Charter 2009 Annual Report Download - page 85

CCH II, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009, 2008, AND 2007
(dollars in millions, except where indicated)
F-37
processing and related support, benefits administration and coordination of insurance coverage and self-insurance
programs for medical, dental and workers’ compensation claims. Costs associated with providing these services are
charged directly to the Company’ s operating subsidiaries and are included within operating costs in the
accompanying consolidated statements of operations. Such costs totaled $21 million, $220 million, $213 million,
and $213 million for the one month ended December 31, 2009, eleven months ended November 30, 2009 and years
ended December 31, 2008, and 2007, respectively. All other costs incurred on behalf of Charter’ s operating
subsidiaries are considered a part of the management fee and are recorded as a component of selling, general and
administrative expense, in the accompanying consolidated financial statements. The management fee charged to the
Company’ s operating subsidiaries approximated the expenses incurred by Charter Holdco and Charter on behalf of
the Company’ s operating subsidiaries in 2009, 2008 and 2007.
Mr. Allen or his affiliates own or have owned equity interests or warrants to purchase equity interests in various
entities with which the Company does business or which provides it with products, services or programming.
Among these entities are Digeo, Inc. (“Digeo”), and Microsoft Corporation. Mr. Allen owns 100% of the equity of
Vulcan Ventures Incorporated (“Vulcan Ventures”) and Vulcan Inc. and is the president of Vulcan Ventures. Ms. Jo
Lynn Allen was a director of the Company until the Effective Date and is the President and Chief Executive Officer
of Vulcan Inc. and is a director and Vice President of Vulcan Ventures. Mr. Lance Conn is a director of the
Company and was Executive Vice President of Vulcan Inc. and Vulcan Ventures until May 2009. The various
cable, media, Internet and telephone companies in which Mr. Allen has invested may mutually benefit one another.
The Company can give no assurance, nor should you expect, that any of these business relationships will be
successful, that the Company will realize any benefits from these relationships or that the Company will enter into
any business relationships in the future with Mr. Allen’ s affiliated companies.
In 2009, Charter reimbursed Vulcan Inc. approximately $3 million in legal expenses.
9 OM, Inc. (formerly known as Digeo, Inc.)
Mr. Allen, through his 100% ownership of Vulcan Ventures Incorporated (“Vulcan Ventures”), owns a majority
interest in 9 OM, Inc. (formerly known as Digeo, Inc.) on a fully-converted fully-diluted basis. However, in
October 2009, substantially all of 9 OM, Inc.'s assets were sold to ARRIS Group, Inc., an unrelated third party. Ms.
Jo Lynn Allen was a director of Charter until the Effective Date and is a director and Vice President of Vulcan
Ventures. Mr. Lance Conn is a director of Charter and was Executive Vice President of Vulcan Ventures until his
resignation in May 2009. Charter Operating owns a small minority percentage of 9 OM, Inc.'s stock but does not
expect to receive any proceeds from the sale of assets to the ARRIS Group, Inc.
In May 2008, Charter Operating entered into an agreement with 9 OM, LLC (formerly known as Digeo Interactive,
LLC), a subsidiary of 9 OM, Inc., for the minimum purchase of high-definition DVR units for approximately $21
million. This minimum purchase commitment is subject to reduction as a result of certain specified events such as
the failure to deliver units timely and catastrophic failure. The software for these units is being supplied under a
software license agreement with 9 OM, LLC; the cost of which is expected to be approximately $2 million for the
initial licenses and on-going maintenance fees of approximately $0.3 million annually, subject to reduction to
coincide with any reduction in the minimum purchase commitment. The Company purchased approximately $19
million and $1 million of DVR units from 9 OM, LLC under these agreements in 2009 and 2008, respectively.
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 was being supplied by Digeo Interactive, LLC
under a license agreement entered into in April 2004. Pursuant to a software license agreement with Digeo
Interactive for the right to use Digeo's proprietary software for DVR units, the Company paid approximately $2
million, $1 million, $2 million in license and maintenance fees in 2009, 2008, and 2007, respectively.
The Company paid approximately $1 million and $10 million in 2008 and 2007, respectively, in capital purchases
under an agreement with Digeo Interactive for the development, testing and purchase of 70,000 Digeo PowerKey
DVR units. Total purchase price and license and maintenance fees during the term of the definitive agreements
were expected to be approximately $41 million. The definitive agreements were terminable at no penalty to Charter
in certain circumstances.