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FORM 10-K
------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ___________ TO ____________
[GRAPHIC OMITTED - LOGO]
Commission file number 0-6983
COMCAST CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1709202
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1500 Market Street, Philadelphia, PA 19102-2148
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
--------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
---------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Class A Special Common Stock, $1.00 par value
Class A Common Stock, $1.00 par value
----------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- ---------
--------------------------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
--------------------------
As of December 31, 2001, the aggregate market value of the Class A Special
Common Stock and Class A Common Stock held by non-affiliates of the Registrant
was $32.484 billion and $751.3 million, respectively.
--------------------------
As of December 31, 2001, there were 913,931,554 shares of Class A Special Common
Stock, 21,829,422 shares of Class A Common Stock and 9,444,375 shares of Class B
Common Stock outstanding.
--------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Part III - The Registrant's definitive Proxy Statement for its Annual Meeting of
Shareholders presently scheduled to be held in June 2002.
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COMCAST CORPORATION
2001 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1 Business.................................................................................................1
Item 2 Properties..............................................................................................17
Item 3 Legal Proceedings.......................................................................................18
Item 4 Submission of Matters to a Vote of Security Holders.....................................................18
Item 4A Executive Officers of the Registrant....................................................................19
PART II
Item 5 Market for the Registrant's Common Equity and Related Stockholder Matters...............................20
Item 6 Selected Financial Data.................................................................................21
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations...................23
Item 8 Financial Statements and Supplementary Data.............................................................38
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................74
PART III
Item 10 Directors and Executive Officers of the Registrant......................................................74
Item 11 Executive Compensation..................................................................................74
Item 12 Security Ownership of Certain Beneficial Owners and Management..........................................74
Item 13 Certain Relationships and Related Transactions..........................................................74
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.........................................75
SIGNATURES.......................................................................................................79
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This Annual Report on Form 10-K is for the year ended December 31, 2001.
This Annual Report modifies and supersedes documents filed prior to this Annual
Report. The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you directly to those documents. Information incorporated by reference
is considered to be part of this Annual Report. In addition, information that we
file with the SEC in the future will automatically update and supersede
information contained in this Annual Report. In this Annual Report, "Comcast,"
"we," "us" and "our" refer to Comcast Corporation and its subsidiaries.
You should carefully review the information contained in this Annual
Report, and should particularly consider any risk factors that we set forth in
this Annual Report and in other reports or documents that we file from time to
time with the SEC. In this Annual Report, we state our beliefs of future events
and of our future financial performance. In some cases, you can identify those
so-called "forward-looking statements" by words such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of those words and other comparable
words. You should be aware that those statements are only our predictions.
Actual events or results may differ materially. In evaluating those statements,
you should specifically consider various factors, including the risks outlined
below. Those factors may cause our actual results to differ materially from any
of our forward-looking statements.
Factors Affecting Future Operations
On December 19, 2001, we entered into an Agreement and Plan of Merger with
AT&T Corp. ("AT&T") pursuant to which we agreed to a transaction which will
result in the combination of Comcast and a holding company of AT&T's broadband
business ("AT&T Broadband"). Refer to "General Developments of Our Business" on
page 2 for a description of this pending transaction.
Factors that may cause our actual results to differ materially from any of
our forward-looking statements presented in this Annual Report on Form 10-K
include, but are not limited to:
o our businesses and those of AT&T Broadband may not be integrated
successfully or such integration may be more difficult, time-consuming
or costly than expected,
o expected combination benefits from the transaction may not be fully
realized or realized within the expected time frame,
o revenues following the transaction may be lower than expected,
o operating costs, financing costs, subscriber loss and business
disruption, including, without limitation, difficulties in maintaining
relationships with employees, subscribers, clients or suppliers, may
be greater than expected following the transaction, and
o the shareholder, regulatory and other approvals required for the
transaction may not be obtained on the proposed terms or on the
anticipated schedule.
In addition, our businesses may be affected by, among other things:
o changes in laws and regulations,
o changes in the competitive environment,
o changes in technology,
o industry consolidation and mergers,
o franchise related matters,
o market conditions that may adversely affect the availability of debt
and equity financing for working capital, capital expenditures or
other purposes,
o demand for the programming content we distribute or the willingness of
other video program distributors to carry our content, and
o general economic conditions.
PART I
ITEM 1 BUSINESS
We are involved in three principal lines of business:
o Cable-through the development, management and operation of broadband
communications networks,
o Commerce-through QVC, our electronic retailing subsidiary, and
o Content-through our consolidated subsidiaries Comcast Spectacor,
Comcast SportsNet, Comcast SportsNet Mid-Atlantic, Comcast Sports
Southeast, E! Entertainment Television, The Golf Channel, Outdoor Life
Network, G4 Media, and through our other programming investments.
We are currently the third largest cable operator in the United States and
have deployed digital cable applications and high-speed Internet service to the
substantial majority of our cable communications systems to expand the products
available on our broadband communications networks.
Our consolidated cable operations served approximately 8.5 million
subscribers and passed approximately 13.9 million homes in the United States as
of December 31, 2001. We have entered into an agreement which will result in the
combination of Comcast and AT&T Broadband. Upon completion of this pending
transaction, which is subject to the receipt of necessary shareholder,
regulatory and other approvals, we will serve approximately 22 million
subscribers. We expect to close the transaction by the end of 2002.
Through QVC, we market a wide variety of products directly to consumers
primarily on merchandise-focused television programs. As of December 31, 2001,
QVC was available, on a full and part-time basis, to approximately 82.1 million
homes in the United States, approximately 9.5 million homes in the United
Kingdom, approximately 23.6 million homes in Germany and approximately 3.6
million homes in Japan.
We are a Pennsylvania corporation that was organized in 1969. We have our
principal executive offices at 1500 Market Street, Philadelphia, PA 19102-2148.
Our telephone number is (215) 665-1700. We also have a world wide web site at
http://www.comcast.com. The information posted on our web site is not
incorporated into this Annual Report.
FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
Refer to Note 12 to our consolidated financial statements in Item 8 of this
Annual Report for information about our operations by business segment.
GENERAL DEVELOPMENTS OF OUR BUSINESS
We entered into a number of significant transactions in 2001 which have
closed or are expected to close in 2002. We have summarized these transactions
below and have more fully described them in Note 5 to our consolidated financial
statements in Item 8 of this Annual Report.
Agreement and Plan of Merger with AT&T Broadband
On December 19, 2001, we entered into an Agreement and Plan of Merger with
AT&T Corp. ("AT&T") pursuant to which we agreed to a transaction which will
result in the combination of Comcast and a holding company of AT&T's broadband
business ("AT&T Broadband") that AT&T will spin off to its shareholders
immediately prior to the combination. As of December 31, 2001, AT&T Broadband
served approximately 13.6 million subscribers. If not sold by AT&T prior to the
closing, the combined company will also hold AT&T's minority interest in Time
Warner Entertainment ("TWE"). We intend to dispose of the TWE interest in the
event this interest remains as a part of the combined company after closing.
Under the terms of the transaction, the combined company will issue
approximately 1.235 billion shares of its voting common stock to AT&T Broadband
shareholders in exchange for all of AT&T's interests in AT&T Broadband, and
approximately 115 million shares of its common stock to Microsoft Corporation
("Microsoft") in exchange for AT&T Broadband shares that Microsoft will receive
immediately prior to the completion of the transaction for settlement of their
$5 billion aggregate principal amount in quarterly income preferred securities.
The combined company will also assume or incur approximately $20 billion of AT&T
Broadband debt. For each share of a class of common stock of Comcast that they
hold at the time of the merger, each Comcast shareholder will receive one share
of a corresponding class of stock of the combined company. We expect that the
transaction will qualify as tax-free to both us and to AT&T. We will account for
the transaction as an acquisition under the purchase method of accounting, with
Comcast as the acquiring entity. The transaction is subject to customary closing
conditions and shareholder, regulatory and other approvals. We expect to close
the transaction by the end of 2002.
Refer to Note 5 to our financial statements included in Item 8 for a
discussion of this transaction.
Adelphia Cable Systems Exchange
On January 1, 2001, we completed our cable systems exchange with Adelphia
Communications Corporation. We received cable systems serving approximately
445,000 subscribers from Adelphia and Adelphia received certain of our cable
systems serving approximately 441,000 subscribers. We recorded to other income a
pre-tax gain of $1.199 billion, representing the difference between the
estimated fair value of $1.799 billion as of the closing date of the transaction
and our cost basis in the systems exchanged.
Home Team Sports Acquisition
On February 14, 2001, we acquired Home Team Sports (now known as Comcast
SportsNet Mid-Atlantic), a regional sports programming network serving
approximately 4.8 million homes, from Viacom, Inc. and Affiliated Regional
Communications, Ltd. (an affiliate of Fox Cable Network Services, LLC). We also
agreed to increase the distribution of certain of Viacom's and Fox's programming
networks on certain of our cable systems. The estimated fair value of Home Team
Sports as of the closing date of the acquisition was $240.0 million.
AT&T Cable Systems Acquisition
On April 30, 2001, we acquired cable systems serving approximately 585,000
subscribers from AT&T in exchange for approximately 63.9 million shares of AT&T
common stock then held by us. The market value of the AT&T shares was
approximately $1.423 billion, based on the price of the AT&T common stock on the
closing date of the transaction. The transaction is expected to qualify as tax
free to both us and to AT&T.
Acquisition of Controlling Interest in The Golf Channel
On June 8, 2001, we acquired the approximate 30.8% interest in The Golf
Channel held by Fox Entertainment Group, Inc., a subsidiary of The News
Corporation Limited. In addition, Fox Entertainment and News Corp. agreed to a
five-year non-competition agreement. We paid aggregate consideration of $364.9
million in cash. We now own approximately 91.0% of The Golf Channel and
consolidate The Golf Channel.
- 2 -
Baltimore, Maryland System Acquisition
On June 30, 2001, we acquired the cable system serving approximately
112,000 subscribers in Baltimore City, Maryland from AT&T for $518.7 million in
cash.
