) for the Performance
Period in which the termination occurred. In the case of Disability,
if there is a period of time during which Executive is not being paid Annual
Base Salary and not receiving long-term disability insurance payments, the
Company shall make interim payments equal to such unpaid disability
insurance payments to Executive until commencement of disability insurance
payments; provided that, to the extent required to avoid the tax
consequences of Section 409A of the Code, as determined by independent tax
counsel, the first payment shall cover all payments scheduled to be made
to
Executive during the first six (6) months after the date Executive’s employment
terminates, and the first such payment shall be delayed until the day that
is
six (6) months after the date Executive’s employment terminates.
(f) Benefits.
Except as otherwise required by law, Executive’s accrual of, and participation
in plans providing for, the Benefits will cease at the effective Date of
the
Termination of employment.
(g) Conditions
To Payments. To be eligible to receive (and continue to receive) and retain
the payments and benefits described in Sections 15(b)(i) and 15(e), Executive
must comply with the provisions of Sections 17, 18 and 19. In
addition, to be eligible to receive (and continue to receive) and retain
the
payments and benefits described in Sections 15(b) and 15(e) Executive (or
Executive’s executor and personal representatives in case of death) must first
execute and deliver to Company, and comply with, an agreement, in form and
substance reasonably satisfactory to Company, effectively releasing and giving
up all claims Executive may have against Company or any of its subsidiaries
or
affiliates (and each of their respective controlling shareholders, employees,
directors, officers, plans, fiduciaries, insurers and agents) arising out
of or
based upon any facts or conduct occurring prior to that date. The agreement
will
be prepared by Company, will be based upon the standard form (if any) then
being
utilized by Company for executive separations when severance is being paid,
and
will be provided to Executive at the time Executive’s employment is terminated
or as soon as administratively practicable thereafter (not to exceed five
(5)
business days). The agreement will require Executive to consult with
Company representatives, and voluntarily appear as a witness for trial or
deposition (and to prepare for any such testimony) in connection with, any
claim
which may be asserted by or against Company, any investigation or administrative
proceeding, any matter relating to a franchise, or any business matter
concerning Company or any of its transactions or operations. A copy
of the standard form release being used by Company as of the date of this
agreement for executive separations when
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12
severance
is being paid is attached to this Agreement as Exhibit C. It is understood
that the final document may not contain provisions specific to the release
of a
federal age discrimination claim if Executive is not at least forty (40)
years
of age, and may be changed as Company’s chief legal counsel considers necessary
and appropriate to enforce the same, including provisions to comply with
changes
in applicable laws and recent court decisions. Payments under and/or
benefits provided by Section 15 will not be made unless and until Executive
executes and delivers that agreement to Company within twenty-one (21)
days
after delivery of the document (or such lesser time as Company’s chief legal
counsel may specify in the document) and all conditions to the effectiveness
of
that agreement and the releases contemplated thereby have been satisfied
(including without limitation the expiration of any applicable revocation
period
without revoking acceptance).
(h)
Survival. The expiration or termination of the Term shall not
impair the rights or obligations of any party hereto which shall have accrued
hereunder prior to such expiration, subject to the terms of any agreement
containing a general release provided by Executive.
16. Excess
Parachute Payment.
(a) Anything
in this Agreement or the Plan to the contrary notwithstanding, to the extent
that any payment, distribution or acceleration of vesting to or for the benefit
of Executive by the Company (within the meaning of Section 280G of the Code
and
the regulations thereunder), whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the "Total
Payments") is or will be subject to the excise tax imposed under Section
4999 of
the Code (the "Excise Tax"), then the Total Payments shall be reduced (but
not
below zero) to the Safe Harbor Amount (as defined below) if and to the extent
that a reduction in the Total Payments would result in Executive retaining
a
larger amount, on an after-tax basis (taking into account federal, state
and
local income and employment taxes and the Excise Tax), than if Executive
received the entire amount of such Total Payments in accordance with their
existing terms (taking into account federal, state, and local income and
employment taxes and the Excise Tax). For purposes of this
Agreement, the term “Safe Harbor Amount” means the largest portion of the Total
Payments that would result in no portion of the Total Payments being subject
to
the Excise Tax. Unless Executive shall have given prior written
notice specifying a different order to the Company to effectuate the foregoing,
the Company shall reduce or eliminate the Total Payments, by first reducing
or
eliminating the portion of the Total Payments which are payable in cash and
then
by reducing or eliminating non-cash payments in such order as Executive shall
determine; provided that Executive may not so elect to the extent that, in
the
determination of the Determining Party (as defined herein), such election
would
cause Executive to be subject to the Excise Tax. Any notice given by
Executive pursuant to the preceding sentence shall take precedence over the
provisions of any other plan, arrangement or agreement governing Executive's
rights and entitlements to any benefits or compensation.
(b) The
determination of whether the Total Payments shall be reduced as provided
in
Section 16(a) and the amount of such reduction shall be made at the Company's
expense by an accounting firm selected by Company from among the ten largest
accounting firms in the United States or by qualified independent tax counsel
(the “Determining Party”); provided that Executive shall be given
advance notice of the Determining Party selected by the Company, and shall
have
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the
opportunity to reject to the selection, within two business days of being
notified of the selection, on the basis of that Determining Party’s having a
conflict of interest or other reasonable basis, in which case the Company
shall
select an alternative auditing firm among the ten largest accounting firms
in the United States or alternative independent qualified tax counsel,
which
shall become the Determining Party. Such Determining Party shall
provide its determination (the "Determination"), together with detailed
supporting calculations and documentation to the Company and Executive
within
ten (10) days of the termination of Executive’s employment or at such other time
mutually agreed by the Company and Executive. If the Determining
Party determines that no Excise Tax is payable by Executive with respect
to the
Total Payments, it shall furnish Executive with an opinion reasonably acceptable
to Executive that no Excise Tax will be imposed with respect to any such
payments and, absent manifest error, such Determination shall be binding,
final
and conclusive upon the Company and Executive. If the Determining
Party determines that an Excise Tax would be payable, the Company shall
have the
right to accept the Determination as to the extent of the reduction, if
any,
pursuant to Section 16(a), or to have such Determination reviewed by another
accounting firm selected by the Company, at the Company’s expense. If
the two accounting firms do not agree, a third accounting firm shall be
jointly
chosen by the Executive Party and the Company, in which case the determination
of such third accounting firm shall be binding, final and conclusive upon
the
Company and Executive.
(c) If,
notwithstanding any reduction described in this Section 16, the IRS determines
that Executive is liable for the Excise Tax as a result of the receipt of
any of
the Total Payments or otherwise, then Executive shall be obligated to pay
back
to the Company, within thirty (30) days after a final IRS determination or
in
the event that Executive challenges the final IRS determination, a final
judicial determination, a portion of the Total Payments equal to the “Repayment
Amount.” The Repayment Amount with respect to the payment of benefits
shall be the smallest such amount, if any, as shall be required to be paid
to
the Company so that Executive’s net after-tax proceeds with respect to the Total
Payments (after taking into account the payment of the Excise Tax and all
other
applicable taxes imposed on the Payment) shall be maximized. The
Repayment Amount shall be zero if a Repayment Amount of more than zero would
not
result in Executive’s net after-tax proceeds with respect to the Total Payments
being maximized. If the Excise Tax is not eliminated pursuant to this
paragraph, the Executive shall pay the Excise Tax.
(d) Notwithstanding
any other provision of this Section 16, if (i) there is a reduction in the
Total
Payments as described in this Section 16, (ii) the IRS later determines that
Executive is liable for the Excise Tax, the payment of which would result
in the
maximization of Executive’s net after-tax proceeds (calculated as if Executive’s
benefits had not previously been reduced), and (iii) Executive pays the
Excise Tax, then the Company shall pay to Executive those payments or benefits
which were reduced pursuant to this Section 16 as soon as administratively
possible after Executive pays the Excise Tax so that Executive’s net after-tax
proceeds with respect to the Total Payments are maximized.
17. Competition/Confidentiality.
(a) Acknowledgments
by Executive. Executive acknowledges that (a) during the Term and
as a part of Executive’s employment, Executive has been and will be afforded
access to
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14
Confidential
Information (as defined below); (b) public disclosure of such Confidential
Information could have an adverse effect on the Company and its business;
(c)
because Executive possesses substantial technical expertise and skill with
respect to the Company’s business, Company desires to obtain exclusive ownership
of each invention by Executive while Executive is employed by the Company,
and
Company will be at a substantial competitive disadvantage if it fails to
acquire
exclusive ownership of each such invention by Executive; and (d) the provisions
of this Section 17 are reasonable and necessary to prevent the improper
use or
disclosure of Confidential Information and to provide Company with exclusive
ownership of all inventions and works made or created by
Executive.
(b) Confidential
Information. (i) The Executive acknowledges that during the Term
Executive will have access to and may obtain, develop, or learn of Confidential
Information (as defined below) under and pursuant to a relationship of trust
and
confidence. The Executive shall hold such Confidential Information in
strictest confidence and never at any time, during or after Executive’s
employment terminates, directly or indirectly use for Executive’s own benefit or
otherwise (except in connection with the performance of any duties as an
employee hereunder) any Confidential Information, or divulge, reveal, disclose
or communicate any Confidential Information to any unauthorized person or
entity
in any manner whatsoever.
(ii) As
used in this Agreement, the term “Confidential Information” shall
include, but not be limited to, any of the following information relating
to
Company learned by the Executive during the Term or as a result of Executive’s
employment with Company:
(A) information
regarding the Company’s business proposals, manner of the Company’s operations,
and methods of selling or pricing any products or services;
(B) the
identity of persons or entities actually conducting or considering conducting
business with the Company, and any information in any form relating to such
persons or entities and their relationship or dealings with the Company or
its
affiliates;
(C) any
trade secret or confidential information of or concerning any business operation
or business relationship
(D) computer
databases, software programs and information relating to the nature of the
hardware or software and how said hardware or software is used in combination
or
alone;
(E) information
concerning Company personnel, confidential financial information, customer
or
customer prospect information, information concerning subscribers, subscriber
and customer lists and data, methods and formulas for estimating costs and
setting prices, engineering design standards, testing procedures, research
results (such as marketing surveys, programming trials or product trials),
cost
data (such as billing, equipment and programming cost projection models),
compensation information and models, business or marketing plans or strategies,
deal or business terms, budgets, vendor names, programming operations, product
names, information on proposed acquisitions or dispositions, actual performance
compared to budgeted performance, long-range plans, internal financial
information
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15
(including
but not limited to financial and operating results for certain offices,
divisions, departments, and key market areas that are not disclosed to
the
public in such form), results of internal analyses, computer programs and
programming information, techniques and designs, and trade secrets;
(F) information
concerning the Company’s employees, officers, directors and shareholders;
and
(G) any
other trade secret or information of a confidential or proprietary
nature.
(iii) Executive
shall not make or use any notes or memoranda relating to any Confidential
Information except for uses reasonably expected by Executive to be for
the
benefit of the Company, and will, at Company’s request, return each original and
every copy of any and all notes, memoranda, correspondence, diagrams or
other
records, in written or other form, that Executive may at any time have
within
his possession or control that contain any Confidential
Information.
(iv) Notwithstanding
the foregoing, Confidential Information shall not include information which
has
come within the public domain through no fault of or action by Executive
or
which has become rightfully available to Executive on a non-confidential
basis
from any third party, the disclosure of which to Executive does not violate
any
contractual or legal obligation such third party has to the Company or
its
affiliates with respect to such Confidential Information. None of the
foregoing obligations and restrictions applies to any part of the
Confidential Information that Executive demonstrates was or became generally
available to the public other than as a result of a disclosure by Executive
or
by any other person bound by a confidentiality obligation to the Company
in
respect of such Confidential Information.
(v) Executive
will not remove from the Company’s premises (except to the extent such removal
is for purposes of the performance of Executive’s duties at home or while
traveling, or except as otherwise specifically authorized by Company) any
Company document, record, notebook, plan, model, component, device, or
computer
software or code, whether embodied in a disk or in any other form (collectively,
the “Proprietary Items”). Executive recognizes that, as
between Company and Executive, all of the Proprietary Items, whether or
not
developed by Executive, are the exclusive property of the
Company. Upon termination of Executive’s employment by either party,
or upon the request of Company during the Term, Executive will return to
Company
all of the Proprietary Items in Executive’s possession or subject to Executive’s
control, including all equipment (e.g., laptop computers, cell phone,
portable e-mail devices, etc.), documents, files and data, and Executive
shall
not retain any copies, abstracts, sketches, or other physical embodiment
of any
such Proprietary Items.
18. Proprietary
Developments.
(a) Any
and all inventions, products, discoveries, improvements, processes, methods,
computer software programs, models, techniques, or formulae (collectively,
hereinafter referred to as “Developments”), made, conceived, developed,
or created by Executive (alone or in conjunction with others, during regular
work hours or otherwise) during Executive’s
employment,
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which
may
be directly or indirectly useful in, or relate to, the business conducted
or to
be conducted by the Company will be promptly disclosed by Executive
to Company and shall be Company’s exclusive property. The term
“Developments” shall not be deemed to include inventions, products, discoveries,
improvements, processes, methods, computer software programs, models,
techniques, or formulae which were in the possession of Executive prior to
the
Term. Executive hereby transfers and assigns to Company all
proprietary rights which Executive may have or acquire in any Developments
and Executive waives any other special right which the Executive may have
or
accrue therein. Executive will execute any documents and to take any
actions that may be required, in the reasonable determination of Company’s
counsel, to effect and confirm such assignment, transfer and waiver, to direct
the issuance of patents, trademarks, or copyrights to Company with respect
to
such Developments as are to be Company’s exclusive property or to vest in
Company title to such Developments; provided, however, that the expense of
securing any patent, trademark or copyright shall be borne by Company. The
parties agree that Developments shall constitute Confidential
Information.
