Charter 2012 Annual Report Download - page 106

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012, 2011 AND 2010
(dollars in millions, except share or per share data or where indicated)
F- 31
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. Costs
associated with providing these services are charged directly to the Company’s operating subsidiaries and are included within
operating costs and expenses in the accompanying consolidated statements of operations. Such costs totaled $247 million, $249
million, and $246 million for the years ended December 31, 2012, 2011, and 2010, 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 operating
costs and expenses, 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 2012, 2011, and 2010.
Registration Rights Agreement
As part of the emergence from Chapter 11 bankruptcy in 2009, the Company agreed to a Registration Rights Agreement with
certain holders of the Company's Class A common stock which required the Company to file a shelf-registration statement with
the SEC to provide for a continuous secondary offering of the stock. The registration statement became effective in November
2010. The Registration Rights Agreement provided that any holder of securities that wished to sell stock under the existing shelf-
registration statement must give the Company five business days notice that such holder wishes to sell and that the Company
notify the other holders which were party to the Registration Rights Agreement.
In August 2012, the Company and the Company's three largest holders, Apollo Management, funds affiliated with Encore LLC
and Oaktree Capital, amended the Registration Rights Agreement to provide for sales of shares of the Company's Class A common
stock in a block trade through an underwriter and the related mechanics for block trades. Because the amendment involved the
Company and affiliates, it was deemed a related party transaction. The amendment was considered and approved by the Audit
Committee. Charter received no compensation from entering into the amendment nor from any subsequent sales of shares.
Allen Agreement
As part of the emergence from Chapter 11 bankruptcy in 2009, 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 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 was 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 was 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. Pursuant to the terms of the Certificate of Incorporation of Charter, on January 18, 2011, the Disinterested Members
of the Board of Directors of Charter caused a conversion of the shares of Class B common stock, all held by Mr. Allen, into shares
of Class A common stock on a one-for-one basis. As a result of such conversion, Mr. Allen no longer has the right to appoint four
directors and the Class B directors became Class A directors. On January 18, 2011, directors William L. McGrath and Christopher
M. Temple, both former Class B directors, resigned from Charter’s board of directors.
Stock Repurchases
See “Note 9. Treasury Stock” for the description of Charter’s purchase of shares of its Class A common stock from Franklin
Advisers, Inc., Oaktree Capital Management and Apollo Management Holdings. At the time of the purchase, funds advised by
Franklin Advisers, Inc., Oaktree Capital Management and Apollo Management Holdings beneficially held more than 10% of
Charter’s Class A common stock.