Acquisition of Outdoor Life Network
On October 30, 2001, we acquired from Fox Entertainment Group, Inc. the
approximate 83.2% interest in Outdoor Life Network not previously owned by us by
exchanging our 14.5% interest in Speedvision Network, together with a previously
made loan, for Fox Entertainment's interest in Outdoor Life Network. The
estimated fair value of the additional interest we acquired in Outdoor Life
Network as of the closing date of the transaction was approximately $512
million. We no longer own any interest in Speedvision Network and now own 100%
of Outdoor Life Network.
At Home Services
On September 28, 2001, At Home Corporation, our provider of high-speed
Internet services, filed for protection under Chapter 11 of the U.S. Bankruptcy
Code. On December 3, 2001, At Home agreed to continue to provide high-speed
Internet services to our subscribers through February 28, 2002. In December
2001, we began to transfer our high-speed Internet subscribers from the At Home
network to our new Comcast-owned and managed network. We completed this
transition in February 2002.
DESCRIPTION OF OUR BUSINESSES
Cable Communications
Technology and Capital Improvements
Our cable communications networks receive signals by means of:
o special antennae,
o microwave relay systems,
o earth stations, and
o coaxial and fiber optic cables.
Products and Services
We offer a variety of services over our cable communications networks,
including traditional analog video, digital cable and high-speed Internet
service. Available service offerings depend on the bandwidth capacity of the
cable communications system. Bandwidth, expressed in megahertz (MHz), is a
measure of information-carrying capacity. It is the range of usable frequencies
that can be carried by a cable communications system. The greater the bandwidth,
the greater the capacity of the system. As of December 31, 2001, approximately
82% of our cable subscribers were served by a system with a capacity of at least
750-MHz and approximately 95% of our cable subscribers were served by a system
with a capacity of at least 550-MHz.
Digital compression technology enables us to substantially increase the
number of channels our cable communications systems can carry, thereby providing
a significant number of additional programming choices to our subscribers.
Digital compression technology converts up to twelve analog signals into a
digital format and compresses such signals into the bandwidth normally occupied
by one analog signal. At the home, a set-top video terminal converts the digital
signal into analog signals that can be viewed on a television set.
We have deployed fiber optic cable and have upgraded the technical quality
of the substantial majority of our cable communications networks. As a result,
the reliability and capacity of our systems have increased, aiding in the
delivery of additional video programming and other services such as enhanced
digital video, high- speed Internet service and, in some areas, telephony.
Franchises
Cable communications systems are constructed and operated under
non-exclusive franchises granted by state or local governmental authorities for
varying lengths of time and are subject to federal, state and local legislation
and regulation. Our franchises establish our contractual rights and obligations
for constructing and operating a cable communications system in our franchise
areas and typically provide for periodic payment of fees to franchising
authorities of up to 5% of "revenues" (as defined by each franchise agreement).
We normally pass those fees on to subscribers. In many cases, we need the
consent of the franchising authority to transfer our franchises.
Although franchises historically have been renewed, renewals may include
less favorable terms and conditions than the existing franchise. Under law,
franchises should continue to be renewed for companies that have provided
adequate service and have complied with existing franchise terms and applicable
law. We have never had a franchise revoked or otherwise been denied the right to
provide service in a municipality. The franchising authority may choose to award
additional franchises to competing companies at any time. As of December 31,
2001, we served approximately 1,900 franchise areas in the United States.
- 3 -
Traditional Analog Video Services
We receive the majority of our revenues from subscription services.
Subscribers typically pay us on a monthly basis and generally may discontinue
services at any time. Monthly subscription rates and related charges vary
according to the type of service selected and the type of equipment used by
subscribers.
We offer a full range of traditional analog video services. We tailor both
our basic channel line-up and our additional channel offerings to each system
according to demographics, programming preferences, competition, price
sensitivity and local regulation. Our analog service offerings include the
following programming:
o basic programming,
o expanded basic programming,
o premium services, and
o pay-per-view programming.
Our basic cable service typically consists of between 10-20 channels of
programming. This service generally consists of programming provided by national
television networks, local broadcast television stations, locally- originated
programming, including governmental and public access, and limited
satellite-delivered programming.
Our expanded basic cable service, which may vary in size depending on the
system's channel capacity, generally includes a group of satellite-delivered or
non- broadcast channels in addition to the basic channel line- up.
Subscribers can also subscribe to our premium services either individually
or in packages of several channels. Our premium services generally offer,
without commercial interruption, feature motion pictures, live and taped
sporting events, concerts and other special features. The charge for premium
services depends upon the type and level of service selected by the subscriber.
Our pay-per-view service permits our subscribers to order, for a separate
fee, individual feature motion pictures and special event programs, such as
professional boxing, professional wrestling and concerts on an unedited,
commercial-free basis.
Advanced Service Offerings
The high bandwidth capacity of our cable communications networks enables us
to deliver substantially more channels and/or advanced products and services to
our subscribers. A variety of technologies and the rapid growth of the Internet
have presented us with opportunities to provide new or expanded products and
services to our subscribers and to expand our sources of revenue. As a result,
we now offer for the benefit of both our residential and commercial subscribers:
o digital cable television services in substantially all of our systems,
and
o high-speed Internet service installed in personal computers in
approximately 75% of our systems.
We have and will continue to upgrade our cable communications systems so
that we are able to provide these and other new services such as video on
demand, commonly known as VOD, interactive television and cable telephony to our
subscribers.
Digital Cable Services
Subscribers to our digital cable service may receive:
o an interactive program guide,
o multiple channels of digital music,
o additional expanded basic programming,
o additional premium services,
o "multiplexes" of premium channels to which a subscriber also
subscribes, which are varied as to time of broadcast or programming
content theme, and
o additional pay-per-view programming, such as more pay-per-view options
and/or frequent showings of the most popular films to provide near
video-on-demand.
Subscribers typically pay us on a monthly basis for digital cable services
and generally may discontinue services at any time. Monthly rates vary generally
according to the level of service and the number of digital converters selected
by the subscriber.
High-Speed Internet Service
Prior to March 2002, we marketed At Home's high- speed Internet services as
Comcast@Home in areas served by our cable communications systems. Subsequent to
that time, our high-speed Internet subscribers are on our network. Residential
subscribers can connect their personal computers via cable modems to a
high-speed national network provided and managed by us to access online
information, including the Internet, at faster speeds than that of conventional
modems. We also provide businesses with Internet connectivity solutions and
networked business applications.
- 4 -
Other Revenue Sources
We also generate revenues from advertising sales, installation services,
commissions from electronic retailing and other services. We generate revenues
from the sale of advertising time to local, regional and national advertisers on
non-broadcast channels we carry over our cable communications systems.
Sales and Marketing
Our sales efforts are primarily directed toward generating incremental
revenues in our franchise areas and increasing the number of subscribers we
serve. We sell our products and services through:
o telemarketing,
o direct mail advertising,
o door-to-door selling,
o cable television advertising,
o local media advertising, and
o retail outlets.
Programming
We generally acquire a license for the programming we sell to our
subscribers by paying a monthly fee to the licensor on a per subscriber per
channel basis. Our programming costs are increased by:
o increases in the number of subscribers,
o expansion of the number of channels provided to subscribers, and
o increases in contract rates from programming suppliers.
We attempt to secure long-term programming contracts with volume discounts
and/or marketing support and incentives from programming suppliers. Our
programming contracts are generally for a fixed period of time and are subject
to negotiated renewal. We have experienced increases in our cost of programming
and we anticipate that future contract renewals will result in programming costs
that are higher than our costs today, particularly for sports programming.
We utilize interactive programming guides to provide our subscribers with
current programming information, as well as advertising and other content.
Customer Service
We manage most of our cable communications systems in geographic clusters.
Clustering improves our ability to sell advertising, enhances our ability to
efficiently introduce and market new products, and allows us to more efficiently
and effectively provide customer service and support. As part of our clustering
strategy, we have consolidated our local customer service operations into large
regional call centers. These regional call centers have technologically advanced
telephone systems that provide 24-hour per day, 7-day per week call answering
capability, telemarketing and other services.
- 5 -
Our Cable Communications Systems
The table below summarizes certain information for our cable communications
systems as of December 31 (homes, subscribers and subscriptions in thousands):
2001(9) 2000(9) 1999(9) 1998 1997
---------- ---------- ----------- --------- ----------
Cable
Homes Passed (1)..................... 13,929 12,679 9,522 7,382 7,138
Subscribers (2)...................... 8,471 7,607 5,720 4,511 4,366
Penetration (3)...................... 60.8% 60.0% 60.1% 61.1% 61.2%
Digital Cable
"Digital Ready" Subscribers (4)...... 8,375 7,258 4,637 1,570
Subscriptions (5).................... 2,336 1,354 515 78
Penetration (6)...................... 27.9% 18.7% 11.1% 5.0%
High-Speed Internet
"Modem Ready" Homes Passed (7)....... 10,400 6,360 3,259 1,804 866
Subscribers.......................... 948 400 142 51 10
"Modem Ready" Penetration (8)........ 9.1% 6.3% 4.4% 2.8% 1.2%
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(1) A home is "passed" if we can connect it to our distribution system without
further extending the transmission lines.
(2) A dwelling with one or more television sets connected to a system counts as
one cable subscriber.
(3) Cable penetration means the number of cable subscribers as a percentage of
cable homes passed.
(4) A subscriber is "digital ready" if the subscriber is in a market where we
have launched our digital cable service.
(5) Each digital converter box counts as one digital cable subscription.
(6) Digital cable penetration means the number of digital cable subscriptions
as a percentage of "digital ready" subscribers. Certain subscribers may
have multiple digital cable subscriptions.
(7) A home passed is "modem ready" if we can connect it to our Internet service
connection system without further upgrading the transmission lines.
(8) "Modem ready" penetration means the number of high-speed Internet
subscribers as a percentage of "modem ready" homes passed.
(9) In April 1999, we acquired a controlling interest in Jones Intercable, Inc.