(b) “Work
Made for Hire.” Any work performed by Executive during
Executive’s employment with Company shall be considered a “Work Made for
Hire” as defined in the U.S. Copyright laws, and shall be owned by and for
the express benefit of Company. In the event it should be established
that such work does not qualify as a Work Made for Hire, Executive agrees
to and
does hereby assign to Company all of Executive’s right, title, and interest in
such work product including, but not limited to, all copyrights and other
proprietary rights.
19. Non-Competition
and Non-Interference.
(a) Acknowledgments
by Executive. Executive acknowledges and agrees that: (a) the
services to be performed by Executive under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Company
competes with other businesses that are or could be located in any part of
the
United States; and (c) the provisions of this Section 19 are reasonable and
necessary to protect the Company’s business and lawful protectable interests,
and do not impair Executive’s ability to earn a living.
(b) Covenants
of Executive. For purposes of this Section 19, the term
“Restricted Period” shall mean the period commencing as of the date of
this Agreement and terminating on the second anniversary (or, in the case
of
Section 19(b)(i), the first anniversary), of the date Executive’s employment
terminated provided that the “Restricted Period” also shall encompass
any period of time from whichever anniversary date is applicable until and
ending on the last date Executive is to be paid any payment under Section
15
hereof. In consideration of the acknowledgments by Executive, and in
consideration of the compensation and benefits to be paid or provided to
Executive by Company, Executive covenants and agrees that during the Restricted
Period, the Executive will not, directly or indirectly, for Executive’s own
benefit or for the benefit of any other person or entity other than the
Company:
(i) in
the United States or any other country or territory where the Company then
conducts its business: engage in, operate, finance, control or be employed
by a
“Competitive Business” (defined below); serve as an officer or director of a
Competitive Business (regardless of where Executive then lives or conducts
such
activities); perform any work as an employee,
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consultant
(other than as a member of a professional consultancy, law firm, accounting
firm
or similar professional enterprise that has been retained by the Competitive
Business and where Executive has no direct role in such professional consultancy
and maintains the confidentiality of all information acquired by Executive
during his or her employment with the Company), contractor, or in any other
capacity with, a Competitive Business; directly or indirectly invest or own
any interest in a Competitive Business (regardless of where Executive then
lives or conducts such activities); or directly or indirectly provide any
services or advice to a any business, person or entity who or which is engaged
in a Competitive Business (other than as a member of a professional consultancy,
law firm, accounting firm or similar professional enterprise that has been
retained by the Competitive Business and where Executive has no direct role
in
such professional consultancy and maintains the confidentiality of all
information acquired by Executive during his or her employment with the
Company). A “Competitive Business” is any business, person or
entity who or which, anywhere within that part of the United States, or that
part of any other country or territory, where the Company conducts business;
owns or operates a cable television system; provides direct television or
any
satellite-based, telephone system-based, internet based or wireless system
for
delivering television, music or other entertainment programming (other than
as
an ancillary service, such as cellular telephone providers); provides telephony
services using any wired connection or fixed (as opposed to mobile) wireless
application; provides data or internet access services; or offers, provides,
markets or sells any service or product of a type that is offered or marketed
by
or directly competitive with a service or product offered or marketed by
the
Company at the time Executive’s employment terminates; or who or which in any
case is preparing or planning to do so. The provisions of this Section 19
shall
not be construed or applied (i) so as to prohibit Executive from owning not
more
than five percent (5%) of any class of securities that is publicly traded
on any
national or regional securities exchange, as long as Executive’s investment is
passive and Executive does not lend or provide any services or advice to
such
business or otherwise violate the terms of this Agreement in connection with
such investment; or (ii) so as to prohibit Executive from working as an employee
in the cable television business for a company/business that owns or operates
cable television franchises (by way of current example only, Time Warner,
Cablevision, Cox or Comcast), provided that the company/business is not
providing cable services in any political subdivision/ geographic area where
the
Company has a franchise or provides cable services (other than nominal overlaps
of service areas) and the company/business is otherwise not engaged in a
Competitive Business, and provided Executive does not otherwise violate the
terms of this Agreement in connection with that work;
(ii) contact,
solicit or provide any service to any person or entity that was a customer
franchisee, or prospective customer of the Company at any time during
Executive’s employment (a prospective customer being one to whom the Company had
made a business proposal within twelve (12) months prior to the time Executive’s
employment terminated); or directly solicit or encourage any customer,
franchisee or subscriber of the Company to purchase any service or product
of a
type offered by or competitive with any product or service provided by the
Company, or to reduce the amount or level of business purchased by such
customer, franchisee or subscriber from the Company; or take away or procure
for
the benefit of any competitor of the Company, any business of a type provided
by
or competitive with a product or service offered by the Company; or
Charter
- Approved Prototype July 31, 2007
18
(iii) solicit
or recruit for employment, any person or persons who are employed by Company
or
any of its subsidiaries or affiliates, or who were so employed at any time
within a period of six (6) months immediately prior to the date Executive’s
employment terminated, or otherwise interfere with the relationship between
any
such person and the Company; nor will the Executive assist anyone else in
recruiting any such employee to work for another company or business or discuss
with any such person his or her leaving the employ of the Company or engaging
in
a business activity in competition with the Company. This provision shall
not
apply to secretarial, clerical, custodial or maintenance employees.
If
Executive violates any covenant contained in this Section 19, then the term
of
the covenants in this Section shall be extended by the period of time Executive
was in violation of the same.
(c) Provisions
Pertaining to the Covenants. Executive recognizes that the
existing business of the Company extends to various locations and areas
throughout the United States and may extend hereafter to other countries
and
territories and agrees that the scope of Section 19 shall extend to any part
of
the United States, and any other country or territory, where the Company
operates or conducts business, or has concrete plans to do so at the time
Executive’s employment terminates. It is agreed that the Executive’s
services hereunder are special, unique, unusual and extraordinary giving
them
peculiar value, the loss of which cannot be reasonably or adequately compensated
for by damages, and in the event of the Executive’s breach of this Section,
Company shall be entitled to equitable relief by way of injunction or otherwise
in addition to the cessation of payments and benefits hereunder. If
any provision of Sections 17, 18 or 19 of this Agreement is deemed to be
unenforceable by a court (whether because of the subject matter of the
provision, the duration of a restriction, the geographic or other scope of
a
restriction or otherwise), that provision shall not be rendered void but
the
parties instead agree that the court shall amend and alter such provision
to
such lesser degree, time, scope, extent and/or territory as will grant Company
the maximum restriction on Executive’s activities permitted by applicable law in
such circumstances. Company’s failure to exercise its rights to enforce the
provisions of this Agreement shall not be affected by the existence or non
existence of any other similar agreement for anyone else employed by Company
or
by Company’s failure to exercise any of its rights under any such
agreement.
(d) Notices. In
order to preserve Company’s rights under this Agreement, Company is authorized
to advise any potential or future employer, any third party with whom Executive
may become employed or enter into any business or contractual relationship
with,
and any third party whom Executive may contact for any such purpose, of the
existence of this Agreement and its terms, and Company shall not be liable
for
doing so.
(e) Injunctive
Relief and Additional Remedy. Executive acknowledges that the
injury that would be suffered by Company as a result of a breach of the
provisions of this Agreement (including any provision of Sections 17, 18
and 19)
would be irreparable and that an award of monetary damages to Company for
such a
breach would be an inadequate remedy. Consequently, Company will have the
right, in addition to any other rights it may have, to obtain injunctive
relief
to restrain any breach or threatened breach or otherwise to specifically
enforce
any provision of this Agreement, and Company will not be obligated to post
bond
or other security in seeking such relief. Without limiting Company’s
rights under this Section or any other remedies of Company, if
Charter
- Approved Prototype July 31, 2007
19
Executive
breaches any of the provisions of Sections 17, 18 or 19, Company will have
the
right to cease making any payments otherwise due to Executive under this
Agreement.
(f) Covenants
of Sections 17, 18 and 19 are Essential and Independent
Covenants. The covenants by Executive in Sections 17, 18 and 19
are essential elements of this Agreement, and without Executive’s agreement to
comply with such covenants, Company would not have entered into this Agreement
or employed Executive. Company and Executive have independently
consulted their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific
regard to the nature of the business conducted by
Company. Executive’s covenants in Sections 17, 18 and 19 are
independent covenants and the existence of any claim by Executive against
Company, under this Agreement or otherwise, will not excuse Executive’s breach
of any covenant in Section 17, 18 or 19. If Executive’s employment hereunder is
terminated, this Agreement will continue in full force and effect as is
necessary or appropriate to enforce the covenants and agreements of Executive
in
Sections 17, 18 and 19. The Company’s right to enforce the covenants
in Sections 17, 18 and 19 shall not be adversely affected or limited by the
Company’s failure to have an agreement with another employee with provisions at
least as restrictive as those contained in Sections 17, 18 or 19 , or by
the
Company’s failure or inability to enforce (or agreement not to enforce) in full
the provisions of any other or similar agreement containing one or more
restrictions of the type specified in Sections 17, 18 and 19 of this
Agreement.
20. Executive’s
Representations And Further
Agreements.
(a) Executive
represents, warrants and covenants to Company that:
(i) Neither
the execution and delivery of this Agreement by Executive nor the performance
of
any of Executive’s duties hereunder in accordance with the Agreement will
violate, conflict with or result in the breach of any order, judgment,
employment contract, agreement not to compete or other agreement or arrangement
to which Executive is a party or is subject;
(ii) On
or prior to the date hereof, Executive has furnished to Company true
and complete copies of all judgments, orders, written employment contracts,
agreements not to compete, and other agreements or arrangements restricting
Executive’s employment or business pursuits, that have current application to
Executive;
(iii) Executive
is knowledgeable and sophisticated as to business matters, including the
subject
matter of this Agreement, and that prior to assenting to the terms of this
Agreement, or giving the representations and warranties herein, Executive
has
been given a reasonable time to review it and has consulted with counsel
of
Executive’s choice; and
(iv) Executive
has not provided, nor been requested by Company to provide, to Company, any
confidential or non public document or information of a former employer that
constitutes or contains any protected trade secret, and will not use any
protected trade secrets in connection with the Executive’s
employment.
Charter
- Approved Prototype July 31, 2007
20
(b) During
and subsequent to expiration of the Term, the Executive will cooperate with
Company, and furnish any and all complete and truthful information, testimony
or
affidavits in connection with any matter that arose during the Executive’s
employment, that in any way relates to the business or operations of the
Company
or any of its parent or subsidiary corporations or affiliates, or of which
the
Executive may have any knowledge or involvement; and will consult with and
provide information to Company and its representatives concerning such
matters. Executive shall fully cooperate with Company in the
protection and enforcement of any intellectual property rights that relate
to
services performed by Executive for Company, whether under the terms of
this Agreement or prior to the execution of this Agreement. This
shall include without limitation executing, acknowledging, and delivering
to
Company all documents or papers that may be necessary to enable Company to
publish or protect such intellectual property rights. Subsequent to
the Term, the parties will make their best efforts to have such cooperation
performed at reasonable times and places and in a manner as not to unreasonably
interfere with any other employment in which Executive may then be
engaged. Nothing in this Agreement shall be construed or interpreted
as requiring the Executive to provide any testimony, sworn statement or
declaration that is not complete and truthful. If Company requires
the Executive to travel outside the metropolitan area in the United States
where
the Executive then resides to provide any testimony or otherwise provide
any
such assistance, then Company will reimburse the Executive for any reasonable,
ordinary and necessary travel and lodging expenses incurred by Executive
to do
so provided the Executive submits all documentation required under Company’s
standard travel expense reimbursement policies and as otherwise may be required
to satisfy any requirements under applicable tax laws for Company to deduct
those expenses. Nothing in this Agreement shall be construed or interpreted
as
requiring the Executive to provide any testimony or affidavit that is not
complete and truthful.
21. Mutual
Non-Disparagement. Neither
the Company nor Executive shall make any oral or written statement about
the
other party which is intended or reasonably likely to disparage the other
party,
or otherwise degrade the other party’s reputation in the business or legal
community or in the telecommunications industry.
22. Foreign
Corrupt Practices Act. Executive
agrees to comply in all material respects with the applicable provisions
of the
U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”), as amended, which
provides generally that: under no circumstances will foreign officials,
representatives, political parties or holders of public offices be offered,
promised or paid any money, remuneration, things of value, or provided any
other
benefit, direct or indirect, in connection with obtaining or maintaining
contracts or orders hereunder. When any representative, employee,
agent, or other individual or organization associated with Executive is required
to perform any obligation related to or in connection with this Agreement,
the
substance of this section shall be imposed upon such person and included
in any
agreement between Executive and any such person. Failure by Executive
to comply with the provisions of the FCPA shall constitute a material breach
of
this Agreement and shall entitle the Company to terminate Executive’s employment
for Cause.
23. Purchases
and Sales of the Company’s
Securities. Executive
has read and agrees to comply in all respects with the Company’s Policy
Regarding the Purchase and Sale of the Company’s Securities by Employees, as
such Policy may be amended from time to time.
Charter
- Approved Prototype July 31, 2007
21
Specifically,
and without limitation, Executive agrees that Executive shall not purchase
or
sell stock in the Company at any time (a) that Executive possesses material
non-public information about the Company or any of its businesses; and
(b)
during any “Trading Blackout Period” as may be determined by the Company as set
forth in the Policy from time to time.
