Charter 2008 Annual Report Download - page 55

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and maintenance fees. Maximum license and maintenance fees during the term of the agreement are expected
to be approximately $7 million. The agreement includes an “MFN clause” pursuant to which Charter is
entitled to receive contract terms, considered on the whole, and license fees, considered apart from other
contract terms, no less favorable than those accorded to any other Digeo customer. Charter paid $2 million in
license and maintenance fees in 2007.
In May 2004, Charter Holdco entered into a binding term sheet with Digeo Interactive for the
development, testing and purchase of 70,000 Digeo PowerKey DVR units. The term sheet provided that the
parties would proceed in good faith to negotiate, prior to year-end 2004, definitive agreements for the
development, testing and purchase of the DVR units and that the parties would enter into a license agreement
for Digeo’s proprietary software on terms substantially similar to the terms of the license agreement described
above. In November 2004, Charter Holdco and Digeo Interactive executed the license agreement and in
December 2004, the parties executed the purchase agreement, each on terms substantially similar to the
binding term sheet. Total purchase price and license and maintenance fees during the term of the definitive
agreements are expected to be approximately $41 million. The definitive agreements are terminable at no
penalty to Charter in certain circumstances. Charter paid $10 million for capital purchases for the year ended
December 31, 2007 under this agreement. In November 2007, Charter entered into a statement of work with
Digeo for the development, testing and delivery of its proprietary software over a switched digital video
set-top box environment in a number of our western division systems. The maximum amount of fees during
the term of the statement of work is expected to be approximately $300,000. Charter has paid approximately
$27,000 pursuant to this statement of work.
In late 2003, Microsoft filed suit against Digeo for $9 million in a breach of contract action, involving an
agreement that Digeo and Microsoft had entered into in 2001. Digeo informed Charter that it believed it had
an indemnification claim against Charter for half that amount. Digeo settled with Microsoft agreeing to make
a cash payment and to purchase certain amounts of Microsoft software products and consulting services
through 2008. In consideration of Digeo agreeing to release Charter from its potential claim against Charter,
after consultation with outside counsel Charter agreed, in June 2005, to purchase a total of $2.3 million in
Microsoft consulting services through 2008, a portion of which amounts Digeo has informed Charter will
count against Digeo’s purchase obligations with Microsoft.
We believe that Vulcan Ventures, an entity controlled by Mr. Allen, owns a majority interest in Digeo,
Inc., on a fully-converted fully-diluted basis. Messrs. Allen and Conn and Ms. Patton are directors of Digeo.
Other Miscellaneous Relationships
Radio Advertising
We believe that, through a third party advertising agency, we have paid approximately $158,000 for
advertising for the year ended December 31, 2007 to Mapleton Communications, an affiliate of Mapleton
Investments, LLC that owns radio stations in Oregon and California. Mr. Nathanson is the Chairman and
owner of Mapleton Investments, LLC.
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Source: CHARTER COMMUNICATIO, DEF 14A, March 17, 2008