In January 2000, we acquired Lenfest Communications, Inc. and began
consolidating the results of Comcast Cablevision of Garden State, L.P. In
August 2000, we acquired Prime Communications LLC. On December 31, 2000 and
January 1, 2001, we completed our cable systems exchanges with AT&T Corp.
and Adelphia Communications, respectively. In April and June 2001, we
acquired cable systems serving an aggregate of approximately 697,000
subscribers from AT&T. The subscriber information as of December 31, 2000
excludes the effects of our exchange with AT&T.
---------------------------
- 6 -
Competition
Our cable communications systems compete with a number of different sources
which provide news, information and entertainment programming to consumers,
including:
o local television broadcast stations that provide off-air programming
which can be received using a roof-top antenna and television set,
o program distributors that transmit satellite signals containing video
programming, data and other information to receiving dishes of varying
sizes located on the subscriber's premises,
o satellite master antenna television systems, commonly known as SMATV,
which generally serve condominiums, apartment and office complexes and
residential developments,
o other operators who build and operate communications systems in the
same communities that we serve,
o interactive online computer services,
o newspapers, magazines and book stores,
o movie theaters,
o live concerts and sporting events, and
o home video products.
In order to compete effectively, we strive to provide, at a reasonable
price to subscribers:
o new products and services,
o superior technical performance,
o superior customer service, and
o a greater variety of video programming.
Federal law allows local telephone companies to provide, directly to
subscribers, a wide variety of services that are competitive with our cable
communications services, including video and Internet services within and
outside their telephone service areas.
Telephone companies and other businesses construct and operate
communications facilities that provide access to the Internet and distribute
interactive computer-based services, data and other non-video services to homes
and businesses. We are unable to predict the likelihood of success of competing
video or cable service ventures by telephone companies or other businesses. Nor
can we predict the impact these competitive ventures might have on our business
and operations.
We operate our cable communications systems pursuant to a non-exclusive
franchise that is issued by the community's governing body such as a city
council, a county board of supervisors or a state regulatory agency. Federal law
prohibits franchising authorities from unreasonably denying requests for
additional franchises, and it permits franchising authorities to operate cable
systems. Companies that traditionally have not provided cable services and that
have substantial financial resources (such as public utilities that own certain
of the poles to which our cables are attached) may also obtain cable franchises
and may provide competing communications services.
Certain facilities-based competitors offer cable and other communications
services in various areas where we hold franchises. We anticipate that
facilities-based competitors will develop in other franchise areas that we
serve.
In recent years, Congress has enacted legislation and the Federal
Communications Commission, commonly known as the FCC, has adopted regulatory
policies intended to provide a favorable operating environment for existing
competitors and for potential new competitors to our cable communications
systems. These competitors include open video systems, commonly known as OVS,
and direct broadcast satellite service, commonly known as DBS, among others.
According to recent government and industry reports, conventional, medium and
high-power satellites currently provide video programming to over 17 million
individual households, condominiums, apartment and office complexes in the
United States. DBS providers with high-power satellites typically offer to their
subscribers more than 300 channels of programming, including programming
services substantially similar to those provided by our cable communications
systems.
DBS service can be received throughout the continental United States
through the installation of a small roof top or side-mounted antenna. DBS
systems use video compression technology to increase channel capacity and
digital technology to improve the quality and quantity of the signals
transmitted to their subscribers. Our digital cable service is competitive with
the programming, channel capacity and the digital quality of signals delivered
to subscribers by DBS systems.
Two major companies, DirecTV and Echostar, are currently offering
nationwide high-power DBS services. On October 29, 2001, the Board of Directors
of General Motors agreed to sell its Hughes Electronics subsidiary, the parent
of DirecTV, to Echostar. Upon closing of the transaction, which is subject to
shareholder and regulatory approvals, the combined company would serve more than
16 million subscribers, which constitutes
- 7 -
approximately 94% of satellite television subscribers nationwide according to a
recent FCC report.
Federal legislation establishes, among other things, a permanent compulsory
copyright license that permits satellite carriers to retransmit local broadcast
television signals to subscribers who reside in the local television station's
market. These companies are transmitting local broadcast signals in most markets
which we serve. As a result, satellite carriers are competitive to cable
communications system operators like us because they offer programming which
closely resembles what we offer. These companies and others are also developing
ways to bring advanced communications services to their customers. They are
currently offering satellite-delivered high-speed Internet services with a
telephone return path and are beginning to provide true two-way interactivity.
We are unable to predict the effects these competitive developments might have
on our business and operations.
Our cable communications systems also compete for subscribers with SMATV
systems. SMATV system operators typically are not subject to regulation like
local franchised cable communications system operators. SMATV systems offer
subscribers both improved reception of local television stations and many of the
same satellite-delivered programming services offered by franchised cable
communications systems. In addition, some SMATV operators are developing and/or
offering packages of telephony, data and video services to private residential
and commercial developments. SMATV system operators often enter into exclusive
service agreements with building owners or homeowners' associations, although
some states have enacted laws to provide cable communications systems access to
these complexes. Courts have reviewed challenges to these laws and have reached
varying results.
Most of our cable communications systems are currently offering high-speed
Internet services to subscribers. These systems compete with a number of other
companies, many of whom have substantial resources, such as:
o existing Internet service providers, commonly known as ISPs,
o local telephone companies, and
o long distance telephone companies.
Various companies, including telephone companies and ISPs, have asked
local, state and federal governments to mandate that cable communications
systems operators provide capacity on their broadband infrastructure so that
these companies and others may deliver high-speed Internet and interactive
television services to customers over cable facilities. In February 2002, we
announced an agreement with a national ISP which will provide our subscribers in
two major markets with access to the ISP's service, with the potential to
roll-out this offering to other of our cable communications systems with the
concurrence of both parties.
The deployment of Digital Subscriber Line technology, known as DSL, allows
Internet access to subscribers at data transmission speeds equal to or greater
than that of modems over conventional telephone lines. Numerous companies,
including telephone companies, have introduced DSL service, and certain
telephone companies are seeking to provide high-speed broadband services without
regard to present service boundaries and other regulatory restrictions. Congress
is currently considering legislation that, if enacted into law, will eliminate
or reduce significantly many of the regulatory restrictions on the offering of
high-speed broadband services by local telephone companies. We are unable to
predict the outcome of any legislative initiatives, the likelihood of success of
competing online services offered by our competitors or what impact these
competitive ventures may have on our business and operations.
We expect advances in communications technology, as well as changes in the
marketplace and the regulatory and legislative environment to occur in the
future. We refer you to page 11 for a detailed discussion of legislative and
regulatory factors. Other new technologies and services may develop and may
compete with services that our cable communications systems offer. Consequently,
we are unable to predict the effect that ongoing or future developments might
have on our business and operations.
Commerce
QVC is a domestic and international electronic media general merchandise
retailer which produces and distributes merchandise-focused television programs,
via satellite, to affiliated video program distributors for retransmission to
subscribers. At QVC, program hosts and guests describe and demonstrate the
products and viewers place orders directly with QVC. We own 57% of QVC.
Revenue Sources
QVC sells a variety of consumer products and accessories including jewelry,
housewares, electronics, apparel and accessories, collectibles, toys and
cosmetics. QVC purchases, or obtains on consignment, products from domestic and
foreign manufacturers and wholesalers, often on favorable terms based on the
volume of the transactions. QVC intends to continue
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introducing new products and product lines. QVC does not depend upon any one
particular supplier for any significant portion of its inventory. QVC's business
is seasonal, with the highest amount of net sales occurring in the fourth
quarter.
Viewers place orders to purchase QVC merchandise by either calling a
toll-free telephone number to speak to a telemarketing operator, by using their
touch-tone telephone to call QVC's integrated automated ordering system which
gives customers the ability to place orders without speaking to a telemarketing
operator, or by using their personal computer to place orders on QVC.com. QVC
uses automatic call distributing equipment to distribute calls to its operators.
The majority of all payments for purchases are made with a major credit card or
QVC's private label credit card. QVC's private label credit card program is
serviced by an unrelated third party. QVC ships merchandise from its
distribution centers, typically within 24 hours after receipt of an order. QVC's
return policy permits customers to return, within 30 days, any merchandise
purchased for a full refund of the purchase price and original shipping charges.
Distribution Channels
In the United States, QVC is transmitted live 24 hours a day, 7 days a
week, to 64.1 million cable television homes. An additional 0.6 million cable
television homes receive QVC on a less than full time basis and 17.4 million
home satellite dish users receive QVC programming. The QVC program schedule
consists of one-hour and multi-hour program segments. Each program theme is
devoted to a particular category of product or lifestyle. From time to time,
special program segments are devoted to merchandise associated with a particular
celebrity, event, geographical region or seasonal interest.
QVC sells products by means of electronic media in the United Kingdom,
Germany and Japan. In the UK, this service currently reaches approximately 9.5
million cable television and home satellite dish-served homes. In Germany, this
service currently is available to approximately 23.6 million cable television
and home satellite dish-served homes. However, we estimate that only 10.6
million homes in Germany have programmed their television sets to receive this
service. In Japan, this service is currently available to approximately 3.6
million cable television and home satellite dish-served homes.
QVC also offers an interactive shopping service, QVC.com, on the Internet.
QVC.com offers a diverse array of merchandise, on-line, 24 hours a day, 7 days a
week. QVC.com also maintains a mailing list which e- mails product news to
customers who choose to receive it.
QVC Transmission
A transponder on a communications satellite transmits the QVC domestic
signal. QVC subleases transponders for the transmission of its signals to the
UK, Germany and Japan, and has made arrangements for redundant coverage through
other satellites in case of a failure. To date, QVC has never had an
interruption in programming due to transponder failure. We cannot offer
assurances that there will not be an interruption or termination of satellite
transmission due to transponder failure. Interruption or termination could have
a material adverse effect on QVC's future results of operations.