24. Indemnification. (a) If
Executive is made a party or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter, a "proceeding"), by reason
of the
fact that he or she is or was a director or an officer of the Corporation
or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee
benefit
plan (hereinafter, a "Covered Person"), whether the basis of such proceeding
is
alleged action in an official capacity as a director, officer, employee or
agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists
or
may hereafter be amended, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such Covered Person
in
connection therewith; provided, however, that, except as provided in
Section 24(c) hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such Covered Person
in
connection with a proceeding (or part thereof) initiated by such Covered
Person
only if such proceeding (or part thereof) was authorized by the
Board.
(b) The
Corporation shall pay
the expenses (including attorneys' fees) incurred by Executive in defending
any
such proceeding in advance of its final disposition (hereinafter, an
"advancement of expenses"), provided, however, that, if the Delaware
General Corporation Law so requires, an advancement of expenses incurred
by
Executive in his or her capacity as such shall be made only upon delivery
to the
Corporation of an undertaking (hereinafter, an "Undertaking"), by or on behalf
of such Executive, to repay all amounts so advanced if it shall ultimately
be
determined by final judicial decision from which there is no further right
to
appeal (hereinafter, a "Final Adjudication") that Executive was not entitled
to
be indemnified for such expenses under this Section 24 or
otherwise. The rights to indemnification and to the advancement of
expenses conferred in Subsections 24(a) and (b) hereof shall be contract
rights and such rights shall continue even after Executive ceases to be employed
by the Company and shall inure to the benefit of Executive’s heirs, executors
and administrators.
(c) If
a claim under Section 24(a) or (b) hereof is not paid in full by the
Company within sixty (60) days after a written claim therefore has been
received by the Company, except in the case of a claim for an advancement
of
expenses, in which case the applicable period shall be twenty (20) days,
Executive may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim. If Executive is successful in whole
or in part in any such suit, or in a suit brought by the Company to recover
an
advancement of expenses pursuant to the terms of an Undertaking, Executive
shall
be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by Executive to enforce a right to
indemnification hereunder (but not in a suit brought by Executive to enforce
a
right to an advancement of expenses)
Charter
- Approved Prototype July 31, 2007
22
it
shall
be a defense that, and (ii) any suit brought by the Company to recover an
advancement of expenses pursuant to the terms of an Undertaking, the Company
shall be entitled to recover such expenses upon a final adjudication that,
Executive has not met the applicable standard for indemnification set forth
in
the Delaware General Corporation Law. To the fullest extent permitted
by law, neither the failure of the Company (including its disinterested
directors, committee thereof, independent legal counsel or its stockholders)
to
have made a determination prior to the commencement of such suit that
indemnification of Executive is proper in the circumstances because the
Executive has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Company (including
its disinterested directors, committee thereof, independent legal counsel
or its
stockholders) that Executive has not met such applicable standard of conduct,
shall create a presumption that Executive has not met the applicable standard
of
conduct or, in the case of such a suit brought by Executive, be a defense
to
such suit. In any suit brought by Executive to enforce a right to
indemnification or to an advancement of expenses hereunder, or brought
by the
Company to recover an advancement of expenses pursuant to the terms of
an
undertaking, the burden of proving that Executive is not entitled to be
indemnified, or to such advancement of expenses, under this Section 24
or
otherwise shall, to the extent permitted by law, be on the
Company.
(d) The
rights to indemnification and to the advancement of expenses conferred in
this
Section 24 shall not be exclusive of any other right of indemnification which
Executive or any other person may have or hereafter acquire by any statute,
the
Corporation's Certificate of Incorporation or Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
(e) The
Company may maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the Delaware General
Corporation Law.
25. Withholding.
Anything to the contrary notwithstanding, all payments required to be made
by
Company hereunder to Executive or his estate or beneficiary shall be
subject to the withholding of such amounts, if any, relating to tax and other
payroll deductions as the Company may reasonably determine it should withhold
pursuant to applicable law or regulation.
26. Notices. Any
written notice required by this Agreement will be deemed provided and delivered
to the intended recipient when (a) delivered in person by hand; or (b) three
days after being sent via U.S. certified mail, return receipt requested;
or (c)
the day after being sent via by overnight courier, in each case when such
notice
is properly addressed to the following address and with all postage and similar
fees having been paid in advance:
|
|
If
to the Company:
|
Charter
Communications, Inc.
|
|
|
Attn.:
Human Resources
|
|
|
12405
Powerscourt Drive
|
| St. Louis, MO 63131 |
Charter
- Approved Prototype July 31, 2007
23
|
|
If
to Executive:
|
12405
Powerscourt Drive
|
|
|
St.
Louis, MO 63131
|
Either
party may change the address to which notices, requests, demands and other
communications to such party shall be delivered personally or mailed by giving
written notice to the other party in the manner described above.
27. Binding
Effect. This
Agreement shall be for the benefit of and binding upon the parties hereto
and
their respective heirs, personal representatives, legal representatives,
successors and, where applicable, assigns.
28. Entire
Agreement. As
of the Effective Date, the Employee and the Company hereby irrevocably agree
that the Old Employment Agreement is hereby terminated in its entirety, and
neither party thereto shall have any rights or obligations under the Old
Employment Agreement, including but not limited to, in the case of the Employee,
any right to any severance payment or benefit. This Agreement
constitutes the entire agreement between the listed parties with respect
to the
subject matter described in this Agreement and supersedes all prior agreements,
understandings and arrangements, both oral and written, between the parties
with
respect to such subject matter, except to the extent said agreements,
understandings and arrangements are referenced or referred to in this
Agreement. This Agreement may not be modified, amended, altered or
rescinded in any manner, except by written instrument signed by both of the
parties hereto; provided, however, that the waiver by either party of a breach
or compliance with any provision of this Agreement shall not operate nor
be
construed as a waiver of any subsequent breach or compliance. Except to the
extent the terms hereof are explicitly and directly inconsistent with the
terms of the Plan, nothing herein shall be deemed to override or replace
the
terms of the Plan, including but not limited to sections 6.4, 9.4 and 10.4
thereof.
29. Severability. In
case any one or more of the provisions of this Agreement shall be held by
any
court of competent jurisdiction or any arbitrator selected in accordance
with
the terms hereof to be illegal, invalid or unenforceable in any respect,
such
provision shall have no force and effect, but such holding shall not affect
the
legality, validity or enforceability of any other provision of this Agreement
provided that the provisions held illegal, invalid or unenforceable does
not
reflect or manifest a fundamental benefit bargained for by a party
hereto.
30. Assignment. Subject
to the Executive’s right to terminate in the event of a Change of Control
hereunder, this Agreement can be assigned by the Company only to a company
that
controls, is controlled by, or is under common control with the Company and
which assumes all of the Company’s obligations hereunder. The duties
and covenants of Executive under this Agreement, being personal, may not
be
assigned or delegated except that Executive may assign payments due hereunder
to
a trust established for the benefit of Executive’s family or to Executive’s
estate or to any partnership or trust entered into by Executive and/or
Executive’s immediate family members (meaning, Executive’s spouse and lineal
descendants). This agreement shall be binding in all respects on
permissible assignees.
Charter
- Approved Prototype July 31, 2007
24
31. Notification. In
order to preserve the Company’s rights under this Agreement, the Company is
authorized to advise any third party with whom Executive may become employed
or
enter into any business or contractual relationship with, or whom Executive
may
contact for any such purpose, of the existence of this Agreement and its
terms,
and the Company shall not be liable for doing so.
32. Choice
of Law/Jurisdiction This Agreement is deemed to be accepted and
entered into in St. Louis County, Missouri. Executive and the Company intend
and
hereby acknowledge that jurisdiction over disputes with regard to this
Agreement, and over all aspects of the relationship between the parties hereto,
shall be governed by the laws of the State of Missouri without giving effect
to
its rules governing conflicts of laws. Executive agrees that in any
suit to enforce this Agreement, or as to any dispute that arises between
the
Company and the Executive regarding or relating to this Agreement and/or
any
aspect of Executive’s employment relationship with Company, venue and
jurisdiction are proper in the County of St. Louis, and (if federal jurisdiction
exists) the United States District Court for the Eastern Division of Missouri
in
St. Louis, and Executive waives all objections to jurisdiction and venue
in any
such forum and any defense that such forum is not the most convenient
forum.
33. Section
Headings. The
section headings contained in this Agreement are for reference purposes only
and
shall not affect in any manner the meaning or interpretation of this
Agreement.
34. Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original, but all of which taken together shall constitute one
and the
same instrument.
[remainder
of page intentionally left blank]
Charter
- Approved Prototype July 31, 2007
25
IN
WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
Charter
Communications, Inc.
By:
/s/ Neil
Smit
Name:
Neil Smit
Title:
President and Chief Executive Officer
EXECUTIVE
/s/
Grier
Raclin
Name: Grier
Raclin
Address: _________________________
Charter
- Approved Prototype July 31, 2007
26
Charter
Communications
Grant
Summary Report
Exhibit
A
Activity
as of 6/25/2007
|
Grant
Date
|
Grant
Type
|
Grant
Price
|
Granted
|
Exercised
|
Canceled
|
Subject
to Repurchase
|
Outstanding
|
Vested
|
Outstanding
Exercisable
|
||||||||||||||||||||||||
|
2001
Non-Qualified Stock Option
|
|||||||||||||||||||||||||||||||||
|
Grier
C. Raclin
|
|||||||||||||||||||||||||||||||||
|
10/10/2005
|
Restricted
|
$ |
0.00
|
50,000
|
16,667
|
0
|
0
|
33,333
|
16,667
|
0
|
|||||||||||||||||||||||
|
10/10/2005
|
Non-Qualified
|
$ |
1.36
|
245,800
|
61,450
|
0
|
0
|
184,350
|
61,450
|
0
|
|||||||||||||||||||||||
|
10/10/2005
|
Restricted
|
$ |
0.00
|
62,775
|
0
|
8,632
|
0
|
54,143
|
0
|
0
|
|||||||||||||||||||||||
|
3/10/2006
|
Non-Qualified
|
$ |
1.00
|
57,300
|
14,325
|
0
|
0
|
42,975
|
14,325
|
0
|
|||||||||||||||||||||||
|
3/10/2006
|
Restricted
|
$ |
0.00
|
133,741
|
0
|
0
|
0
|
133,741
|
0
|
0
|
|||||||||||||||||||||||
|
3/10/2006
|
Restricted
|
$ |
0.00
|
80,244
|
0
|
0
|
0
|
80,244
|
0
|
0
|
|||||||||||||||||||||||
|
3/9/2007
|
Non-Qualified
|
$ |
2.84
|
57,300
|
0
|
0
|
0
|
57,300
|
0
|
0
|
|||||||||||||||||||||||
|
3/9/2007
|
Restricted
|
$ |
0.00
|
133,741
|
0
|
0
|
0
|
133,741
|
0
|
0
|
|||||||||||||||||||||||
|
Optionee
Total
|
820,901
|
92,442
|
8,632
|
0
|
719,827
|
92,442
|
0
|
||||||||||||||||||||||||||
|
Plan
Total
|
820,901
|
92,442
|
8,632
|
0
|
719,827
|
92,442
|
0
|
||||||||||||||||||||||||||
Charter
- Approved Prototype July 31, 2007
27
Exhibit
B
Executive
Cash Award Plan
Charter
- Approved Prototype July 31, 2007
28
Exhibit
10.5
AMENDED
AND RESTATED EMPLOYMENT AGREEMENT
THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”),
dated and effective the 1st day of August 2007 (the “Effective
Date”) is made by and between CHARTER COMMUNICATIONS, INC., a Delaware
corporation (the “Company”), and Robert A. Quigley, an adult
resident of Illinois (the “Executive”).
RECITALS:
WHEREAS,
the Executive and the Company have previously entered into that certain
Employment Agreement dated December 9, 2005 the "Old Employment
Agreement") and the parties desire to amend and restate in its entirety the
Old Employment Agreement;
WHEREAS,
it is the desire of the Company to assure itself of the services of Executive
by
engaging Executive as its Executive Vice President and Chief Marketing
Officer and the Executive desires to serve the Company on the terms
herein provided;
WHEREAS,
in connection with the entry into the Agreement, the Executive will
be
granted performance units and restricted shares of Company
Stock pursuant to the Company's 2001 Stock Incentive Plan,
as amended as of the date hereof (the “Special
Equity”);
WHEREAS,
Executive’s agreement to the terms and conditions of Sections 17 and 19
are a material and essential condition of Executive’s employment with the
Company hereafter under the terms of this Agreement;
NOW,
THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as
follows:
1. Certain
Definitions.
(a) “Allen”
shall mean Paul G. Allen (and his heirs or beneficiaries under his will(s),
trusts or other instruments of testamentary disposition), and any entity or
group over which Paul G. Allen has Control and that constitutes a Person as
defined herein. For the purposes of this definition, “Control”
means the power to direct the management and policies of an entity
or to appoint
or elect a majority of its governing board.
(b) “Annual
Base Salary” shall have the meaning set forth in Section 5.
(c) “Board”
shall mean the Board of Directors of the Company.
(d) “Bonus”
shall have the meaning set forth in Section 6.
