Charter 2004 Annual Report Download - page 96

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
business other than the cable transmission business. The cable be successful, that we will realize any benefits from these
transmission business means the business of transmitting video, relationships or that we will enter into any business relationships
audio, including telephony, and data over cable systems owned, in the future with Mr. Allen’s affiliated companies.
operated or managed by Charter, Charter Holdco or any of Mr. Allen and his affiliates have made, and in the future
their subsidiaries from time to time. likely will make, numerous investments outside of us and our
Under Delaware corporate law, each director of Charter, business. We cannot assure you that, in the event that we or
including Mr. Allen, is generally required to present to Charter, any of our subsidiaries enter into transactions in the future with
any opportunity he or she may have to acquire any cable any affiliate of Mr. Allen, such transactions will be on terms as
transmission business or any company whose principal business favorable to us as terms we might have obtained from an
is the ownership, operation or management of cable transmis- unrelated third party.
sion businesses, so that we may determine whether we wish to TechTV, Inc.
pursue such opportunities. However, Mr. Allen and the other TechTV, Inc. (‘‘TechTV’’) operated a cable television network
directors generally will not have an obligation to present other that offered programming mostly related to technology. Pursu-
types of business opportunities to Charter and they may exploit ant to an affiliation agreement that originated in 1998 and that
such opportunities for their own account. terminates in 2008, TechTV has provided us with programming
Also, conflicts could arise with respect to the allocation of for distribution via our cable systems. The affiliation agreement
corporate opportunities between us and Mr. Allen and his provides, among other things, that TechTV must offer Charter
affiliates in connection with his investments in businesses in certain terms and conditions that are no less favorable in the
which we are permitted to engage under Charter’s restated affiliation agreement than are given to any other distributor that
certificate of incorporation. Certain of the indentures of Charter serves the same number of or fewer TechTV viewing customers.
and its subsidiaries require the applicable issuer of notes to Additionally, pursuant to the affiliation agreement, we were
obtain, under certain circumstances, approval of the board of entitled to incentive payments for channel launches through
directors of Charter and, where a transaction or series of related December 31, 2003.
transactions is valued at or in excess of $50 million, a fairness In March 2004, Charter Holdco entered into agreements
opinion with respect to transactions in which Mr. Allen has an with Vulcan Programming and TechTV, which provide for
interest. Related party transactions are approved by our Audit (i) Charter Holdco and TechTV to amend the affiliation
Committee in compliance with the listing requirements applica- agreement which, among other things, revises the description of
ble to NASDAQ national market listed companies. We have not the TechTV network content, provides for Charter Holdco to
instituted any other formal plan or arrangement to address waive certain claims against TechTV relating to alleged
potential conflicts of interest. breaches of the affiliation agreement and provides for TechTV
The restrictive provisions of the organizational documents to make payment of outstanding launch receivables due to
described above may limit our ability to take advantage of Charter Holdco under the affiliation agreement, (ii) Vulcan
attractive business opportunities. Consequently, our ability to Programming to pay approximately $10 million and purchase
offer new products and services outside of the cable transmis- over a 24-month period, at fair market rates, $2 million of
sion business and enter into new businesses could be adversely advertising time across various cable networks on Charter cable
affected, resulting in an adverse effect on our growth, financial systems in consideration of the agreements, obligations, releases
condition and results of operations. and waivers under the agreements and in settlement of the
aforementioned claims and (iii) TechTV to be a provider of
THIRD PARTY BUSINESS RELATIONSHIPS IN WHICH MR. ALLEN HAS OR HAD content relating to technology and video gaming for Charter’s
AN INTEREST interactive television platforms through December 31, 2006
As previously noted, Mr. Allen has and has had extensive (exclusive for the first year). For the year ended December 31,
investments in the areas of media and technology. We have a 2004, we recognized approximately $5 million of the Vulcan
number of commercial relationships with third parties in which Programming payment as an offset to programming expense and
Mr. Allen has an interest. Mr. Allen or his affiliates own equity paid approximately $2 million to Tech TV under the affiliation
interests or warrants to purchase equity interests in various agreement.
entities with which we do business or which provide us with We believe that Vulcan Programming, which is 100%
products, services or programming. Mr. Allen owns 100% of the owned by Mr. Allen, owned an approximate 98% equity interest
equity of Vulcan Ventures Incorporated and Vulcan Inc. and is in TechTV at the time Vulcan Programming sold TechTV to an
the president of Vulcan Ventures. Ms. Jo Allen Patton is a unrelated third party in May 2004. Until September 2003,
director and the President and Chief Executive Officer of Vulcan Mr. Savoy, a former Charter director, was the president and
Inc. and is a director and Vice President of Vulcan Ventures. director of Vulcan Programming and was a director of TechTV.
Mr. Lance Conn is Executive Vice President of Vulcan Inc. and Mr. Wangberg, one of Charter’s directors, was the chairman,
Vulcan Ventures. The various cable, media, Internet and chief executive officer and a director of TechTV. Mr. Wangberg
telephony companies in which Mr. Allen has invested may resigned as the chief executive officer of TechTV in July 2002.
mutually benefit one another. We can give no assurance, nor
should you expect, that any of these business relationships will
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