Program Distributors
QVC has entered into affiliation agreements with video program distributors
to carry QVC programming. There are no charges to the programming distributors
for the distribution of QVC. In return for carrying QVC, each programming
distributor receives an allocated portion, based upon market share, of up to
five percent of the net sales of merchandise sold to customers located in the
programming distributor's service area. QVC has entered into multi-year
affiliation agreements with various cable and satellite system operators for
carriage of QVC programming. The terms of most affiliation agreements are
automatically renewable for one-year terms unless terminated by either party on
at least 90 days notice prior to the end of the term. Most of the affiliation
agreements provide for the programming distributor to broadcast commercials
regarding QVC on other channels and to distribute QVC's advertising material to
subscribers. As of December 31, 2001, 8.8% of the total homes reached by QVC
were attributable to QVC's affiliation agreement with us.
QVC's business depends on its affiliation with programming distributors for
the transmission of QVC programming. If a significant number of homes are no
longer served because of termination or non-renewal of affiliation agreements,
our financial results could be adversely affected. QVC has incentive programs to
induce programming distributors to enter into or extend affiliation agreements,
to increase the number of homes under existing affiliation agreements, or to
enhance channel placement of the QVC programming. These incentives include
various forms of marketing, carriage and launch support. QVC will continue to
recruit additional programming distributors and seek to enlarge its audience.
Competition
QVC operates in a highly competitive environment. As a general merchandise
retailer, QVC competes for consumer expenditures with the entire retail
industry,
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including department, discount, warehouse and specialty stores, mail order and
other direct sellers, shopping center and mall tenants and conventional retail
stores. On television, QVC competes with other programs for channel space and
viewer loyalty against similar electronic retailing programming, as well as
against alternative programming supplied by other sources, including news,
public affairs, entertainment and sports programmers. The use of digital
compression provides programming distributors with greater channel capacity.
While greater channel capacity increases the opportunity for QVC to be
distributed, it also may adversely impact QVC's ability to compete for
television viewers to the extent it results in higher channel position,
placement of QVC in separate programming tiers, or the addition of competitive
channels.
Content
We have made investments in cable television networks and other
programming-related enterprises as a means of generating additional revenues and
subscriber interest. Our consolidated programming investments as of December 31,
2001 include:
Investment Description
- ------------------------------------ ----------------------------------------------------------
Comcast Spectacor Live sporting events, concerts and other events
Comcast SportsNet Regional sports programming and events
Comcast SportsNet Mid-Atlantic Regional sports programming and events
Comcast Sports Southeast Regional sports programming and events
E! Entertainment Entertainment-related news and original programming
Style Fashion-related programming
The Golf Channel Golf-related programming
Outdoor Life Network Outdoor activities
CN8-The Comcast Network Regional and local programming
G4 Media Interactive video, computer and online games
---------------------------
Consolidated Programming Investments
Comcast Spectacor
Comcast Spectacor is our group of businesses that perform live sporting
events and that own or manage facilities and venues for sports activities,
sports events, concerts and other special events. Comcast Spectacor consists
principally of the Philadelphia Flyers NHL hockey team, the Philadelphia 76ers
NBA basketball team and two large multi-purpose arenas in Philadelphia.
Comcast SportsNet
Comcast SportsNet ("CSN") is our 24-hour regional sports programming
network which provides sports- related programming, including the Philadelphia
Flyers NHL hockey team, the Philadelphia 76ers NBA basketball team and the
Philadelphia Phillies MLB baseball team to approximately 2.9 million subscribers
in the Philadelphia region. CSN is delivered to affiliates terrestrially.
Comcast SportsNet Mid-Atlantic
We acquired Home Team Sports (now known as Comcast SportsNet Mid-Atlantic)
("CSN Mid-Atlantic") in February 2001. CSN Mid-Atlantic is our 24-hour
satellite-delivered regional sports programming network which provides
sports-related programming, including the Baltimore Orioles MLB baseball team,
the Washington Wizards NBA basketball team and the Washington Capitals NHL
hockey team. CSN Mid-Atlantic serves approximately 5.4 million subscribers
primarily in Delaware, Maryland, Pennsylvania, Virginia, Washington, D.C. and
West Virginia.
Comcast Sports Southeast
Comcast Sports Southeast ("CSS") was created in September 1999. CSS is a
satellite-delivered regional sports programming network which provides sports
programming and sports news geared toward college athletics to approximately 3.0
million subscribers primarily in Alabama, Arkansas, Florida, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina, South Carolina and Tennessee.
E! Entertainment
E! Entertainment is our 24-hour network with programming dedicated to the
world of entertainment. Programming formats include behind-the-scenes specials,
original movies and series, news, talk shows and comprehensive coverage of
entertainment industry awards shows and film festivals worldwide. The network
has distribution to approximately 71 million subscribers.
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Style
Style, a division of E! Entertainment, is our 24-hour cable network
dedicated to fashion, home design, beauty, health, fitness and more, with
distribution to approximately 17 million subscribers.
The Golf Channel
We acquired a controlling interest in The Golf Channel in June 2001. The
Golf Channel is our 24-hour network devoted exclusively to golf programming with
distribution to approximately 46 million subscribers. The programming schedule
includes live tournaments, golf instruction programs and golf news.
Outdoor Life Network
We acquired the approximate 83.2% interest in Outdoor Life Network that we
did not previously own in October 2001. Outdoor Life Network is our 24-hour
network devoted exclusively to adventure and the outdoor lifestyle with
distribution to approximately 41 million subscribers. Its programming focuses on
a wide range of outdoor activities including expeditions, skiing, bicycling,
surfing and camping.
CN8-The Comcast Network
CN8-The Comcast Network, our regional programming service, is delivered to
approximately 3.5 million cable subscribers in Pennsylvania, New Jersey,
Delaware and Maryland. CN8 provides original programming, including local and
regional news and public affairs, regional sports, health, cooking and family-
oriented programming.
G4 Media
G4 Media, our 24-hour programming network, is dedicated to creating a
lifestyle brand that is the source of entertainment, news and information about
the interactive entertainment industry, including video, computer, online and
wireless games. G4 Media is expected to launch during the second or third
quarter of 2002.
---------------------------
LEGISLATION AND REGULATION
Cable
The Communications Act of 1934, as amended, establishes a national policy
to regulate the development and operation of cable communications systems. The
Communications Act allocates responsibility for enforcing federal policies among
the FCC, state and local governmental authorities. The courts, especially the
federal courts, play an important oversight role as these statutory and
regulatory provisions are interpreted and enforced by the various federal, state
and local governmental units.
We expect that court actions and regulatory proceedings will continue to
refine the rights and obligations of various parties, including the government,
under the Communications Act. The results of these judicial and administrative
proceedings may materially affect our business operations. In the following
paragraphs, we summarize the principal federal laws and regulations materially
affecting the growth and operation of the cable communications industry. We also
provide a brief description of certain state and local laws applicable to our
businesses.
The Communications Act and FCC Regulations
The Communications Act and the regulations and policies of the FCC affect
significant aspects of our cable system operations, including:
o subscriber rates,
o the content of programming we offer our subscribers, as well as the
way we sell our program packages to subscribers and other video
program distributors,
o the use of our cable systems by franchising authorities, the public
and other unrelated third parties,
o our franchise agreements with governmental authorities,
o cable system ownership limitations and prohibitions, and
o our use of utility poles and conduit.
Subscriber Rates
The Communications Act and the FCC's regulations and policies limit the
ability of cable systems to raise rates for basic services and equipment in
communities that are not subject to effective competition, as defined by federal
law. Where there is no effective competition, federal law gives franchising
authorities the power to regulate the monthly rates charged by the operator for:
o the lowest level of programming service,
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typically called basic service, which generally includes local
broadcast channels and public access or governmental channels required
by the operator's franchise, and
o the installation, sale and lease of equipment used by subscribers to
receive basic service, such as converter boxes and remote control
units.
The FCC has detailed rate regulations, guidelines and rate forms that we
and the franchising authority must use in connection with the regulation of our
basic service and equipment rates. If the franchising authority concludes that
our rates are not in accordance with the FCC's rate regulations, it may require
us to reduce our rates and to refund overcharges to subscribers, with interest.
We may appeal adverse rate decisions to the FCC.
The Communications Act and the FCC's regulations also:
o prohibit regulation of rates charged by cable operators for
programming offered on a per channel or per program basis, and for
multi- channel groups of non-basic programming,
o require operators to charge uniform rates throughout each franchise
area that is not subject to effective competition,
o prohibit regulation of non-predatory bulk discount rates offered by
operators to subscribers in commercial and residential developments,
o permit regulated equipment rates to be computed by aggregating costs
of broad categories of equipment at the franchise, system, regional or
company level, and
o prohibit regulation of rates by local franchising authorities for
other services provided over a cable system, such as high-speed
Internet services.
Content Requirements
The Communications Act and the FCC's regulations contain broadcast signal
carriage requirements that allow certain local commercial television broadcast
stations:
o to elect once every three years to require a cable communications
system to carry the station, subject to certain exceptions, or
o to negotiate with us on the terms by which we may carry the station on
our cable communications system, commonly called retransmission
consent.
The Communications Act and the FCC's regulations require a cable operator
to devote up to one-third of its activated channel capacity for the mandatory
carriage of local commercial television stations. The Communications Act and the
FCC's regulations also give local non-commercial television stations mandatory
carriage rights; however, such stations are not given the option to negotiate
retransmission consent for the carriage of their signals by cable systems.
Additionally, cable systems must obtain retransmission consent for:
o all "distant" commercial television stations (except for commercial
satellite-delivered independent "superstations"),
o commercial radio stations, and
o certain low-power television stations.
FCC regulations require us to carry the signals of local digital-only
broadcast stations (both commercial and non-commercial) and the digital signals
of those local broadcast stations that return their analog spectrum to the
government and convert to a digital broadcast format. The FCC's rules give the
digital-only broadcast stations the discretion to elect whether the operator
will carry the station's signal in a digital or converted analog format, and
they also permit broadcasters with both analog and digital signals to tie the
carriage of their digital signals with the carriage of their analog signals as a
retransmission consent condition. The FCC continues to consider further
modifications to its digital broadcast signal carriage requirements. We are
unable to predict the impact any new carriage requirements might have on the
operations of our cable systems.