(e) The
Company shall have “Cause” to terminate Executive’s employment hereunder upon
Executive’s:
(i) Executive’s
breach of a material obligation (which, if curable, is not cured within ten
business (10) days after Executive receives written notice of such breach)
Charter
- Approved Prototype July 31, 2007
1
or
representation under this Agreement or breach of any fiduciary duty to the
Company which, if curable, is not cured within ten business (10) days after
Executive receives
written notice of such breach; or any act of fraud or knowing material
misrepresentation or concealment upon, to or from the Company or the
Board;
(ii) Executive’s
failure to adhere in any material respect to (i) the Company’s Code of Conduct
in effect from time to time and applicable to officers and/or employees
generally, or (ii) any written Company policy, if such policy is material to
the
effective performance by Executive of the Executive’s duties under this
Agreement, and if Executive has been given a reasonable opportunity to cure
this
failure to comply within a period of time which is reasonable under the
circumstances but not more than the thirty (30) day period after written notice
of such failure is provided to Executive; provided that if Executive
cures this failure to comply with such a policy and then fails again to comply
with the same policy, no further opportunity to cure that failure shall be
required;
(iii) Executive’s
misappropriation (or attempted misappropriation) of a material amount of the
Company’s funds or property;
(iv) Executive’s
conviction of, the entering of a guilty plea or plea of nolo contendere
or no contest (or the equivalent), or entering into any pretrial diversion
program or agreement or suspended imposition of sentence, with respect to either
a felony or a crime that adversely affects or could reasonably be expected
to
adversely affect the Company or its business reputation; or the institution
of
criminal charges against Executive, which are not dismissed within sixty (60)
days after institution, for fraud, embezzlement, any felony offense involving
dishonesty or constituting a breach of trust or moral turpitude;
(v) Executive’s
admission of liability of, or finding of liability, for a knowing and deliberate
violation of any “Securities Laws.” As used herein, the term
“Securities Laws” means any federal or state law, rule or regulation governing
generally the issuance or exchange of securities, including without limitation
the Securities Act of 1933, the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder;
(vi) conduct
by Executive in connection with Executive’s employment that constitutes gross
neglect of any material duty or responsibility, willful
misconduct, or recklessness which, if curable, is not cured within
ten business (10) days after Executive receives written notice of such
breach;
(vii) Executive’s
illegal possession or use of any controlled substance, or excessive use of
alcohol at a work function, in connection with Executive’s duties, or on Company
premises; “excessive” meaning either repeated unprofessional use or any single
event of consumption giving rise to significant intoxication or unprofessional
behavior;
(viii) willful
or grossly negligent commission of any other act or failure to act in connection
with the Executive’s duties as an executive of the Company which causes or
reasonably may be expected (as of the time of such occurrence) to cause
substantial
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economic injury to or substantial injury to the business reputation of the
Company or any subsidiary or affiliate of the Company, including, without
limitation, any material
violation of the Foreign Corrupt Practices Act, as described herein
below.
If
Executive commits or is charged with committing any offense of the character
or
type specified in subparagraphs 1(e)(iv), (v) or (viii) above, then the Company
at its option may suspend the Executive with or without pay. If the
Executive subsequently is convicted of, pleads guilty or nolo
contendere (or equivalent plea) to, or enters into any type of suspended
imposition of sentence or pretrial diversion program with respect to, any such
offense (or any matter that gave rise to the suspension), the Executive shall
immediately repay any compensation paid in cash hereunder from the date of
the
suspension. Notwithstanding anything to the contrary in any stock
option or equity incentive plan or award agreement, all vesting and all lapsing
of restrictions on restricted shares shall be tolled during the period of
suspension and all unvested options and restricted shares for which the
restrictions have not lapsed shall terminate and not be exercisable by or issued
to Executive if during or after such suspension the Executive is convicted
of,
pleads guilty or nolo contendere (or equivalent plea) to, or enters
into any type of suspended imposition of sentence or pretrial diversion program
with respect to, any offense specified in subparagraphs 1(e)(iv), (v) or (viii)
above or any matter that gave rise to the suspension.
(f) “Change
of Control” shall be deemed to have occurred if:
(i) any
Person is or becomes a “beneficial owner” (as determined for purposes of
Regulation 13D-G, as currently in effect, of the Exchange Act), directly or
indirectly, of securities representing the Applicable Percentage (as defined
below) or more of the total voting power of all of the Company’s then
outstanding voting securities. For purposes of this Section 1(f), the
term “Person” shall not include: (A) the Company or any of
its subsidiaries, (B) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its subsidiaries, or
(C) an underwriter temporarily holding securities pursuant to an offering
of said securities, or (D) Allen. For purposes of this Agreement, in
the case of a recapitalization or other exchange involving the exchange of
Company voting stock for the Company's debt, the group of debtholders that
acquires such Company voting stock as the result of such recapitalization or
exchange shall not be treated as a single Person solely by reason of such
recapitalization or exchange; or
(ii) the
occurrence of a merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company
(a
“Business Combination”), in each case, unless following such Business
Combination: (A) all or substantially all of the individuals and
entities who were the “beneficial owners” (as determined for purposes of
Regulation 13D-G, as currently in effect, of the Exchange Act) of the
outstanding voting securities of the Company immediately prior to such Business
Combination beneficially own, directly or indirectly, securities representing
more than fifty percent (50%) of the total voting power of the then outstanding
voting securities of the entity resulting from such Business Combination (or
such assets as the case may be) or the parent of such entity in substantially
the same proportionate ownership as in effect immediately prior to the Business
Combination (the “Resulting Entity”); and (B) a majority of the members of
the board of directors or other governing body of the Resulting Entity were
members of the Board at the
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3
time of the execution of the initial agreement, or at the time of the action
of
the Board, providing for such Business Combination; or
(iii) the
consummation of a plan of complete liquidation or dissolution of the Company;
or
(iv) if
and when Allen shall no longer have the power to appoint a majority of the
Board, during any period of two (2) consecutive calendar years, individuals
who
either (A) at the beginning of such period are members of the Board ("Incumbent
Directors"), or (B) whose election to the Board during such period is approved
by a vote of the majority of those members of the Board who are Incumbent
Directors at the time of such approval, whereupon such individual so approved
shall be treated as an Incumbent Director with respect to future approvals,
cease for any reason to constitute a majority of the Board.
Notwithstanding
the foregoing subsections 1(f)(i) through (iii), a Change of Control shall
not include any transaction or series of transactions, including any
transactions described above if, following such transaction or transactions,
(x)
Allen has the largest percentage ownership of the voting securities in the
Company or any successor or surviving corporation held by any Person (other
than any Person that includes Allen), provided such percentage ownership is
more
than twenty-five percent or (y) Allen has the power to appoint a majority of
the
members of the Board of Directors.
For
purposes of this definition, (A) at all times that Allen is or are the
“beneficial owner(s)” (as determined for purposes of Regulation 13D-G, as
currently in effect, of the Exchange Act) of securities representing in the
aggregate at least fifty percent (50%) of the total voting power of all of
the
Company’s then outstanding voting securities, “Applicable Percentage” means
fifty percent (50%); and (B) at all times that Allen is or are the beneficial
owner(s) of securities representing in the aggregate less than fifty percent
(50%) of the total voting power of all of the Company’s then outstanding voting
securities, “Applicable Percentage” means any percentage that is more than the
greater of (1) the percentage of the total voting power of all of the Company’s
then outstanding voting securities represented by securities beneficially owned
by Allen or (2) twenty-five percent (25%).
(g) “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to
time.
(h) “Committee”
shall mean either the Compensation and Benefits Committee of the Board, or
a
Subcommittee of such Committee duly appointed by the Board or the
Committee.
(i) “Company”
shall have the meaning set forth in the preamble hereto.
(j) “Company
Stock” shall mean the $.10 par value common stock of the Company.
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(k) “Date
of Termination” shall mean (i) if Executive’s employment is terminated by
Executive’s death, the date of Executive’s death and (ii) if Executive’s
employment is terminated pursuant to Section 14(a)(ii) – (vi), the date of
termination of employment, as defined in 409(A) regulations under the
Code.
(l) For
purposes of this Agreement, Executive will be deemed to have a “Disability” if,
due to illness, injury or a physical or medically recognized mental condition,
(a) Executive is unable to perform Executive’s duties under this Agreement with
reasonable accommodation for 120 consecutive days, or 180 days during any twelve
month period, as determined in accordance with this Section, or (b) Executive
is
considered disabled for purposes of receiving / qualifying for long term
disability benefits under any group long term disability insurance plan or
policy offered by Company in which Executive participates. The
Disability of Executive will be determined by a medical doctor selected by
written agreement of Company and Executive upon the request of either party
by
notice to the other, or (in the case of and with respect to any applicable
long
term disability insurance policy or plan) will be determined according to the
terms of the applicable long term disability insurance policy /
plan. If Company and Executive cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two
medical doctors will select a third medical doctor who will determine whether
Executive has a Disability. The determination of the medical doctor
selected under this Section will be binding on both
parties. Executive must submit to a reasonable number of examinations
by the medical doctor making the determination of Disability under this Section,
and to other specialists designated by such medical doctor, and Executive hereby
authorizes the disclosure and release to Company of such determination and
all
supporting medical records. If Executive is not legally competent,
Executive’s legal guardian or duly authorized attorney-in-fact will act in
Executive’s stead under this Section for the purposes of submitting Executive to
the examinations, and providing the authorization of disclosure, required under
this Section.
(m) “Executive”
shall have the meaning set forth in the preamble hereto.
(n) “Good
Reason” shall mean any of the events described herein that occur without
Executive's prior written consent: (i) any reduction in Executive’s Annual Base
Salary, Target Bonus Percentage, or title except as permitted hereunder, (ii)
any failure to pay Executive's compensation hereunder when due; (iii) any
material breach by the Company of a term hereof; (iv) relocation
of Executive’s primary workplace to a location that is more
than fifty (50) miles from the office where Executive is then
assigned to work as Executive’s principal office; (v) a transfer or reassignment
to another executive of material responsibilities that have been assigned to
Executive (and were not identified by the Company to be assigned only on an
interim basis at the time of assignment or thereafter) and generally are part
of
the responsibilities and functions assigned to a Chief Marketing Officer of
a public corporation or (vi) any change in reporting structure such that
Executive no longer reports directly to the "Chief Executive Officer (or
equivalent position, if there is no Chief Executive Officer)" (in each case
“(i)” through “(vi)” only if Executive objects in writing within 30 days after
being informed of such events and unless Company retracts and/or rectifies
the
claimed Good Reason within 30 days following Company’s receipt of timely written
objection from Executive); (vii) if within six months after a Change of Control,
Executive has not received an offer from the surviving company to continue
in
his or her position immediately prior to such Change of Control under at least
the same terms and conditions
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(except
that the value of equity-based compensation after such Change of Control
need
only be commensurate with the value of equity-based compensation given to
executives with equivalent positions in the surviving company, if any)as
set
herein; (viii) the Company's decision not to renew this Agreement at the
end of
its term, or (ix) the failure of a successor to the business of the Company
to
assume the Company's obligations under this Agreement in the event of a Change
of Control during its term.
(o) “Notice
of Termination” shall have the meaning set forth in Section 14(b).
(p) “Options”
shall have the meaning set forth in Section 7
(q) “Performance
Unit” and “Performance Shares” shall have the meaning set forth in Section 9
hereof.
(r) “Person”
shall have the meaning set forth in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934.
(s) “Plan”
shall mean the 2001 Stock Incentive Plan as amended by the Company from time
to
time.
(s) “Restricted
Shares” shall have the meaning set forth in Section 8.
(t) “Term”
shall have the meaning set forth in Section 2.
(u) "Voluntary"
and "Voluntarily" in connection with Executive's termination of employment
shall
mean a termination of employment resulting from the initiative of the Executive,
excluding a termination of employment attributable to Executive's death or
Disability. A resignation by Executive that is in response to a
communicated intent by the Company to discharge Executive other than for Cause
is not considered to be "Voluntary" and shall be considered to be a termination
by the Company for the purposes of this Agreement.
2. Employment
Term. The
Company hereby employs the Executive, and the Executive hereby accepts his
employment, under the terms and conditions hereof, for the period (the
“Term”) beginning on the Effective Date hereof and terminating upon the
earlier of (i) October 31, 2009 (the “Initial Term”) and (ii) the
Date of Termination as defined in Section 1(k), and, if not terminated earlier,
will be automatically renewed at the end of its Initial Term and on each
anniversary thereafter for a period of one (1) year unless either party shall
give written notice of cancellation to the other party not later than ninety
(90) days prior to the end of the Initial Term or anniversaries
thereof.
3. Position
and Duties. Executive
shall serve as Executive Vice President and Chief Marketing Officer
reporting to the Chief Executive Officer, with such responsibilities, duties
and
authority as are customary for such role, including, but not limited to, overall
management responsibility for sales and marketing in the
Company. Executive shall devote all necessary business time and
attention, and employ Executive’s reasonable best efforts, toward the
fulfillment and execution of all assigned duties, and the satisfaction of
defined annual and/or longer-term performance criteria.
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4. Place
of Performance. In connection with Executive’s
employment during the Term, Executive's initial primary workplace shall be
the
Company’s offices in or near St. Louis, MO. except for necessary travel on
the Company’s business.
5. Annual
Base Salary. During
the Term, Executive shall receive a base salary at a rate not less than
$470,025.00 per annum (the “Annual Base Salary”), less standard
deductions, paid in accordance with the Company’s general payroll practices for
executives, but no less frequently than monthly. The Annual Base
Salary shall compensate Executive for any official position or directorship
of a
subsidiary or affiliate that Executive is asked to hold in the Company or its
subsidiaries or affiliates as a part of Executive’s employment
responsibilities. No less frequently than annually during the Term,
the Committee, on advice of the Company’s Chief Executive Officer, shall review
the rate of Annual Base Salary payable to Executive, and may, in its discretion,
increase the rate of Annual Base Salary payable hereunder; provided,
however, that any increased rate shall thereafter be the rate of “Annual
Base Salary” hereunder.
6. Bonus. Except
as otherwise provided for herein, for each fiscal year or other period
consistent with the Company’s then-applicable normal employment practices during
which Executive is employed hereunder on the last day (the “Bonus Year”),
Executive shall be eligible to receive a bonus in an amount up to 60% of
Executive’s Annual Base Salary (the “Bonus” and bonuses at such
percentage of Annual Base Salary being the “Target Bonus”) pursuant to,
and as set forth in, the terms of the Executive Bonus Plan as such Plan may
be
amended from time to time, plus such other bonus payments, if any, as shall
be
determined by the Committee in its sole discretion, with such Bonus being paid
on or before February 28 of the year next following the Bonus Year, or as soon
as is administratively practicable thereafter (e.g., after the public disclosure
of the Company’s financial results for the prior year on SEC Form 10-K or on
such replacement form as the SEC shall determine, for those years as the
Company’s securities are traded publicly, and the Company’s annual financial
results are reported to the shareholders, for those (if any) years as the
Company’s securities are not traded publicly).
