Charter 2010 Annual Report Download - page 120

                                         
F- F-PB
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010, 2009, AND 2008
(dollars in millions, except share or per share data or where indicated)
Shares issued pursuant to the share lending agreement were required
to be returned, in accordance with the contractual arrangement, and
were treated in basic and diluted earnings per share as if they were
already returned and retired. Consequently, there was no impact of
the shares of common stock lent under the share lending agreement
in the earnings per share calculation.
 
e following sets forth certain transactions in which the Company
and the directors, executive officers, and affiliates of the Company
are involved.
Charter is a holding company and its principal assets are its equity
interest in Charter Holdco and prior to the Effective Date, certain
mirror notes payable by Charter Holdco to Charter and mirror
preferred units held by Charter, which had the same principal
amount and terms as those of Charter’s convertible senior notes
and Charter’s outstanding preferred stock. During the year ended
December 31, 2008 (Predecessor), Charter Holdco paid to Charter
$32 million related to interest on the mirror notes. No amounts were
paid for 2009 and 2010.
Charter is a party to management arrangements with Charter Holdco
and certain of its subsidiaries. Under these agreements, Charter
and Charter Holdco provide management services for the cable
systems owned or operated by their subsidiaries. e management
services include such services as centralized customer billing services,
data 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 $246 million, $21 million, $217 million and $213
million for the year ended December 31, 2010 (Successor), one
month ended December 31, 2009 (Successor), eleven months ended
November 30, 2009 (Predecessor) and year ended December 31,
2008 (Predecessor), 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. e 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 2010, 2009 and 2008.
CC VIII, LLC Interest
For the year ended December 31, 2009, pursuant to indemnification
provisions in the October 2005 settlement with Mr. Allen regarding
the CC VIII, LLC (“CC VIII”) interest, the Company reimbursed
Vulcan Inc. approximately $3 million in legal expenses.
Allen Agreement
In connection with the Plan, Charter, Mr. Allen and CII entered
into a separate restructuring agreement (as amended, the “Allen
Agreement”), in settlement and compromise of their legal,
contractual and equitable rights, claims and remedies against Charter
and its subsidiaries. In addition to any amounts received by virtue of
CII’s holding other claims against Charter and its subsidiaries, on the
Effective Date, CII was issued 2.2 million shares of the new Charter
Class B common stock equal to 2% of the equity value of Charter,
after giving effect to the equity rights offering, but prior to issuance
of warrants and equity-based awards provided for by the Plan and
35% (determined on a fully diluted basis) of the total voting power
of all new capital stock of Charter. Each share of new Charter Class
B common stock is convertible, at the option of the holder or the
Disinterested Members of the Board of Directors of Charter, into
one share of new Charter Class A common stock, and is subject to
significant restrictions on transfer and conversion. Certain holders
of new Charter Class A common stock (and securities convertible
into or exercisable or exchangeable therefore) and new Charter Class
B common stock received certain customary registration rights
with respect to their shares. On the Effective Date, CII received:
(i) 4.7 million warrants to purchase shares of new Charter Class A
common stock, (ii) $85 million principal amount of new CCH II
notes (transferred from CCH I, LLC (“CCH I”) noteholders), (iii)
$25 million in cash for amounts previously owed to CII under a
management agreement, (iv) $20 million in cash for reimbursement
of fees and expenses in connection with the Plan, and (v) an
additional $150 million in cash. e warrants described above have
an exercise price of $19.80 per share and expire seven years after the
date of issuance. In addition, on the Effective Date, CII retained a
minority equity interest in reorganized Charter Holdco of 1% and
a right to exchange such interest into new Charter Class A common
stock. On December 28, 2009, CII exchanged 81% of its interest in
Charter Holdco, and on February 8, 2010 the remaining interest was