The Communications Act requires our cable systems to permit subscribers to
purchase video programming on a per channel or a per program basis without the
necessity of subscribing to any tier of service, other than the basic cable
service tier. However, we are not required to comply with this requirement until
October 2002 for any of our cable systems that do not have addressable converter
boxes or that have other substantial technological limitations. Although a
limited number of our systems do not have the technological capability to offer
programming in the manner required by the statute, and thus currently are exempt
from complying with this requirement, we anticipate that all of our systems will
be in compliance with this requirement by the statutory deadline.
The Communications Act and the FCC's regulations:
o preclude any satellite video programmer affiliated with a cable
company, or with a common carrier, providing video programming
directly to its subscribers, from favoring an
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affiliated company over competitors, and
o limit the ability of such programmers to offer exclusive programming
arrangements to their affiliates.
The FCC has concluded that the program access rules do not apply to certain
terrestrially-delivered programming, such as CSN. The FCC decision is currently
under appeal. The FCC also is considering whether to retain the current
prohibition, which is scheduled to expire in October 2002, on exclusive
programming distribution contracts between cable operators and affiliated
program distributors.
The Communications Act contains restrictions on the transmission by cable
operators of obscene programming. The Communications Act requires the cable
operator, upon the request of the subscriber, to scramble or otherwise fully
block any channel that is not included in the programming package purchased by
the subscriber. Additionally, cable operators are required by the Communications
Act and the FCC's regulations to provide by sale or lease a lockbox or other
device that permits the subscriber to block the viewing of specific channels in
the subscriber's home during periods selected by the subscriber.
The FCC actively regulates other aspects of our programming, involving such
areas as:
o our use of syndicated and network programs and local sports broadcast
programming,
o advertising in children's programming,
o political advertising,
o origination cablecasting,
o sponsorship identification, and
o closed captioning of video programming.
The FCC has also initiated a proceeding to evaluate its jurisdiction and
regulatory authority concerning the distribution over cable communications
systems of interactive television services, including advanced instant messaging
and interactive menu services.
Use of Our Cable Systems by The Government and Unrelated Third Parties
The Communications Act allows franchising authorities and unrelated third
parties to have access to our cable systems' channel capacity. For example, it:
o permits franchising authorities to require cable operators to set
aside channels for public, educational and governmental access
programming, and
o requires a cable system with 36 or more activated channels to
designate a significant portion of its channel capacity for commercial
leased access by third parties to provide programming that may compete
with services offered by the cable operator.
The FCC regulates various aspects of third party commercial use of channel
capacity on our cable systems, including the rates and certain terms and
conditions of the commercial use.
Various companies, including telephone companies and ISPs, have asked
local, state and federal governments to mandate that cable operators provide
capacity on their broadband infrastructure so that these companies and others
may deliver high-speed Internet and interactive television services directly to
subscribers over cable facilities. Some cable operators, including us, have
successfully challenged efforts by local franchising authorities to impose
unilaterally so-called "open access" requirements. Although the court decisions
dealing with this issue generally have concluded that the local franchising
authority cannot regulate Internet access over cable systems, the legal
rationale for these decisions has varied.
In connection with its review of the AOL-Time Warner merger in early 2001,
the FCC and the Federal Trade Commission imposed certain access, technical
performance and other requirements relating to the merged company's high-speed
Internet, Interactive Television, and advanced Instant Messaging services. The
FCC and the U.S. Department of Justice (DOJ) are currently reviewing our
proposed merger with AT&T Broadband, but we do not believe the factual
circumstances involved in our merger with AT&T Broadband warrant the imposition
of comparable restrictions on the combined company.
In a decision adopted in March 2002 addressing the regulatory
classification of high-speed Internet services, the FCC concluded that Internet
services delivered over cable operators' communications systems are interstate
"information services," and it confirmed that cable operators like us, who are
offering high-speed Internet services, are not subject to common carrier
requirements to offer on a stand-alone basis to third parties the transport
functions underlying the information services we offer to our subscribers. The
FCC also recently initiated separate rulemaking proceedings to assess the
appropriate regulatory frameworks, including the role of local regulatory
authorities, governing broadband access to the Internet through cable operators'
and telephone companies' communications networks, respectively. In
- 13 -
the telephone broadband proceeding, the FCC has proposed to classify broadband
Internet services delivered by telephone companies over their own wireline
facilities as interstate "information services." The outcome of these FCC
rulemaking proceedings may affect significantly our regulatory obligations,
including whether we will be required to pay local governmental franchise fees
and/or federal and state universal service fees on our cable Internet revenues.
The March 2002 decision of the FCC has been appealed to the courts.
Some cable operators, including us, have entered into contracts that allow
independent ISPs to provide their Internet services over the cable operators'
communications network. We expect such contractual arrangements to become more
common in the future as cable operators' networks evolve and as competitive
alternatives to cable broadband networks continue to grow, thereby limiting the
need, if any, for government action mandating access by ISPs to our
communications networks. We cannot predict the ultimate outcome of the FCC's
rulemaking proceedings, the appeal of the FCC decision, the governmental review
of our proposed merger with AT&T Broadband, or the impact of any new regulatory
requirements on our operations.
Franchise Matters
Although franchising matters are normally regulated at the local level
through a franchise agreement and/or a local ordinance, the Communications Act
provides oversight and guidelines to govern our relationship with local
franchising authorities. For example, the Communications Act:
o affirms the right of franchising authorities (state or local,
depending on the practice in individual states) to award one or more
franchises within their jurisdictions,
o generally prohibits us from operating in communities without a
franchise,
o encourages competition with our existing cable systems by:
o allowing municipalities to operate cable systems without
franchises, and
o preventing franchising authorities from granting exclusive
franchises or from unreasonably refusing to award additional
franchises covering an existing cable system's service area,
o permits local authorities, when granting or renewing our franchises,
to establish requirements for certain cable-related facilities and
equipment, but prohibits franchising authorities from establishing
requirements for specific video programming or information services
other than in broad categories,
o permits us to obtain modification of our franchise requirements from
the franchise authority or by judicial action if warranted by changed
circumstances,
o generally prohibits franchising authorities from:
o imposing requirements during the initial cable franchising
process or during franchise renewal that require, prohibit
or restrict us from providing telecommunications services,
o imposing franchise fees on revenues we derive from providing
telecommunications services over our cable systems, or
o restricting our use of any type of subscriber equipment or
transmission technology, and
o limits our payment of franchise fees to the local franchising
authority to 5% of our gross revenues derived from providing cable
services over our cable system.
The Communications Act contains procedures designed to protect us against
arbitrary denials of the renewal of our franchises, although a franchising
authority under various conditions can deny us a franchise renewal. Moreover,
even if our franchise is renewed, the franchising authority may seek our
agreement to new or additional requirements such as significant upgrades in
facilities and services or increased franchise fees as a condition of renewal.
Similarly, if a franchising authority's consent is required for the purchase or
sale of a cable system or franchise, the franchising authority may seek
additional franchise requirements on us in connection with a request for such
consent. Historically, cable operators providing satisfactory services to their
subscribers and complying with the terms of their franchises have typically
obtained franchise renewals. We believe that we have generally met the terms of
our franchise agreements and have provided quality levels of service. We have
never had a franchise revoked or otherwise been denied the right to provide
service in a municipality. We anticipate that our future franchise renewal
prospects generally will be favorable.
Various courts have considered whether franchising authorities have the
legal right to limit the number of franchises awarded within a community and to
impose certain substantive franchise requirements (e.g. access channels,
universal service and other technical requirements). These decisions have been
inconsistent and, until the United States Supreme Court rules
- 14 -
definitively on the scope of cable operators' constitutional and statutory
protections, the legality of the franchising process generally and of various
specific franchise requirements is likely to be in a state of flux.
Ownership Limitations
The Communications Act generally prohibits us from owning or operating a
SMATV or wireless cable system in any area where we provide franchised cable
service. We may, however, acquire and operate SMATV systems in our franchised
service areas if the programming and other services provided to SMATV
subscribers are offered according to the terms and conditions of our franchise
agreement.
The Communications Act also authorizes the FCC to impose nationwide limits
on the number of subscribers under the control of a cable operator and on the
number of channels that can be occupied on a cable system by video programmers
in which the cable operator has an attributable ownership interest. The FCC
adopted cable ownership regulations and established:
o subscriber ownership information reporting requirements, and
o attribution rules that identify when the ownership or management by us
or third parties of other communications businesses, including cable
systems, television broadcast stations and local telephone companies,
may be imputed to us for purposes of determining our compliance with
the FCC's ownership restrictions.
The federal courts have rejected constitutional challenges to the statutory
ownership limitations; however, a federal appellate court concluded that the
FCC's 30% nationwide cable subscriber ownership limit and its 40% cap on the
number of affiliated programming channels an operator may carry on its system
were unconstitutional and that certain of its ownership attribution rules were
not justified properly. The FCC recently initiated a rulemaking proceeding to
determine new horizontal and vertical cable ownership limitations and to
evaluate its attribution standards. We are unable to predict the outcome of this
administrative proceeding or the impact any ownership restrictions might have on
our business and operations.
The Communications Act eliminated the statutory prohibition on the common
ownership, operation or control of a cable system and a television broadcast
station in the same market. The FCC eliminated its regulations which precluded
the cross-ownership of a national broadcasting network and a cable system, and a
federal appellate court recently ordered the FCC to repeal its regulations
prohibiting the common ownership of other broadcasting interests and cable
systems in the same geographical areas.
The 1996 amendments to the Communications Act made far-reaching changes in
the relationship between local telephone companies and cable companies. These
amendments:
o eliminated federal legal barriers to competition in the local
telephone and cable communications businesses, including allowing
local telephone companies to offer video services in their local
telephone service areas,
o preempted state and local laws and regulations which impose barriers
to telecommunications competition,
o set basic standards for relationships between telecommunications
providers, and
o generally limited acquisitions and prohibited certain joint ventures
between local telephone companies and cable operators in the same
market.