7. Stock
Options. The Company has previously granted to Executive
options to purchase shares of Company Stock as set forth in Exhibit A hereto,
and may, in the Committee’s discretion, grant to Executive additional options to
purchase shares of Company Stock (all of such options, collectively, the
“Options”) pursuant to the terms of the Plan, any successor plan and an
associated Stock Option Agreement.
8. Restricted
Shares. The Company has previously granted to Executive
Restricted Shares of Company Stock as set forth in Exhibit A hereto, and may,
in
the Committee’s discretion, grant to Executive Restricted Shares (collectively,
the “Restricted Shares”), which shall be subject to restrictions on their
sale as set forth in the Plan and an associated Restricted Shares Grant
Letter.
9. Performance
Shares Units. The Company has previously granted to
Executive Performance Share Units of which some have been converted into
Performance Shares (which are not aggregated in the forgoing description of
Restricted Shares) as set forth in Exhibit A hereto, and may, in the Committee’s
discretion, grant to Executive further Performance Share Units (collectively,
the “Performance Units”), which shall be subject to restrictions on their
sale as set forth in the Plan and an associated Performance Unit Grant
Letter.
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10. Executive
Cash Bonus Plan. Executive currently is a participant in
the Company’s 2005 Executive Cash Award Plan with a Plan Award (as defined in
such Plan) as set forth in Exhibit B and shall remain a participant in such
Plan
under the terms therefore for the term of this Agreement.
11. Benefits. Executive
shall be entitled to receive such benefits and to participate in such employee
group benefit plans, including life, health and disability insurance policies,
and financial planning services, and other perquisites and plans as are
generally provided by the Company to its senior executives of comparable level
and responsibility in accordance with the plans, practices and programs of
the
Company, as amended from time to time.
12. Expenses. The
Company shall reimburse Executive for all reasonable and necessary expenses
incurred by Executive in connection with the performance of Executive’s duties
as an employee of the Company in accordance with the Company’s generally
applicable policies and procedures. Such reimbursement is subject to
the submission to the Company by Executive of appropriate documentation and/or
vouchers in accordance with the customary procedures of the Company for expense
reimbursement, as such procedures may be revised by the Company from time to
time hereafter.
13. Vacations. Executive
shall be entitled to paid vacation in accordance with the Company’s vacation
policy as in effect from time to time provided that, in no event shall
Executive be entitled to less than three (3) weeks vacation per calendar
year. Executive shall also be entitled to paid holidays and personal
days in accordance with the Company’s practice with respect to same as in effect
from time to time.
14. Termination.
(a) Executive’s
employment hereunder may be terminated by the Company, on the one hand, or
Executive, on the other hand, as applicable, without any breach of this
Agreement, under the following circumstances:
(i) Death. Executive’s
employment hereunder shall automatically terminate upon Executive’s
death.
(ii) Disability. If
Executive has incurred a Disability, the Company may give Executive written
notice of its intention to terminate Executive’s employment. In such
event, Executive’s employment with the Company shall terminate effective on the
14th day after delivery of such notice to Executive, provided that
within the 14 days after such delivery, Executive shall not have returned to
full-time performance of Executive’s duties. Executive may provide
notice to the Company of Executive's resignation on account of a bona fide
Disability at any time.
(iii) Cause. The
Company may terminate Executive’s employment hereunder for Cause effectively
immediately upon delivery of notice to Executive, taking into account any
procedural requirements set forth under Section 1(e) above.
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(iv) Good
Reason. Executive may terminate Executive’s employment herein for
Good Reason upon (i) satisfaction of any advance notice and other procedural
requirements set forth under Section 1(n) above for any termination pursuant
to
Section 1(n)(i) through (vi) or (ii) at least 30 days’ advance written notice by
the Executive for any termination pursuant to Section 1(n)(vii) through
(ix).
(v) Without
Cause. The Company may terminate Executive’s employment hereunder
without Cause upon at least 30 days’ advance written notice to the
Executive.
(vi) Resignation
Without Good Reason. Executive may resign Executive’s employment
without Good Reason upon at least fourteen (14) days’ written notice to the
Company.
(b) Notice
of Termination. Any termination of Executive’s employment by the
Company or by Executive under this Section 14 (other than pursuant to Sections
14(a)(i)) shall be communicated by a written notice (the “Notice of
Termination”) to the other party hereto, indicating the specific termination
provision in this Agreement relied upon, setting forth in reasonable detail
any
facts and circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so indicated, and specifying a Date
of Termination which notice shall be delivered within the applicable time
periods set forth in subsections 14(a)(ii)-(vi) above ( the “Notice
Period”); provided that the Company may pay to
Executive all Annual Base Salary, benefits and other rights due to Executive
during such Notice Period instead of employing Executive during such Notice
Period.
(c) Resignation
from Representational Capacities. Executive hereby acknowledges
and agrees that upon Executive's termination of employment with the Company
for
whatever reason, [s]he shall be deemed to have, and shall have in fact,
effectively resigned from all executive, director or other positions with the
Company or its affiliates at the time of such termination of employment, and
shall return all property owned by the Company and in Executive’s possession,
including all hardware, files and documents, at that time.
(d) Termination
in Connection with Change in Control. If Executive’s employment
is terminated by the Company without Cause either upon or within thirty days
before or thirteen (13) months after a Change of Control, or prior to a Change
in Control at the request of a prospective purchaser whose proposed purchase
would constitute a Change in Control upon its completion, such termination
shall
be deemed to have occurred immediately before such Change in Control for
purposes of this Agreement and the Plan.
15. Termination
Pay
(a) Effective
upon the termination of Executive’s employment, Company will be obligated to pay
Executive (or, in the event of Executive’s death, the Executive’s designated
beneficiary as defined below) only such compensation as is provided in this
Section 15, except to the extent otherwise provided for in any Company stock
incentive, stock option or cash award plan (including, among others, the Plan),
approved by the Board. For purposes of this Section 15, Executive’s
designated beneficiary will be such individual beneficiary or trust, located
at
such
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address, as Executive may designate by notice to Company from time to time
or,
if Executive fails to give notice to Company of such a beneficiary,
Executive’s
estate. Notwithstanding the preceding sentence, Company will have no
duty, in any circumstances, to attempt to open an estate on behalf of Executive,
to determine whether
any beneficiary designated by Executive is alive or to ascertain the address
of
any such beneficiary, to determine the existence of any trust, to determine
whether any person
purporting to act as Executive’s personal representative (or the trustee of a
trust established by Executive) is duly authorized to act in that capacity,
or
to locate or attempt to
locate any beneficiary, personal representative, or trustee.
(b) Termination
by Executive for Good Reason or by Company without Cause.
If prior to expiration of the Term, Executive terminates his or her
employment for Good Reason, or if the Company terminates Executive’s
employment other than for Cause or Executive’s death or Disability, Executive
will be entitled to receive, subject to the conditions of this Agreement, the
following:
(i) (A)
all Annual Base Salary and Bonus duly payable under the applicable plan for
performance periods ending prior to the Date of Termination, but unpaid as
of
the Date of Termination, plus (B) in consideration for Executive’s obligations
set forth in Section 19 hereof, an amount equal to two (2) times the Executive’s
then-current rate of Annual Base Salary and Target Bonus, which total sum shall
be payable following the Date of Termination in fifty-two (52) equal bi-weekly
installments in accordance with the Company’s normal payroll practices
provided that, if a Change of Control occurs (or is deemed pursuant to
Sec. 14(d) hereof to have occurred after such termination) during such
twenty-four (24) month period (and such Change of Control qualifies either
as a
“change in the ownership or effective control” of the Company or a “change in
the ownership of a substantial portion of the assets” of the Company as such
terms are defined under Section 409A of the Code), any amounts remaining
payable to Executive hereunder shall be paid in a single lump sum immediately
upon such Change of Control.
(ii) if
Executive’s employment is terminated by the Company without Cause either
upon or within thirty days before or thirteen (13) months after a Change of
Control, or prior to a Change in Control at the request of a prospective
purchaser whose proposed purchase would constitute a Change in Control upon
its
completion, the Company shall treat as earned all unvested Performance Units
for
which the performance term has not expired as of such Change of Control at
the
rate calculated pursuant to the Plan and the applicable Grant Letter, and
shall immediately convert those Units into Restricted Shares and accelerate
as
of the Date of Termination the removal of restrictions on such
shares.
(iii) all
reasonable expenses Executive has incurred in the pursuit of Executive’s duties
under this Agreement through the Date of Termination which are payable under
and
in accordance with this Agreement, which amount will be paid within thirty
(30)
days after the submission by Executive of properly completed reimbursement
requests on the Company’s standard forms;
(iv) a
lump sum payment (net after deduction of taxes and other required withholdings)
equal to twenty-four (24) times the monthly cost, at the time Executive’s
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employment terminated, for Executive to receive under COBRA the paid coverage
for health, dental and vision benefits then being provided for Executive
at the
Company’s cost
at
the time Executive’s employment terminated. This amount will be paid
at the same time the payment is made under Section 15(b)(i) and will not
take
into account future
increases in costs during the applicable time period; and
(v) notwithstanding
anything to the contrary in any award agreement, Executive shall be deemed
to be
actively employed during the twenty-four (24) month period following termination
of employment for purposes of vesting of all stock options, performance units
and restricted stock; provided that if a Change of Control
occurs (or is deemed pursuant to Sec. 14(d) hereof to have occurred after such
termination) within such period, all remaining stock options that would
have vested in the twenty-four (24) month period shall vest, and all remaining
restricted stock and performance units whose restrictions would have lapsed
in
the twenty-four (24) month period shall have their restrictions
lapse immediately upon such Change of Control; provided, however, that with
respect to any equity-based compensation awards subject to Section 409A of
the
Code (as determined by independent tax counsel retained by the Company), vesting
and/or the lapse of restrictions will only be accelerated if such Change of
Control qualifies either as a “change in the ownership or effective control” of
the Company or a “change in the ownership of a substantial portion of the
assets” of the Company as such terms are defined under Section 409A of the Code,
or the first subsequent time at which such distribution may be made in
compliance with Section 409A of the Code; and
(vi) pay
the cost of up to twelve (12) months, as required, of executive-level
out-placement services (which provides as part of the outplacement the use
of an
office and secretarial support as near as reasonably practicable to Executive’s
residence).
provided,
however, any of the benefits described in Section 15(b)(i) through (vi)
that are due to be paid or awarded during the first six (6) months after the
Date of Termination shall, to the extent required to avoid the tax consequences
of Section 409A of the Code as determined by independent tax counsel, be
suspended and paid after the six (6) month anniversary of Executive’s Date of
Termination.
(c) The
Executive shall not be required to mitigate the amount of any payments provided
in Section 15, by seeking other employment or otherwise, nor shall the amount
of
any payment provided for in this Section 15 be reduced by any compensation
earned by Executive as a result of employment by another company or business,
or
by profits earned by Employee from any other source at any time before or after
the date of Termination, so long as Executive is not in breach of the
Agreement.
(d) Termination
by Executive without Good Reason or by Company for Cause. If
prior to the expiration of the Term or thereafter, Executive Voluntarily
terminates Executive’s employment prior to expiration of the Term without Good
Reason or if Company terminates this Agreement for Cause, Executive will be
entitled to receive Executive’s then-existing Annual Base Salary only through
the date such termination is effective and will be reimbursed for all reasonable
expenses Executive has incurred in the pursuit of Executive’s duties under this
Agreement through
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the
date
of termination which are payable under and in accordance with this Agreement;
any unvested options and shares of restricted stock shall terminate as of the
date of termination unless otherwise provided for in any applicable plan or
award agreement; and Executive shall be entitled to no other compensation,
bonus, payments or benefits except as expressly provided in this
paragraph.
(e) Termination
upon Disability or Death. If Executive’s employment shall
terminate by reason of Executive’s Disability (pursuant to Section 14(a)(ii)) or
death (pursuant to Section 14(a)(i)), the Company shall pay to Executive, in
a
lump sum cash payment as soon as practicable following the Date of Termination,
all unpaid Annual Base Salary and Bonus previously earned for a performance
period ending prior to the Date of Termination, but unpaid as of the Date of
Termination, and the pro rata portion of their Bonus for such year
(when and as paid to other senior executives of the Company) for the Performance
Period in which the termination occurred. In the case of Disability,
if there is a period of time during which Executive is not being paid Annual
Base Salary and not receiving long-term disability insurance payments, the
Company shall make interim payments equal to such unpaid disability insurance
payments to Executive until commencement of disability insurance payments;
provided that, to the extent required to avoid the tax consequences of
Section 409A of the Code, as determined by independent tax counsel, the first
payment shall cover all payments scheduled to be made to Executive during the
first six (6) months after the date Executive’s employment terminates, and the
first such payment shall be delayed until the day that is six (6) months after
the date Executive’s employment terminates.
(f) Benefits.
Except as otherwise required by law, Executive’s accrual of, and participation
in plans providing for, the Benefits will cease at the effective Date of the
Termination of employment.
