Charter 2008 Annual Report Download - page 54

Table of Contents
Oxygen Media Corporation
Oxygen Media LLC (“Oxygen”) provides programming content to Charter pursuant to a carriage
agreement. Under the carriage agreement, Charter paid Oxygen approximately $8 million for the year ended
December 31, 2007.
In August 2004, Charter Holdco and Oxygen amended an equity issuance agreement to provide for the
issuance of 1 million shares of Oxygen Preferred Stock with a liquidation preference of $33.10 per share plus
accrued dividends to Charter Holdco in place of the $34 million of unregistered shares of Oxygen Media
common stock required under the original equity issuance agreement. Oxygen Media delivered these shares in
March 2005. The preferred stock was convertible into common stock after December 31, 2007 at a conversion
ratio, the numerator of which is the liquidation preference and the denominator which is the fair market value
per share of Oxygen Media common stock on the conversion date.
In November 2007, NBC Universal, Inc. acquired Oxygen. We received $35 million in return for our
investment. As a result of the acquisition, Mr. Allen no longer has an interest in Oxygen and Mr. Nathanson
no longer has an indirect interest in Oxygen.
Cingular Wireless
A subsidiary of Vulcan has entered into an agreement with New Cingular Wireless National Accounts,
LLC (“Cingular”) to receive discounted wireless services for use by Vulcan and its named affiliates. Charter
is named as one of Vulcan’s affiliates to receive discounted wireless services. Charter is billed directly by
Cingular with the discounts applied, and Charter’s portion of the discounted wireless services under the
agreement results in approximately $1 million per year. Charter paid to Cingular approximately $2 million for
the year ended December 31, 2007 in connection with the discounted wireless services. Charter made no
payments to Vulcan in connection with the Cingular wireless services.
Digeo, Inc.
In March 2001, a subsidiary of Charter, Charter Communications Ventures, LLC (“Charter Ventures”)
and Vulcan Ventures Incorporated formed DBroadband Holdings, LLC for the sole purpose of purchasing
equity interests in Digeo, Inc. (“Digeo”), an entity controlled by Paul Allen. In connection with the execution
of the broadband carriage agreement (described below), DBroadband Holdings, LLC purchased an equity
interest in Digeo funded by contributions from Vulcan Ventures Incorporated. At that time, the equity interest
was subject to a priority return of capital to Vulcan Ventures up to the amount contributed by Vulcan
Ventures on Charter Ventures’ behalf. After Vulcan Ventures recovered its amount contributed (the “Priority
Return”), Charter Ventures would have had a 100% profit interest in DBroadband Holdings, LLC. Charter
Ventures was not required to make any capital contributions, including capital calls to DBroadband Holdings,
LLC. Pursuant to an amendment to this arrangement, in 2003, Vulcan Ventures contributed a total of
$29 million to Digeo, $7 million of which was contributed on Charter Ventures’ behalf, subject to the Priority
Return. Vulcan Ventures has contributed approximately $56 million on Charter Ventures’ behalf. On
October 3, 2006, Vulcan Ventures and Digeo recapitalized Digeo. In connection with such recapitalization,
DBroadband Holdings, LLC consented to the conversion of its preferred stock holdings in Digeo to common
stock and Vulcan Ventures abandoned its interest in DBroadband Holdings, LLC and surrendered the Priority
Return to Charter Ventures. As of December 31, 2007, Charter Ventures dissolved DBroadband Holdings,
LLC and transferred its ownership in Digeo to Charter Communications Operating, LLC.
On June 30, 2003, Charter Holdco entered into an agreement with Motorola, Inc. for the purchase of
100,000 digital video recorder (“DVR”) units. The software for these DVR units is being supplied by Digeo
Interactive, LLC under a license agreement entered into in April 2004. Under the license agreement Digeo
Interactive granted to Charter Holdco the right to use Digeo’s proprietary software for the number of DVR
units that Charter deployed from a maximum of 10 headends through year-end 2004. This maximum number
of headends restriction was expanded and eventually eliminated through successive agreement amendments
and the date for entering into license agreements for units deployed was extended. The license granted for
each unit deployed under the agreement is valid for five years. In addition, Charter will pay certain other fees
including a per-headend license fee
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Source: CHARTER COMMUNICATIO, DEF 14A, March 17, 2008