Local telephone companies may provide service as traditional cable
operators with local franchises or they may opt to provide their programming
over unfranchised "open video systems," subject to certain conditions,
including, but not limited to, setting aside a portion of their channel capacity
for use by unaffiliated program distributors on a non-discriminatory basis. A
federal appellate court overturned various parts of the FCC's open video rules,
including the FCC's preemption of local franchising requirements for open video
operators. The FCC has modified its open video rules to comply with the federal
court's decision. We are unable to predict the impact these rule modifications
may have on our business and operations.
Pole Attachment Regulation
The Communications Act requires that utilities provide cable systems and
telecommunications carriers with nondiscriminatory access to any pole, conduit
or right-of-way controlled by the utility. The Communications Act also requires
the FCC to regulate the rates, terms and conditions imposed by public utilities
for cable systems' use of utility pole and conduit space unless state
authorities demonstrate to the FCC that they adequately regulate pole attachment
rates, as is the case in certain states in which we operate. In the absence of
state regulation, the FCC administers pole attachment rates on a formula basis.
The FCC's original rate formula governs the maximum rate certain utilities may
charge for attachments to their poles and conduit by cable operators
- 15 -
providing only cable services. The FCC also adopted a second rate formula that
became effective in February 2001 and governs the maximum rate certain utilities
may charge for attachments to their poles and conduit by companies providing
telecommunications services, including cable operators. Any resulting increase
in attachment rates due to the FCC's new rate formula will be phased in over a
five-year period in equal annual increments, beginning in February 2001.
The U.S. Supreme Court recently upheld the FCC's jurisdiction to regulate
the rates, terms and conditions of cable operators' pole attachments that are
simultaneously used to provide high-speed Internet access and cable services,
and a federal appellate court is currently evaluating whether the FCC's rate
formulas, as applied in a specific case, provide "just compensation" under the
Federal Constitution. We have joined in several pending complaints filed at the
FCC by various state cable associations challenging certain utilities' rate
increases and the unilateral imposition of new contract terms. The utilities in
these cases have challenged, among other things, the constitutionality of the
FCC's pole attachment rate formulas. We are unable to predict the outcome of the
legal challenge to the FCC's regulations or the ultimate impact any revised FCC
rate formula, any new pole attachment rate regulations or any modification of
the FCC's regulatory authority might have on our business and operations.
Other Regulatory Requirements of the Communications Act and the FCC
The Communications Act also includes provisions, among others, regulating:
o customer service,
o subscriber privacy,
o marketing practices,
o equal employment opportunity, and
o technical standards and equipment compatibility.
The FCC actively regulates other parts of our cable operations and has
adopted regulations implementing its authority under the Communications Act.
The FCC may enforce its regulations through the imposition of substantial
fines, the issuance of cease and desist orders and/or the imposition of other
administrative sanctions, such as the revocation of FCC licenses needed to
operate certain transmission facilities often used in connection with cable
operations. The FCC has ongoing rulemaking proceedings that may change its
existing rules or lead to new regulations. We are unable to predict the impact
that any further FCC rule changes may have on our business and operations.
Copyright
Our cable communications systems provide our subscribers with local and
distant television and radio broadcast signals which are protected by the
copyright laws. We generally do not obtain a license to use this programming
directly from the owners of the programming; instead we comply with an
alternative federal copyright licensing process. In exchange for filing certain
reports and contributing a percentage of our revenues to a federal copyright
royalty pool, we obtain blanket permission to retransmit copyrighted material.
The U.S. Copyright Office recommended that Congress make major revisions to
both the cable television and satellite compulsory licenses. Congress modified
the satellite compulsory license in a manner that permits DBS providers to
become more competitive with cable operators like us. The possible
simplification, modification or elimination of the cable communications
compulsory copyright license is the subject of continuing legislative review.
The elimination or substantial modification of the cable compulsory license
could adversely affect our ability to obtain suitable programming and could
substantially increase the cost of programming that remains available for
distribution to our subscribers. We are unable to predict the outcome of this
legislative activity.
Our cable communications systems often utilize music in the programs we
provide to subscribers including local advertising, local origination
programming and pay-per-view events. The right to use this music is controlled
by music performing rights organizations who negotiate on behalf of their
members for license fees covering each performance. The cable industry and one
of these organizations previously agreed upon a standard licensing agreement
covering the performance of music contained in programs originated by cable
operators and in pay-per-view events. Cable industry representatives recently
negotiated standard license agreements with the two remaining sizable music
performing rights organizations covering cable operators' locally originated
programming, including advertising inserted by the operator in programming
produced by other parties. We expect that these organizations will now seek to
execute these standard agreements with most cable operators, including us.
Although each of these agreements requires payment of music license fees for
earlier time periods, we do not believe that the amount of license fees paid to
such organizations will be significant to our financial condition, results of
operations or liquidity.
- 16 -
State and Local Regulation
Our cable systems use local streets and rights-of-way. Consequently, we
must comply with state and local regulation which is typically imposed through
the franchising process. The terms and conditions of our franchises vary
materially from jurisdiction to jurisdiction. Franchises generally contain
provisions governing:
o cable service rates,
o franchise fees,
o franchise term,
o system construction and maintenance obligations,
o system channel capacity,
o design and technical performance,
o customer service standards,
o franchise renewal,
o sale or transfer of the franchise,
o service territory of the franchisee,
o indemnification of the franchising authority,
o use and occupancy of public streets, and
o types of cable services provided.
A number of states subject cable systems to the jurisdiction of state
governmental agencies. Those states in which we operate that have enacted such
state level regulation are Connecticut, New Jersey and Delaware. State and local
franchising jurisdiction is not unlimited, however; it must be exercised
consistently with federal law. The Communications Act immunizes franchising
authorities from monetary damage awards arising from the regulation of cable
systems or decisions made on franchise grants, renewals, transfers and
amendments.
The summary of certain federal and state regulatory requirements in the
preceding pages does not describe all present and proposed federal, state and
local regulations and legislation affecting the cable industry. Other existing
federal regulations, copyright licensing, and, in many jurisdictions, state and
local franchise requirements, are currently the subject of judicial proceedings,
legislative hearings and administrative proposals which could change, in varying
degrees, the manner in which cable systems operate. We are unable to predict the
outcome of these proceedings or their impact upon our cable operations at this
time.
Commerce and Content
The FCC does not directly regulate the content or transmission of our
programming services. The FCC does, however, exercise regulatory authority over
the satellites and uplink facilities which transmit programming services such as
those provided by certain of our programming networks. The FCC has granted,
subject to periodic reviews, permanent licenses to QVC for its uplink facilities
(and for backup equipment of certain of these facilities) at sufficient power
levels for transmission of the QVC service. The FCC has licensing authority over
satellites from which certain of our programming services obtain transponder
capacity, but does not regulate their rates, terms or conditions of service. The
FCC could, however, alter the regulatory obligations applicable to satellite
service providers. The QVC programming services offered in the UK, Germany and
Japan are regulated by the media authorities in those countries.
EMPLOYEES
As of December 31, 2001, we had approximately 38,000 employees. Of these
employees, approximately 20,000 were associated with cable communications,
approximately 11,000 were associated with commerce and approximately 7,000 were
associated with our other divisions. We believe that our relationships with our
employees are good.
ITEM 2 PROPERTIES
Cable
A central receiving apparatus, distribution cables, servers, analog and
digital converters, cable modems, customer service call centers and local
business offices are the principal physical assets of a cable communications
system. We own or lease the receiving and distribution equipment of each system
and own or lease parcels of real property for the receiving sites, customer
service call centers and local business offices. In order to keep pace with
technological advances, we are maintaining, periodically upgrading and
rebuilding the physical components of our cable communications systems.
Commerce
Television studios, customer service call centers,
- 17 -
business offices, product warehouses and distribution centers are the principal
physical assets of our commerce operations. These assets include QVC's studios
and offices, Studio Park, located in West Chester, Pennsylvania, and office,
customer service call centers and warehouses in the UK, Germany and Japan. QVC
owns the majority of these assets. In order to keep pace with technological
advances, QVC is maintaining, periodically upgrading and rebuilding the physical
components of our commerce operations. QVC's warehousing and distribution
facilities will continue to be upgraded over the next several years.
Content
Two large multi-purpose arenas, television studios and business offices are
the principal physical assets of our content operations. We own the arenas and
own or lease the television studios and business offices of our content
operations.
We believe that substantially all of our physical assets are in good
operating condition.
ITEM 3 LEGAL PROCEEDINGS
We are subject to legal proceedings and claims which arise in the ordinary
course of our business. In the opinion of our management, the amount of ultimate
liability with respect to such actions is not expected to materially affect our
financial condition, results of operations or liquidity.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
- 18 -
ITEM 4A EXECUTIVE OFFICERS OF THE REGISTRANT
The current term of office of each of our officers expires at the first
meeting of our Board of Directors following the next Annual Meeting of
Shareholders, presently scheduled to be held in June 2002, or as soon thereafter
as each of their successors is elected and qualified. The following table sets
forth certain information concerning our executive officers, including their
ages, positions and tenure as of December 31, 2001:
Officer
Name Age Since Position with Comcast
- --------------------- ---------- ------------ --------------------------------------------------------
Ralph J. Roberts 81 1969 Chairman of the Board of Directors; Director
Julian A. Brodsky 68 1969 Vice Chairman of the Board of Directors; Director
Brian L. Roberts 42 1986 President; Director
John R. Alchin 53 1990 Executive Vice President; Treasurer
Stephen B. Burke 43 1998 Executive Vice President
Lawrence S. Smith 54 1988 Executive Vice President
Stanley L. Wang 61 1981 Executive Vice President - Law and Administration
Lawrence J. Salva 45 2000 Senior Vice President and Chief Accounting Officer
--------------------
Ralph J. Roberts has served as a Director and as our Chairman of the Board
of Directors for more than five years. Mr. Roberts devotes a major portion of
his time to our business and affairs. Mr. Roberts also presently serves as a
Director of Comcast Cable Communications, Inc. Mr. Roberts is the father of
Brian L. Roberts.