(g) Conditions
To Payments. To be eligible to receive (and continue to receive) and retain
the payments and benefits described in Sections 15(b)(i) and 15(e), Executive
must comply with the provisions of Sections 17, 18 and 19. In
addition, to be eligible to receive (and continue to receive) and retain the
payments and benefits described in Sections 15(b) and 15(e) Executive (or
Executive’s executor and personal representatives in case of death) must first
execute and deliver to Company, and comply with, an agreement, in form and
substance reasonably satisfactory to Company, effectively releasing and giving
up all claims Executive may have against Company or any of its subsidiaries
or
affiliates (and each of their respective controlling shareholders, employees,
directors, officers, plans, fiduciaries, insurers and agents) arising out of
or
based upon any facts or conduct occurring prior to that date. The agreement
will
be prepared by Company, will be based upon the standard form (if any) then
being
utilized by Company for executive separations when severance is being paid,
and
will be provided to Executive at the time Executive’s employment is terminated
or as soon as administratively practicable thereafter (not to exceed five (5)
business days). The agreement will require Executive to consult with
Company representatives, and voluntarily appear as a witness for trial or
deposition (and to prepare for any such testimony) in connection with, any
claim
which may be asserted by or against Company, any investigation or administrative
proceeding, any matter relating to a franchise, or any business matter
concerning Company or any of its transactions or operations. A copy
of the standard form release being used by Company as of the date of this
agreement for executive separations when
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severance
is being paid is attached to this Agreement as Exhibit C. It is understood
that the final document may not contain provisions specific to the release
of a
federal age discrimination claim if Executive is not at least forty (40)
years
of age, and may be changed as Company’s chief legal counsel considers necessary
and appropriate to enforce the same, including provisions to comply with
changes
in applicable laws and recent court decisions. Payments under and/or
benefits provided by Section 15 will not be made unless and until Executive
executes and delivers that agreement to Company within twenty-one (21) days
after delivery of the document (or such lesser time as Company’s chief legal
counsel may specify in the document) and all conditions to the effectiveness
of
that agreement and the releases contemplated thereby have been satisfied
(including without limitation the expiration of any applicable revocation
period
without revoking acceptance).
(h) Survival. The
expiration or termination of the Term shall not impair the rights or obligations
of any party hereto which shall have accrued hereunder prior to such expiration,
subject to the terms of any agreement containing a general release provided
by
Executive.
16. Excess
Parachute Payment.
(a) Anything
in this Agreement or the Plan to the contrary notwithstanding, to the extent
that any payment, distribution or acceleration of vesting to or for the benefit
of Executive by the Company (within the meaning of Section 280G of the Code
and
the regulations thereunder), whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the "Total
Payments") is or will be subject to the excise tax imposed under Section 4999
of
the Code (the "Excise Tax"), then the Total Payments shall be reduced (but
not
below zero) to the Safe Harbor Amount (as defined below) if and to the extent
that a reduction in the Total Payments would result in Executive retaining
a
larger amount, on an after-tax basis (taking into account federal, state and
local income and employment taxes and the Excise Tax), than if Executive
received the entire amount of such Total Payments in accordance with their
existing terms (taking into account federal, state, and local income and
employment taxes and the Excise Tax). For purposes of this
Agreement, the term “Safe Harbor Amount” means the largest portion of the Total
Payments that would result in no portion of the Total Payments being subject
to
the Excise Tax. Unless Executive shall have given prior written
notice specifying a different order to the Company to effectuate the foregoing,
the Company shall reduce or eliminate the Total Payments, by first reducing
or
eliminating the portion of the Total Payments which are payable in cash and
then
by reducing or eliminating non-cash payments in such order as Executive shall
determine; provided that Executive may not so elect to the extent that, in
the
determination of the Determining Party (as defined herein), such election would
cause Executive to be subject to the Excise Tax. Any notice given by
Executive pursuant to the preceding sentence shall take precedence over the
provisions of any other plan, arrangement or agreement governing Executive's
rights and entitlements to any benefits or compensation.
(b) The
determination of whether the Total Payments shall be reduced as provided in
Section 16(a) and the amount of such reduction shall be made at the Company's
expense by an accounting firm selected by Company from among the ten largest
accounting firms in the United States or by qualified independent tax counsel
(the “Determining Party”); provided that Executive shall be given
advance notice of the Determining Party selected by the Company, and shall
have
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the
opportunity to reject to the selection, within two business days of being
notified of the selection, on the basis of that Determining Party’s having a
conflict of interest or other reasonable basis, in which case the Company
shall
select an alternative auditing firm among the ten largest accounting firms
in the United States or alternative independentqualified tax counsel, which
shall become the Determining Party. Such Determining Party shall
provide its determination (the "Determination"), together with detailed
supporting calculations and documentation to the Company and Executive within
ten (10) days of the termination of Executive’s employment or at such other time
mutually agreed by the Company and Executive. If the Determining
Party determines that no Excise Tax is payable by Executive with respect
to the
Total Payments, it shall furnish Executive with an opinion reasonably acceptable
to Executive that no Excise Tax will be imposed with respect to any such
payments and, absent manifest error, such Determination shall be binding,
final
and conclusive upon the Company and Executive. If the Determining
Party determines that an Excise Tax would be payable, the Company shall have
the
right to accept the Determination as to the extent of the reduction, if any,
pursuant to Section 16(a), or to have such Determination reviewed by another
accounting firm selected by the Company, at the Company’s expense. If
the two accounting firms do not agree, a third accounting firm shall be jointly
chosen by the Executive Party and the Company, in which case the determination
of such third accounting firm shall be binding, final and conclusive upon
the
Company and Executive.
(c) If,
notwithstanding any reduction described in this Section 16, the IRS determines
that Executive is liable for the Excise Tax as a result of the receipt of any
of
the Total Payments or otherwise, then Executive shall be obligated to pay back
to the Company, within thirty (30) days after a final IRS determination or
in
the event that Executive challenges the final IRS determination, a final
judicial determination, a portion of the Total Payments equal to the “Repayment
Amount.” The Repayment Amount with respect to the payment of benefits
shall be the smallest such amount, if any, as shall be required to be paid
to
the Company so that Executive’s net after-tax proceeds with respect to the Total
Payments (after taking into account the payment of the Excise Tax and all other
applicable taxes imposed on the Payment) shall be maximized. The
Repayment Amount shall be zero if a Repayment Amount of more than zero would
not
result in Executive’s net after-tax proceeds with respect to the Total Payments
being maximized. If the Excise Tax is not eliminated pursuant to this
paragraph, the Executive shall pay the Excise Tax.
(d) Notwithstanding
any other provision of this Section 16, if (i) there is a reduction in the
Total
Payments as described in this Section 16, (ii) the IRS later determines that
Executive is liable for the Excise Tax, the payment of which would result in
the
maximization of Executive’s net after-tax proceeds (calculated as if Executive’s
benefits had not previously been reduced), and (iii) Executive pays the
Excise Tax, then the Company shall pay to Executive those payments or benefits
which were reduced pursuant to this Section 16 as soon as administratively
possible after Executive pays the Excise Tax so that Executive’s net after-tax
proceeds with respect to the Total Payments are maximized.
17. Competition/Confidentiality.
(a) Acknowledgments
by Executive. Executive acknowledges that (a) during the Term and
as a part of Executive’s employment, Executive has been and will be afforded
access to
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14
Confidential
Information (as defined below); (b) public disclosure of such Confidential
Information could have an adverse effect on the Company and its business;
(c)
because Executive possesses substantial technical expertise and skill with
respect to the Company’s business, Company desires to obtain exclusive ownership
of each invention by Executive while Executive is employed by the Company,
and
Company will be at a substantial competitive disadvantage if it fails to
acquire
exclusive ownership of each such invention by Executive; and (d) the provisions
of this Section 17 are reasonable and necessary to prevent the improper use
or
disclosure of Confidential Information and to provide Company with exclusive
ownership of all inventions and works made or created by
Executive.
(b) Confidential
Information. (i) The Executive acknowledges that during the Term
Executive will have access to and may obtain, develop, or learn of Confidential
Information (as defined below) under and pursuant to a relationship of trust
and
confidence. The Executive shall hold such Confidential Information in
strictest confidence and never at any time, during or after Executive’s
employment terminates, directly or indirectly use for Executive’s own benefit or
otherwise (except in connection with the performance of any duties as an
employee hereunder) any Confidential Information, or divulge, reveal, disclose
or communicate any Confidential Information to any unauthorized person or entity
in any manner whatsoever.
(ii) As
used in this Agreement, the term “Confidential Information” shall
include, but not be limited to, any of the following information relating to
Company learned by the Executive during the Term or as a result of Executive’s
employment with Company:
(A) information
regarding the Company’s business proposals, manner of the Company’s operations,
and methods of selling or pricing any products or services;
(B) the
identity of persons or entities actually conducting or considering conducting
business with the Company, and any information in any form relating to such
persons or entities and their relationship or dealings with the Company or
its
affiliates;
(C) any
trade secret or confidential information of or concerning any business operation
or business relationship;
(D) computer
databases, software programs and information relating to the nature of the
hardware or software and how said hardware or software is used in combination
or
alone;
(E) information
concerning Company personnel, confidential financial information, customer
or
customer prospect information, information concerning subscribers, subscriber
and customer lists and data, methods and formulas for estimating costs and
setting prices, engineering design standards, testing procedures, research
results (such as marketing surveys, programming trials or product trials),
cost
data (such as billing, equipment and programming cost projection models),
compensation information and models, business or marketing plans or strategies,
deal or business terms, budgets, vendor names, programming operations, product
names, information on proposed acquisitions or dispositions, actual performance
compared to budgeted performance, long-range plans, internal financial
information
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(including
but not limited to financial and operating results for certain offices,
divisions, departments, and key market areas that are not disclosed to the
public in such form), results of internal analyses, computer programs and
programming information, techniques and designs, and trade secrets;
(F) information
concerning the Company’s employees, officers, directors and shareholders;
and
(G) any
other trade secret or information of a confidential or proprietary
nature.
(iii) Executive
shall not make or use any notes or memoranda relating to any Confidential
Information except for uses reasonably expected by Executive to be for the
benefit of the Company, and will, at Company’s request, return each original and
every copy of any and all notes, memoranda, correspondence, diagrams or other
records, in written or other form, that Executive may at any time have within
his possession or control that contain any Confidential
Information.
(iv) Notwithstanding
the foregoing, Confidential Information shall not include information which
has
come within the public domain through no fault of or action by Executive or
which has become rightfully available to Executive on a non-confidential basis
from any third party, the disclosure of which to Executive does not violate
any
contractual or legal obligation such third party has to the Company or its
affiliates with respect to such Confidential Information. None of the
foregoing obligations and restrictions applies to any part of the Confidential
Information that Executive demonstrates was or became generally available to
the
public other than as a result of a disclosure by Executive or by any other
person bound by a confidentiality obligation to the Company in respect of such
Confidential Information.
(v) Executive
will not remove from the Company’s premises (except to the extent such removal
is for purposes of the performance of Executive’s duties at home or while
traveling, or except as otherwise specifically authorized by Company) any
Company document, record, notebook, plan, model, component, device, or
computer software or code, whether embodied in a disk or in any other form
(collectively, the “Proprietary Items”). Executive recognizes
that, as between Company and Executive, all of the Proprietary Items, whether
or
not developed by Executive, are the exclusive property of the
Company. Upon termination of Executive’s employment by either party,
or upon the request of Company during the Term, Executive will return to Company
all of the Proprietary Items in Executive’s possession or subject to Executive’s
control, including all equipment (e.g., laptop computers, cell phone,
portable e-mail devices, etc.), documents, files and data, and Executive shall
not retain any copies, abstracts, sketches, or other physical embodiment of
any
such Proprietary Items.
18. Proprietary
Developments.
(a) Any
and all inventions, products, discoveries, improvements, processes, methods,
computer software programs, models, techniques, or formulae (collectively,
hereinafter referred to as “Developments”), made, conceived, developed,
or created by Executive (alone or in conjunction with others, during regular
work hours or otherwise) during Executive’s employment,
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which
may
be directly or indirectly useful in, or relate to, the business conducted or
to
be conducted by the Company will be promptly disclosed by Executive
to Company and shall be Company’s exclusive property. The term
“Developments” shall not be deemed to include inventions, products, discoveries,
improvements, processes, methods, computer software programs, models,
techniques, or formulae which were in the possession of Executive prior to
the
Term. Executive hereby transfers and assigns to Company all
proprietary rights which Executive may have or acquire in any Developments
and
Executive waives any other special right which the Executive may have or accrue
therein. Executive will execute any documents and to take any actions
that may be required, in the reasonable determination of Company’s counsel, to
effect and confirm such assignment, transfer and waiver, to direct the issuance
of patents, trademarks, or copyrights to Company with respect to such
Developments as are to be Company’s exclusive property or to vest in Company
title to such Developments; provided, however, that the expense of securing
any
patent, trademark or copyright shall be borne by Company. The parties agree
that
Developments shall constitute Confidential Information.
(b) “Work
Made for Hire.” Any work performed by Executive during
Executive’s employment with Company shall be considered a “Work Made for
Hire” as defined in the U.S. Copyright laws, and shall be owned by and for
the express benefit of Company. In the event it should be established
that such work does not qualify as a Work Made for Hire, Executive agrees to
and
does hereby assign to Company all of Executive’s right, title, and interest in
such work product including, but not limited to, all copyrights and other
proprietary rights.
19. Non-Competition
and Non-Interference.
(a) Acknowledgments
by Executive. Executive acknowledges and agrees that: (a) the
services to be performed by Executive under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Company
competes with other businesses that are or could be located in any part of
the
United States; and (c) the provisions of this Section 19 are reasonable and
necessary to protect the Company’s business and lawful protectable interests,
and do not impair Executive’s ability to earn a living.