Julian A. Brodsky has served as a Director and as our Vice Chairman of the
Board of Directors for more than five years. Mr. Brodsky devotes a major portion
of his time to our business and affairs. Mr. Brodsky has served as the Chairman
of Comcast Interactive Capital, LP since its formation in January 1999. Mr.
Brodsky is also a Director of RBB Fund, Inc. and NDS Group plc.
Brian L. Roberts has served as our President and as a Director for more
than five years. Mr. Roberts devotes a major portion of his time to our business
and affairs. Mr. Roberts is Manager of Sural LLC ("Sural"), a privately-held
investment company and our controlling shareholder. As of December 31, 2001, our
shares owned by Sural constituted approximately 87% of the voting power of the
two classes of our voting common stock combined. Mr. Roberts has sole voting
power over stock representing a majority of voting power of all Sural stock and,
therefore, has voting control over Comcast. Mr. Roberts is our Principal
Executive Officer. Mr. Roberts also presently serves as a Director of Comcast
Cable Communications, Inc. and The Bank of New York. Mr. Roberts is a son of
Ralph J. Roberts.
John R. Alchin was named an Executive Vice President in January 2000. Prior
to that time, Mr. Alchin served as our Treasurer and as a Senior Vice President
for more than five years. Mr. Alchin is our Principal Financial Officer.
Stephen B. Burke was named an Executive Vice President in January 2000. Mr.
Burke joined the Company in June 1998 as Senior Vice President and has served as
President of Comcast Cable Communications, Inc. since that time. Prior to
joining the Company, Mr. Burke served with The Walt Disney Company as President
of ABC Broadcasting from January 1996 to June 1998, and as President of Euro
Disney from October 1992 to January 1996.
Lawrence S. Smith has served as an Executive Vice President for more than
five years. For more than five years prior to January 2000, Mr. Smith served as
our Principal Accounting Officer. Mr. Smith also presently serves as a Director
of Comcast Cable Communications, Inc.
Stanley L. Wang was named Executive Vice President - Law and Administration
in January 2000. Prior to that time, Mr. Wang served as a Senior Vice President
and as our Secretary and General Counsel for more than five years. Mr. Wang also
presently serves as a Director of Comcast Cable Communications, Inc.
Lawrence J. Salva joined the Company in January 2000 as Senior Vice
President and Chief Accounting Officer. Prior to that time, Mr. Salva was a
national accounting consulting partner in the public accounting firm of
PricewaterhouseCoopers for more than five years. Mr. Salva has served as our
Principal Accounting Officer since January 2000.
- 19 -
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our Class A Special Common Stock is included on Nasdaq under the symbol
CMCSK and our Class A Common Stock is included on Nasdaq under the symbol CMCSA.
There is no established public trading market for our Class B Common Stock. Our
Class B Common Stock can be converted, on a share for share basis, into Class A
Special or Class A Common Stock. The following table sets forth, for the
indicated periods, the closing price range of our Class A Special and Class A
Common Stock as furnished by Nasdaq.
Class A
Special Class A
-------------------------------------------------------------
High Low High Low
------------- ----------- ------------- ------------
2001
First Quarter...................................... $45.88 $38.69 $45.25 $38.06
Second Quarter..................................... 45.50 39.50 44.75 38.88
Third Quarter...................................... 43.30 32.51 42.70 32.79
Fourth Quarter..................................... 40.18 35.19 40.06 34.95
2000
First Quarter...................................... $54.56 $38.31 $51.44 $36.25
Second Quarter..................................... 44.19 29.75 41.75 29.75
Third Quarter...................................... 41.06 31.06 40.69 30.75
Fourth Quarter..................................... 43.94 34.00 43.94 33.88
--------------------
Our Board of Directors eliminated the quarterly cash dividend on all
classes of our common stock in March 1999. We do not intend to pay dividends on
our Class A Special, Class A or Class B Common Stock for the foreseeable future.
If you hold shares of our Class A Special Common Stock, you cannot vote in
the election of directors or otherwise, except where class voting is required by
law. In that case, if you hold Class A Special Common Stock, you have one vote
per share. Generally, if you hold Class A Common Stock, you have one vote per
share. If you hold Class B Common Stock, you have 15 votes per share. Generally,
including the election of directors, holders of Class A Common Stock and Class B
Common Stock vote as one class except where class voting is required by law.
As of December 31, 2001, there were 4,088 record holders of our Class A
Special Common Stock, 1,484 record holders of our Class A Common Stock and one
record holder of our Class B Common Stock.
- 20 -
ITEM 6 SELECTED FINANCIAL DATA
Year Ended December 31,
2001(1) 2000(1) 1999(1) 1998 1997
-------------------------------------------------------------
(Dollars in millions, except per share data)
-------------------------------------------------
Statement of Operations Data:
Revenues........................................... $9,674.2 $8,218.6 $6,529.2 $5,419.0 $4,700.4
Operating income (loss)............................ (746.2) (161.0) 664.0 557.1 466.6
Income (loss) from continuing operations before
extraordinary items and cumulative effect
of accounting change.......................... 225.6 2,045.1 780.9 1,007.7 (182.9)
Discontinued operations (2)........................ 335.8 (31.4) (25.6)
Extraordinary items................................ (1.5) (23.6) (51.0) (4.2) (30.2)
Cumulative effect of accounting change............. 384.5
Net income (loss).................................. 608.6 2,021.5 1,065.7 972.1 (238.7)
Basic earnings (loss) for common stockholders
per common share (3)
Income (loss) from continuing operations
before extraordinary items and cumulative
effect of accounting change................ $.24 $2.27 $1.00 $1.34 ($.29)
Discontinued operations (2)................... .45 (.04) (.04)
Extraordinary items........................... (.03) (.07) (.01) (.04)
Cumulative effect of accounting change........ .40
----------- ---------- ---------- ---------- ----------
Net income (loss)............................. $.64 $2.24 $1.38 $1.29 ($.37)
=========== ========== ========== ========== ==========
Diluted earnings (loss) for common
stockholders per common share (3)
Income (loss) from continuing operations
before extraordinary items and cumulative
effect of accounting change................ $.23 $2.16 $.95 $1.25 ($.29)
Discontinued operations (2)................... .41 (.03) (.04)
Extraordinary items........................... (.03) (.06) (.01) (.04)
Cumulative effect of accounting change ....... .40
----------- ---------- ---------- ---------- ----------
Net income (loss)............................. $.63 $2.13 $1.30 $1.21 ($.37)
=========== ========== ========== ========== ==========
Cash dividends declared per common share (3)....... $.0467 $.0467
Balance Sheet Data (at year end):
Total assets....................................... $38,131.8 $35,744.5 $28,685.6 $14,710.5 $11,234.3
Working capital.................................... 1,419.5 1,670.9 4,771.6 2,497.0 13.6
Long-term debt..................................... 11,741.6 10,517.4 8,707.2 5,464.2 5,334.1
Stockholders' equity............................... 14,473.0 14,086.4 10,341.3 3,815.3 1,646.5
Supplementary Financial Data:
Operating income before depreciation and
amortization (4).............................. $2,701.8 $2,470.3 $1,880.0 $1,496.7 $1,293.1
Net cash provided by (used in) (5)
Operating activities.......................... 1,229.5 1,219.3 1,249.4 1,067.7 844.6
Financing activities.......................... 1,476.3 (271.4) 1,341.4 809.2 283.9
Investing activities.......................... (3,007.3) (1,218.6) (2,539.3) (1,415.3) (1,045.8)
- ----------
(1) You should see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Item 7 of this Annual Report for a discussion
of events which affect the comparability of the information reflected in
this financial data.
(2) In July 1999, we sold Comcast Cellular Corporation to SBC Communications,
Inc. Comcast Cellular is presented as a discontinued operation for all
periods presented (see Note 5 to our consolidated financial statements in
Item 8 of this Annual Report).
(3) We have adjusted these for our two-for-one stock split in the form of a
100% stock dividend in May 1999.
- 21 -
(4) Operating income before depreciation and amortization is commonly referred
to in our businesses as "operating cash flow." Operating cash flow is a
measure of a company's ability to generate cash to service its obligations,
including debt service obligations, and to finance capital and other
expenditures. In part due to the capital intensive nature of our businesses
and the resulting significant level of non-cash depreciation and
amortization expense, operating cash flow is frequently used as one of the
bases for comparing businesses in our industries, although our measure of
operating cash flow may not be comparable to similarly titled measures of
other companies. Operating cash flow is the primary basis used by our
management to measure the operating performance of our businesses.
Operating cash flow does not purport to represent net income or net cash
provided by operating activities, as those terms are defined under
generally accepted accounting principles, and should not be considered as
an alternative to those measurements as an indicator of our performance.
(5) This represents net cash provided by (used in) operating activities,
financing activities and investing activities as presented in our
consolidated statement of cash flows which is included in Item 8 of this
Annual Report.
- 22 -
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
We have grown significantly in recent years through both strategic
acquisitions and growth in our existing businesses. We have historically met our
cash needs for operations through our cash flows from operating activities. We
have generally financed our cash requirements for acquisitions and capital
expenditures through borrowings of long-term debt, sales of investments and from
existing cash, cash equivalents and short-term investments.
Except where specifically indicated, the following management's discussion
and analysis of financial condition and results of operations does not include
the anticipated effects of the AT&T Broadband transaction.
General Developments of Business
Refer to "General Developments of Our Business" in Part I and Note 5 to our
financial statements in Item 8 for a discussion of our acquisitions and other
significant events.
Most Significant and Subjective Estimates
The following discussion and analysis of our financial condition and
results of operations is based upon our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to sales returns, doubtful accounts, inventories, investments and
derivative financial instruments, long-lived assets, non-monetary transactions,
and contingencies. We base our estimates on historical experience and on various
other assumptions that we believe are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.