(b) Covenants
of Executive. For purposes of this Section 19, the term
“Restricted Period” shall mean the period commencing as of the date of
this Agreement and terminating on the second anniversary (or, in the case of
Section 19(b)(i), the first anniversary), of the date Executive’s employment
terminated provided that the “Restricted Period” also shall encompass
any period of time from whichever anniversary date is applicable until and
ending on the last date Executive is to be paid any payment under Section 15
hereof. In consideration of the acknowledgments by Executive, and in
consideration of the compensation and benefits to be paid or provided to
Executive by Company, Executive covenants and agrees that during the Restricted
Period, the Executive will not, directly or indirectly, for Executive’s own
benefit or for the benefit of any other person or entity other than the
Company:
(i) in
the United States or any other country or territory where the Company then
conducts its business: engage in, operate, finance, control or be employed
by a
“Competitive Business” (defined below); serve as an officer or director of a
Competitive Business (regardless of where Executive then lives or conducts
such
activities); perform any work as an employee,
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consultant
(other than as a member of a professional consultancy, law firm, accounting
firm
or similar professional enterprise that has been retained by the Competitive
Business and where Executive has no direct role in such professional consultancy
and maintains the confidentiality of all information acquired by Executive
during his or her employment with the Company), contractor, or in any other
capacity with, a Competitive Business; directly or indirectly invest or own
any
interest in a Competitive Business (regardless of where Executive then lives
or
conducts such activities); or directly or indirectly provide any services or
advice to a any business, person or entity who or which is engaged in a
Competitive Business (other than as a member of a professional consultancy,
law
firm, accounting firm or similar professional enterprise that has been retained
by the Competitive Business and where Executive has no direct role in such
professional consultancy and maintains the confidentiality of all information
acquired by Executive during his or her employment with the
Company). A “Competitive Business” is any business, person or
entity who or which, anywhere within that part of the United States, or that
part of any other country or territory, where the Company conducts business;
owns or operates a cable television system; provides direct television or any
satellite-based, telephone system-based, internet based or wireless system
for
delivering television, music or other entertainment programming (other than
as
an ancillary service, such as cellular telephone providers); provides telephony
services using any wired connection or fixed (as opposed to mobile) wireless
application; provides data or internet access services; or offers, provides,
markets or sells any service or product of a type that is offered or marketed
by
or directly competitive with a service or product offered or marketed by the
Company at the time Executive’s employment terminates; or who or which in any
case is preparing or planning to do so. The provisions of this Section 19 shall
not be construed or applied (i) so as to prohibit Executive from owning not
more
than five percent (5%) of any class of securities that is publicly traded on
any
national or regional securities exchange, as long as Executive’s investment is
passive and Executive does not lend or provide any services or advice to such
business or otherwise violate the terms of this Agreement in connection with
such investment; or (ii) so as to prohibit Executive from working as an employee
in the cable television business for a company/business that owns or operates
cable television franchises (by way of current example only, Time Warner,
Cablevision, Cox or Comcast), provided that the company/business is not
providing cable services in any political subdivision/ geographic area where
the
Company has a franchise or provides cable services (other than nominal overlaps
of service areas) and the company/business is otherwise not engaged in a
Competitive Business, and provided Executive does not otherwise violate the
terms of this Agreement in connection with that work;
(ii) contact,
solicit or provide any service to any person or entity that was a customer
franchisee, or prospective customer of the Company at any time during
Executive’s employment (a prospective customer being one to whom the Company had
made a business proposal within twelve (12) months prior to the time Executive’s
employment terminated); or directly solicit or encourage any customer,
franchisee or subscriber of the Company to purchase any service or product
of a type offered by or competitive with any product or service provided by
the
Company, or to reduce the amount or level of business purchased by such
customer, franchisee or subscriber from the Company; or take away or procure
for the benefit of any competitor of the Company, any business of a type
provided by or competitive with a product or service offered by the Company;
or
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(iii) solicit
or recruit for employment, any person or persons who are employed by Company
or
any of its subsidiaries or affiliates, or who were so employed at any time
within a period of six (6) months immediately prior to the date Executive’s
employment terminated, or otherwise interfere with the relationship between
any
such person and the Company; nor will the Executive assist anyone else in
recruiting any such employee to work for another company or business or discuss
with any such person his or her leaving the employ of the Company or engaging
in
a business activity in competition with the Company. This provision shall not
apply to secretarial, clerical, custodial or maintenance employees.
If
Executive violates any covenant contained in this Section 19, then the term
of
the covenants in this Section shall be extended by the period of time Executive
was in violation of the same.
(c) Provisions
Pertaining to the Covenants. Executive recognizes that the
existing business of the Company extends to various locations and areas
throughout the United States and may extend hereafter to other countries and
territories and agrees that the scope of Section 19 shall extend to any part
of
the United States, and any other country or territory, where the Company
operates or conducts business, or has concrete plans to do so at the time
Executive’s employment terminates. It is agreed that the Executive’s
services hereunder are special, unique, unusual and extraordinary giving them
peculiar value, the loss of which cannot be reasonably or adequately compensated
for by damages, and in the event of the Executive’s breach of this Section,
Company shall be entitled to equitable relief by way of injunction or otherwise
in addition to the cessation of payments and benefits hereunder. If
any provision of Sections 17, 18 or 19 of this Agreement is deemed to be
unenforceable by a court (whether because of the subject matter of the
provision, the duration of a restriction, the geographic or other scope of
a
restriction or otherwise), that provision shall not be rendered void but the
parties instead agree that the court shall amend and alter such provision to
such lesser degree, time, scope, extent and/or territory as will grant Company
the maximum restriction on Executive’s activities permitted by applicable law in
such circumstances. Company’s failure to exercise its rights to enforce the
provisions of this Agreement shall not be affected by the existence or non
existence of any other similar agreement for anyone else employed by Company
or
by Company’s failure to exercise any of its rights under any such
agreement.
(d) Notices. In
order to preserve Company’s rights under this Agreement, Company is authorized
to advise any potential or future employer, any third party with whom Executive
may become employed or enter into any business or contractual relationship
with,
and any third party whom Executive may contact for any such purpose, of the
existence of this Agreement and its terms, and Company shall not be liable
for
doing so.
(e) Injunctive
Relief and Additional Remedy. Executive acknowledges that the
injury that would be suffered by Company as a result of a breach of the
provisions of this Agreement (including any provision of Sections 17, 18 and
19)
would be irreparable and that an award of monetary damages to Company for such
a
breach would be an inadequate remedy. Consequently, Company will have the
right, in addition to any other rights it may have, to obtain injunctive relief
to restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and Company will not be obligated to post
bond or other security in seeking such relief. Without limiting
Company’s rights under this Section or any other remedies of Company, if
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Executive
breaches any of the provisions of Sections 17, 18 or 19, Company will have
the
right to cease making any payments otherwise due to Executive under this
Agreement.
(f) Covenants
of Sections 17, 18 and 19 are Essential and Independent
Covenants. The covenants by Executive in Sections 17, 18 and 19
are essential elements of this Agreement, and without Executive’s agreement to
comply with such covenants, Company would not have entered into this Agreement
or employed Executive. Company and Executive have independently
consulted their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific
regard to the nature of the business conducted by
Company. Executive’s covenants in Sections 17, 18 and 19 are
independent covenants and the existence of any claim by Executive against
Company, under this Agreement or otherwise, will not excuse Executive’s breach
of any covenant in Section 17, 18 or 19. If Executive’s employment hereunder is
terminated, this Agreement will continue in full force and effect as is
necessary or appropriate to enforce the covenants and agreements of Executive
in
Sections 17, 18 and 19. The Company’s right to enforce the covenants
in Sections 17, 18 and 19 shall not be adversely affected or limited by the
Company’s failure to have an agreement with another employee with provisions at
least as restrictive as those contained in Sections 17, 18 or 19 , or by the
Company’s failure or inability to enforce (or agreement not to enforce) in full
the provisions of any other or similar agreement containing one or more
restrictions of the type specified in Sections 17, 18 and 19 of this
Agreement.
20. Executive’s
Representations And Further
Agreements.
(a) Executive
represents, warrants and covenants to Company that:
(i) Neither
the execution and delivery of this Agreement by Executive nor the performance
of
any of Executive’s duties hereunder in accordance with the Agreement will
violate, conflict with or result in the breach of any order, judgment,
employment contract, agreement not to compete or other agreement or arrangement
to which Executive is a party or is subject;
(ii) On
or prior to the date hereof, Executive has furnished to Company true
and complete copies of all judgments, orders, written employment contracts,
agreements not to compete, and other agreements or arrangements restricting
Executive’s employment or business pursuits, that have current application to
Executive;
(iii) Executive
is knowledgeable and sophisticated as to business matters, including the subject
matter of this Agreement, and that prior to assenting to the terms of this
Agreement, or giving the representations and warranties herein, Executive has
been given a reasonable time to review it and has consulted with counsel of
Executive’s choice; and
(iv) Executive
has not provided, nor been requested by Company to provide, to Company, any
confidential or non public document or information of a former employer that
constitutes or contains any protected trade secret, and will not use any
protected trade secrets in connection with the Executive’s
employment.
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(b) During
and subsequent to expiration of the Term, the Executive will cooperate with
Company, and furnish any and all complete and truthful information, testimony
or
affidavits in connection with any matter that arose during the Executive’s
employment, that in any way relates to the business or operations of the Company
or any of its parent or subsidiary corporations or affiliates, or of which
the
Executive may have any knowledge or involvement; and will consult with and
provide information to Company and its representatives concerning such
matters. Executive shall fully cooperate with Company in the
protection and enforcement of any intellectual property rights that relate
to
services performed by Executive for Company, whether under the terms of this
Agreement or prior to the execution of this Agreement. This shall
include without limitation executing, acknowledging, and delivering to Company
all documents or papers that may be necessary to enable Company to publish
or
protect such intellectual property rights. Subsequent to the Term,
the parties will make their best efforts to have such cooperation performed
at
reasonable times and places and in a manner as not to unreasonably interfere
with any other employment in which Executive may then be
engaged. Nothing in this Agreement shall be construed or interpreted
as requiring the Executive to provide any testimony, sworn statement or
declaration that is not complete and truthful. If Company requires
the Executive to travel outside the metropolitan area in the United States
where
the Executive then resides to provide any testimony or otherwise provide any
such assistance, then Company will reimburse the Executive for any reasonable,
ordinary and necessary travel and lodging expenses incurred by Executive to
do
so provided the Executive submits all documentation required under Company’s
standard travel expense reimbursement policies and as otherwise may be required
to satisfy any requirements under applicable tax laws for Company to deduct
those expenses. Nothing in this Agreement shall be construed or interpreted
as requiring the Executive to provide any testimony or affidavit that is not
complete and truthful.
21. Mutual
Non-Disparagement. Neither
the Company nor Executive shall make any oral or written statement about the
other party which is intended or reasonably likely to disparage the other party,
or otherwise degrade the other party’s reputation in the business or legal
community or in the telecommunications industry.
22. Foreign
Corrupt Practices Act. Executive
agrees to comply in all material respects with the applicable provisions of
the
U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”), as amended, which
provides generally that: under no circumstances will foreign officials,
representatives, political parties or holders of public offices be offered,
promised or paid any money, remuneration, things of value, or provided any
other
benefit, direct or indirect, in connection with obtaining or maintaining
contracts or orders hereunder. When any representative, employee,
agent, or other individual or organization associated with Executive is required
to perform any obligation related to or in connection with this Agreement,
the
substance of this section shall be imposed upon such person and included in
any
agreement between Executive and any such person. Failure by Executive
to comply with the provisions of the FCPA shall constitute a material breach
of
this Agreement and shall entitle the Company to terminate Executive’s employment
for Cause.
23. Purchases
and Sales of the Company’s
Securities. Executive
has read and agrees to comply in all respects with the Company’s Policy
Regarding the Purchase and Sale of the Company’s Securities by Employees, as
such Policy may be amended from time to time.
Charter
- Approved Prototype July 31, 2007
21
Specifically,
and without limitation, Executive
agrees that Executive shall not purchase or sell stock in the Company at any
time (a) that Executive possesses material non-public information about the
Company or any of its businesses; and (b) during any “Trading Blackout Period”
as may be determined by the Company as set forth in the Policy from time to
time.
24. Indemnification. (a) If
Executive is made a party or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter, a "proceeding"), by reason of
the
fact that he or she is or was a director or an officer of the Corporation or
is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan (hereinafter, a "Covered Person"), whether the basis of such proceeding
is
alleged action in an official capacity as a director, officer, employee or
agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists
or
may hereafter be amended, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such Covered Person
in
connection therewith; provided, however, that, except as provided in
Section 24(c) hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such Covered Person in
connection with a proceeding (or part thereof) initiated by such Covered Person
only if such proceeding (or part thereof) was authorized by the
Board.
(b)
The Corporation shall pay the expenses (including attorneys' fees) incurred
by
Executive in defending any such proceeding in advance of its final disposition
(hereinafter, an "advancement of expenses"), provided, however, that,
if the Delaware General Corporation Law so requires, an advancement of expenses
incurred by Executive in his or her capacity as such shall be made only upon
delivery to the Corporation of an undertaking (hereinafter, an "Undertaking"),
by or on behalf of such Executive, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter, a "Final Adjudication") that Executive
was
not entitled to be indemnified for such expenses under this Section 24 or
otherwise. The rights to indemnification and to the advancement of
expenses conferred in Subsections 24(a) and (b) hereof shall be contract
rights and such rights shall continue even after Executive ceases to be employed
by the Company and shall inure to the benefit of Executive’s heirs, executors
and administrators.
(c) If
a claim under Section 24(a) or (b) hereof is not paid in full by the
Company within sixty (60) days after a written claim therefore has been
received by the Company, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty (20) days,
Executive may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim. If Executive is successful in whole
or in part in any such suit, or in a suit brought by the Company to recover
an
advancement of expenses pursuant to the terms of an Undertaking, Executive
shall
be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by Executive to enforce a right to
indemnification hereunder (but not in a suit brought by Executive to enforce
a
right to an advancement of expenses)
Charter
- Approved Prototype July 31, 2007
22
it
shall
be a defense that, and (ii) any suit brought by the Company to recover an
advancement of expenses pursuant to the terms of an Undertaking, the Company
shall be entitled to recover such expenses upon a final adjudication that,
Executive has not met the applicable standard for indemnification set forth
in
the Delaware General Corporation Law. To the fullest extent permitted
by law, neither the failure of the Company (including its disinterested
directors, committee thereof, independent legal counsel or its stockholders)
to
have made a determination prior to the commencement of such suit that
indemnification of Executive is proper in the circumstances because the
Executive has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Company (including
its disinterested directors, committee thereof, independent legal counsel
or its
stockholders) that Executive has not met such applicable standard of conduct,
shall create a presumption that Executive has not met the applicable standard
of
conduct or, in the case of such a suit brought by Executive, be a defense
to
such suit. In any suit brought by Executive to enforce a right to
indemnification or to an advancement of expenses hereunder, or brought by
the
Company to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that Executive is not entitled to be
indemnified, or to such advancement of expenses, under this Section 24 or
otherwise shall, to the extent permitted by law, be on the
Company.
(d)
The rights to indemnification and to the advancement of expenses conferred
in
this Section 24 shall not be exclusive of any other right of indemnification
which Executive or any other person may have or hereafter acquire by any
statute, the Corporation's Certificate of Incorporation or Bylaws, agreement,
vote of stockholders or disinterested directors or otherwise.
(e) The
Company may maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the Delaware General
Corporation Law.
25. Withholding.
Anything to the contrary notwithstanding, all payments required to be made
by
Company hereunder to Executive or his estate or beneficiary shall be
subject to the withholding of such amounts, if any, relating to tax and other
payroll deductions as the Company may reasonably determine it should withhold
pursuant to applicable law or regulation.
26. Notices. Any
written notice required by this Agreement will be deemed provided and delivered
to the intended recipient when (a) delivered in person by hand; or (b) three
days after being sent via U.S. certified mail, return receipt requested; or
(c)
the day after being sent via by overnight courier, in each case when such notice
is properly addressed to the following address and with all postage and similar
fees having been paid in advance:
|
|
If
to the Company:
|
Charter
Communications, Inc.
|
|
|
Attn.:
Human Resources
|
|
|
12405
Powerscourt Drive
|
| St. Louis, MO 63131 |
Charter
- Approved Prototype July 31, 2007
23
|
|
If
to Executive:
|
12405
Powerscourt Drive
|
|
|
St.
Louis, MO 63131
|
Either
party may change the address to which notices, requests, demands and other
communications to such party shall be delivered personally or mailed by giving
written notice to the other party in the manner described above.
27. Binding
Effect. This
Agreement shall be for the benefit of and binding upon the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and, where applicable, assigns.
28. Entire
Agreement. As
of the Effective Date, the Employee and the Company hereby irrevocably agree
that the Old Employment Agreement is hereby terminated in its entirety, and
neither party thereto shall have any rights or obligations under the Old
Employment Agreement, including but not limited to, in the case of the Employee,
any right to any severance payment or benefit. This Agreement
constitutes the entire agreement between the listed parties with respect to
the
subject matter described in this Agreement and supersedes all prior agreements,
understandings and arrangements, both oral and written, between the parties
with
respect to such subject matter, except to the extent said agreements,
understandings and arrangements are referenced or referred to in this
Agreement. This Agreement may not be modified, amended, altered or
rescinded in any manner, except by written instrument signed by both of the
parties hereto; provided, however, that the waiver by either party of a
breach or compliance with any provision of this Agreement shall not operate
nor
be construed as a waiver of any subsequent breach or compliance. Except to
the extent the terms hereof are explicitly and directly inconsistent with
the terms of the Plan, nothing herein shall be deemed to override or replace
the
terms of the Plan, including but not limited to sections 6.4, 9.4 and 10.4
thereof.
29. Severability. In
case any one or more of the provisions of this Agreement shall be held by any
court of competent jurisdiction or any arbitrator selected in accordance with
the terms hereof to be illegal, invalid or unenforceable in any respect, such
provision shall have no force and effect, but such holding shall not affect
the
legality, validity or enforceability of any other provision of this Agreement
provided that the provisions held illegal, invalid or unenforceable does not
reflect or manifest a fundamental benefit bargained for by a party
hereto.
30. Assignment. Subject
to the Executive’s right to terminate in the event of a Change of Control
hereunder, this Agreement can be assigned by the Company only to a company
that
controls, is controlled by, or is under common control with the Company and
which assumes all of the Company’s obligations hereunder. The duties
and covenants of Executive under this Agreement, being personal, may not be
assigned or delegated except that Executive may assign payments due hereunder
to
a trust established for the benefit of Executive’s family or to Executive’s
estate or to any partnership or trust entered into by Executive and/or
Executive’s immediate family members (meaning, Executive’s spouse and lineal
descendants). This agreement shall be binding in all respects on
permissible assignees.
Charter
- Approved Prototype July 31, 2007
24
31. Notification. In
order to preserve the Company’s rights under this Agreement, the Company is
authorized to advise any third party with whom Executive may become employed
or
enter into any business or contractual relationship with, or whom Executive
may
contact for any such purpose, of the existence of this Agreement and its terms,
and the Company shall not be liable for doing so.
32. Choice
of Law/Jurisdiction This Agreement is deemed to be accepted and
entered into in St. Louis County, Missouri. Executive and the Company intend
and
hereby acknowledge that jurisdiction over disputes with regard to this
Agreement, and over all aspects of the relationship between the parties hereto,
shall be governed by the laws of the State of Missouri without giving effect
to
its rules governing conflicts of laws. Executive agrees that in any
suit to enforce this Agreement, or as to any dispute that arises between the
Company and the Executive regarding or relating to this Agreement and/or any
aspect of Executive’s employment relationship with Company, venue and
jurisdiction are proper in the County of St. Louis, and (if federal jurisdiction
exists) the United States District Court for the Eastern Division of Missouri
in
St. Louis, and Executive waives all objections to jurisdiction and venue in
any such forum and any defense that such forum is not the most convenient
forum.
33. Section
Headings. The
section headings contained in this Agreement are for reference purposes only
and
shall not affect in any manner the meaning or interpretation of this
Agreement.
34. Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original, but all of which taken together shall constitute one and
the
same instrument.
[remainder
of page intentionally left blank]
Charter
- Approved Prototype July 31, 2007
25
IN
WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
Charter
Communications, Inc.
By:
/s/ Neil
Smit
Name:
Neil Smit
Title:
President and Cheif Executive Officer
EXECUTIVE
/s/
Robert A.
Quigley
Name: Robert
A.
Quigley
Address: _________________________
Charter
- Approved Prototype July 31, 2007
26
Charter
Communications
Grant
Summary Report
Exhibit
A
Activity
as of 6/25/2007
|
Grant
Date
|
Grant
Type
|
Grant
Price
|
Granted
|
Exercised
|
Canceled
|
Subject
to Repurchase
|
Outstanding
|
Vested
|
Outstanding
Exercisable
|
||||||||||||||||||||||||
|
2001
Non-Qualified Stock Option
|
|||||||||||||||||||||||||||||||||
|
Robert
A. Quigley
|
|||||||||||||||||||||||||||||||||
|
12/5/2005
|
Non-Qualified
|
$ |
1.25
|
145,800
|
36,450
|
0
|
0
|
109,350
|
36,450
|
0
|
|||||||||||||||||||||||
|
12/5/2005
|
Restricted
|
$ |
0.00
|
50,000
|
16,667
|
0
|
0
|
33,333
|
16,667
|
0
|
|||||||||||||||||||||||
|
3/10/2006
|
Non-Qualified
|
$ |
1.00
|
57,300
|
14,325
|
0
|
0
|
42,975
|
14,325
|
0
|
|||||||||||||||||||||||
|
3/10/2006
|
Restricted
|
$ |
0.00
|
133,741
|
0
|
0
|
0
|
133,741
|
0
|
0
|
|||||||||||||||||||||||
|
3/10/2006
|
Restricted
|
$ |
0.00
|
80,244
|
0
|
0
|
0
|
80,244
|
0
|
0
|
|||||||||||||||||||||||
|
3/9/2007
|
Non-Qualified
|
$ |
2.84
|
57,300
|
0
|
0
|
0
|
57,300
|
0
|
0
|
|||||||||||||||||||||||
|
3/9/2007
|
Restricted
|
$ |
0.00
|
133,741
|
0
|
0
|
0
|
133,741
|
0
|
0
|
|||||||||||||||||||||||
|
Optionee
Total
|
658,126
|
67,442
|
0
|
0
|
590,684
|
67,442
|
0
|
||||||||||||||||||||||||||
|
Plan
Total
|
658,126
|
67,442
|
0
|
0
|
590,684
|
67,442
|
0
|
||||||||||||||||||||||||||
Charter
- Approved Prototype July 31, 2007
27
Exhibit
B
Executive
Cash Award Plan
Charter
- Approved Prototype July 31, 2007
28
Exhibit
12.1
|
CHARTER
COMMUNICATIONS, INC AND SUBSIDIARIES
|
||||||||||||||||
|
RATIO
OF EARNINGS TO FIXED CHARGES CALCULATION
|
||||||||||||||||
|
(In
millions)
|
||||||||||||||||
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Earnings
|
||||||||||||||||
|
Loss
from operations before Income Taxes
|
$ | (300 | ) | $ | (326 | ) | $ | (610 | ) | $ | (776 | ) | ||||
|
Fixed
Charges
|
473
|
477
|
938
|
947
|
||||||||||||
|
Total
Earnings
|
$ |
173
|
$ |
151
|
$ |
328
|
$ |
171
|
||||||||
|
Fixed
Charges
|
||||||||||||||||
|
Interest
Expense
|
$ |
463
|
$ |
464
|
$ |
919
|
$ |
920
|
||||||||
|
Amortization
of Debt Costs
|
8
|
11
|
16
|
23
|
||||||||||||
|
Interest
Element of Rentals
|
2
|
2
|
3
|
4
|
||||||||||||
|
Total
Fixed Charges
|
$ |
473
|
$ |
477
|
$ |
938
|
$ |
947
|
||||||||
|
Ratio
of Earnings to Fixed Charges (1)
|
-
|
-
|
-
|
-
|
||||||||||||
|
(1) Earnings
for the three months ended June 30, 2007 and 2006 were insufficient
to
cover fixed charges by $300 and $326, respectively.
|
||||||||||||||||
|
Earnings for the six months ended June 30, 2007 and 2006 were insufficient
to cover fixed charges by $610 and $776, respectively.
|
||||||||||||||||
|
As a result of such deficiencies, the ratios are not presented
above.
|
||||||||||||||||
Exhibit
31.1
I,
Neil
Smit, certify that:
|
1.
|
|
I
have reviewed this Quarterly Report on Form 10-Q of Charter
Communications, Inc.;
|
|
|
||
|
2.
|
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
||
|
3.
|
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
||
|
4.
|
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control
over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and
15d-15(f)) for the registrant and
have:
|
|
|
(a)
|
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
|
|
|||
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
||
|
|
(c)
|
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
|||
|
|
(d)
|
|
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant's internal control over financial
reporting.
|
|
5.
|
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
|
(a)
|
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
|
|||
|
|
(b)
|
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
August 2, 2007
/s/
Neil Smit
Neil
Smit
President
and Chief Executive Officer
Exhibit
31.2
I,
Jeffrey T. Fisher, certify that:
|
1.
|
|
I
have reviewed this Quarterly Report on Form 10-Q of Charter
Communications, Inc.;
|
|
|
||
|
2.
|
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
||
|
3.
|
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
||
|
4.
|
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control
over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and
15d-15(f)) for the registrant and
have:
|
|
|
(a)
|
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
|
|
|||
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
||
|
|
(c)
|
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
|||
|
|
(d)
|
|
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant's internal control over financial
reporting.
|
|
5.
|
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
|
(a)
|
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
|
|||
|
|
(b)
|
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
August 2, 2007
/s/
Jeffrey T. Fisher
Jeffrey
T. Fisher
Chief
Financial Officer
(Principal
Financial Officer)
Exhibit
32.1
CERTIFICATION
OF CHIEF EXECUTIVE
OFFICER
REGARDING PERIODIC REPORT CONTAINING
FINANCIAL
STATEMENTS
I,
Neil
Smit, the President and Chief Executive Officer of Charter Communications,
Inc.
(the "Company") in compliance with 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, the
Company's Annual Report on Form 10-Q for the period ended June 30, 2007 (the
"Report") filed with the Securities and Exchange Commission:
|
·
|
fully
complies with the requirements of Section 13(a) of the Securities
Exchange
Act of 1934; and
|
|
·
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
/s/
Neil
Smit
Neil
Smit
President
andChief
Executive Officer
August
2,
2007
Exhibit
32.2
CERTIFICATION
OF CHIEF FINANCIAL
OFFICER
REGARDING PERIODIC REPORT CONTAINING
FINANCIAL
STATEMENTS
I,
Jeffrey T. Fisher, the Chief Financial Officer of Charter Communications, Inc.
(the "Company") in compliance with 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, the
Company's Annual Report on Form 10-Q for the period June 30, 2007 (the "Report")
filed with the Securities and Exchange Commission:
|
·
|
fully
complies with the requirements of Section 13(a) of the Securities
Exchange
Act of 1934; and
|
|
·
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
/s/
Jeffrey T.
Fisher
Jeffrey
T.
Fisher
Chief
Financial
Officer
(Principal
Financial
Officer)
August
2,
2007