We believe the following represent the most significant and subjective
estimates used in the preparation of our consolidated financial statements.
QVC, Inc. ("QVC") is our majority-owned electronic retailing subsidiary.
QVC's return policy permits customers to return, within 30 days, any merchandise
purchased for a full refund of the purchase price and original shipping charges.
QVC estimates and maintains reserves for expected sales returns and allowances
based principally on its return practices and its historical experience. If
actual sales returns differ from the estimated return rates projected by QVC,
QVC may need to increase or decrease its reserves for sales returns and
allowances, which could affect our reported income.
We maintain allowances for doubtful accounts for estimated losses resulting
from our customers' failure to make required payments. If the future payments by
our customers were to differ from our estimates, we may need to increase or
decrease our allowances for doubtful accounts, which could affect our reported
income.
QVC maintains reserves for excess and obsolete inventories to reflect its
inventory at the lower of its stated cost or market value. QVC's estimate for
excess and obsolete inventory is based upon QVC's assumptions about future
demand and market conditions. If future demand and actual market conditions are
more or less favorable than those projected by QVC, QVC may need to increase or
decrease its reserves for excess and obsolete inventories, which could affect
our reported income.
We hold minority interests in companies generally having operations or
technology in areas within our strategic focus, some of which are publicly
traded and may have highly volatile share prices. We also hold investments in
private companies that have no active market by which fair values can be easily
assessed. We record an investment impairment charge when we believe an
investment has experienced a decline in value that is other than temporary.
Future adverse changes in market conditions or poor operating results of
underlying investments could result in losses or an inability to recover the
carrying value of the investments that may not be reflected in an investment's
current carrying value, thereby possibly requiring an impairment charge in the
future.
We use derivative financial instruments to manage exposures to interest
rates and equity prices, and to manage the cost of our share repurchases. We
make investments in businesses, to some degree, through the purchase of equity
call option or call warrant agreements. We have issued indexed debt instruments
and entered into prepaid forward sale agreements whose value, in part, is
derived from the market value of Sprint PCS common stock, and we have also sold
call options on certain of our investments in equity securities in order to
monetize a
- 23 -
portion of those investments. We record all our derivative financial instruments
on our balance sheet at their estimated fair values. Other than for the
effective portion of our derivative instruments that we designate as cash flow
hedges, all changes in the fair value of our derivative financial instruments
are recorded each period in current earnings. The estimated fair values of our
derivative financial instruments are determined through the use of various
valuation models that incorporate certain market assumptions such as volatility,
dividend yield and interest rates. The estimated fair values assigned could
change significantly as a result of changes in the underlying assumptions.
We periodically examine those instruments that we have entered into to
hedge exposure to interest rate and equity price risks to ensure that the
instruments are matched with underlying assets and liabilities, reduce our risks
relating to interest rates and equity prices and, through market value and
sensitivity analysis, maintain a high correlation to the risk inherent in the
hedged item. For those instruments that do not meet the above criteria,
variations in their fair value are marked-to-market on a current basis in our
statement of operations. Although we periodically monitor hedge effectiveness,
market conditions could cause our hedges to become ineffective, thereby reducing
our ability to manage our risks and requiring additional amounts to be recorded
through our statement of operations. We manage the credit risks associated with
our derivative financial instruments through the evaluation and monitoring of
the creditworthiness of the counterparties. Although we may be exposed to losses
in the event of nonperformance by the counterparties, we do not expect such
losses, if any, to be significant.
We periodically evaluate the recoverability of our long-lived assets,
including property and equipment and intangible assets, whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. Our evaluations include analyses based on the cash flows generated
by the underlying assets, profitability information, including estimated future
operating results, trends or other determinants of fair value. If the value of
an asset determined by these evaluations is less than its carrying amount, a
loss is recognized for the difference between the fair value and the carrying
value of the asset. Future adverse changes in market conditions or poor
operating results of the related business may indicate an inability to recover
the carrying value of the assets, thereby possibly requiring an impairment
charge in the future.
Periodically, we enter into non-monetary transactions such as exchanges of
cable systems and exchanges of investments which require us to make estimates of
the fair values of the assets involved in order to record these transactions in
our financial statements. Fair values assigned affect operating results in the
period of the exchange and possibly in future periods. In the case of a cable
systems exchange, the gain or loss on the systems sold and the future
depreciation and amortization expense on the assets acquired are affected by the
fair values assigned to the transaction.
Refer to Note 2 to our financial statements included in Item 8 for a
discussion of our accounting policies with respect to these and other items.
Liquidity and Capital Resources
The cable communications and the electronic retailing industries are
experiencing increasing competition and rapid technological changes. Our future
results of operations will be affected by our ability to react to changes in the
competitive environment and by our ability to implement new technologies. We
believe that competition and technological changes will not significantly affect
our ability to obtain financing.
We believe that we will be able to meet our current and long-term liquidity
and capital requirements, including fixed charges, through our cash flows from
operating activities, existing cash, cash equivalents and investments, and
through available borrowings under our existing credit facilities.
We have both the ability and intent to redeem the $1.096 billion
outstanding Zero Coupon Debentures with amounts available under subsidiary
credit facilities if holders exercise their rights to require us to repurchase
the Zero Coupon Debentures in December 2002. As of December 31, 2001, certain of
our subsidiaries had unused lines of credit of $3.460 billion under their
respective credit facilities.
Refer to Note 7 to our financial statements included in Item 8 for a
discussion of our Zero Coupon Debentures. Refer to the Contractual Cash
Obligations and Commitments table on page 28 and to Note 11 to our financial
statements included in Item 8 for a discussion of our commitments and
contingencies.
AT&T Broadband Transaction
Excluding AT&T Broadband's exchangeable notes, which are mandatorily
redeemable at AT&T Broadband's option into shares of certain publicly traded
companies held by AT&T Broadband, we currently estimate that an aggregate of
approximately $20 billion of assumed and refinanced indebtedness will be
required upon completion of the AT&T Broadband transaction. At the completion of
the transaction, we anticipate that the combined company will assume
approximately $7 to $8 billion of
- 24 -
debt and will require financing of $11 billion to $14 billion. The financing,
while not a condition for the closing, is expected to include:
o approximately $9 billion to $10 billion to retire the intercompany
debt balance which AT&T Broadband is expected to owe AT&T Corp.
("AT&T"),
o approximately $1 billion to $2 billion to refinance certain AT&T
Broadband debt that may be put for redemption by investors or that
will mature on or soon after the closing date for the transaction, and
o approximately $1 billion to $2 billion to provide appropriate cash
reserves to fund the operations and capital expenditures of AT&T
Broadband after completion of the transaction.
We are in the process of attempting to secure an aggregate of $12.5 billion
in new indebtedness in order to achieve these funding requirements. If we obtain
this financing, we expect that we will be required to provide subsidiary
guarantees, including guarantees by certain of our wholly owned subsidiaries and
by subsidiaries of AT&T Broadband.
We may also use other available sources of financing to fund these
requirements, including:
o our existing cash, cash equivalents and short- term investments, which
totaled $2.973 billion as of December 31, 2001,
o amounts available under our subsidiaries' lines of credit, which
totaled $3.460 billion as of December 31, 2001, and
o through the sales of our and AT&T Broadband's investments, including
AT&T Broadband's investment in Time Warner Entertainment.
Subsequent to closing of the AT&T Broadband transaction, we will have a
substantially higher amount of debt, interest expense and capital expenditures
at the combined company. If the credit rating agencies determine that the
combined company is less creditworthy, on a combined basis, than that of Comcast
on an historical basis, it is possible that our cost of and access to capital
could be negatively affected. We currently hold investment grade ratings for our
various debt securities. If our debt securities are downgraded as a result of
our assumption of debt in the AT&T Broadband transaction, access to the
commercial paper market would likely become limited and the costs of borrowing
under alternative sources would likely increase.
Cash, Cash Equivalents and Short-term Investments
We have traditionally maintained significant levels of cash, cash
equivalents and short-term investments to meet our short-term liquidity
requirements. Our cash equivalents and short-term investments are recorded at
fair value. Cash, cash equivalents and short-term investments as of December 31,
2001 were $2.973 billion, substantially all of which is unrestricted.
Investments
A significant portion of our investments are in publicly traded companies
and are reflected at fair value, which fluctuates with market changes.
We do not have any significant contractual funding commitments with respect
to any of our investments. Our ownership interests in these investments may,
however, be diluted if we do not fund our investees' non-binding capital calls.
We continually evaluate our existing investments, as well as new investment
opportunities.
Refer to Note 6 to our financial statements included in Item 8 for a
discussion of our investments.
Capital Expenditures
During 2002, we expect to incur approximately $1.5 billion of capital
expenditures in our cable, commerce and content businesses, including
approximately $1.3 billion for our cable operations.
We anticipate capital expenditures for years subsequent to 2002 will
continue to be significant. As of December 31, 2001, we do not have any
significant contractual obligations for capital expenditures.
Cable
We expect our 2002 cable capital expenditures will include approximately
$225 million for the upgrading and rebuilding of certain of our cable
communications systems, approximately $625 million for the deployment of cable
modems, digital converters and new service offerings, and approximately $450
million for recurring capital projects.
The amount of our capital expenditures for years subsequent to 2002 will
depend on numerous factors, some of which are beyond our control including:
o competition,
o cable system capacity of newly acquired systems, and
- 25 -
o the timing and rate of deployment of new services.
Commerce
During 2002, we expect to incur approximately $175 million of capital
expenditures for QVC, primarily for the upgrading of QVC's warehousing
facilities, distribution facilities and information systems. Capital
expenditures in QVC's international operations represent nearly 50% of QVC's
total capital expenditures.
Affiliation Agreements
Certain of our content subsidiaries and QVC enter into multi-year
affiliation agreements with various cable and satellite system operators for
carriage of their respective programming. In connection with these affiliation
agreements, we generally pay a fee to the cable or satellite operator based upon
the number of subscribers. During 2002, we expect to incur $200 million to $300
million related to these affiliation agreements.
Financing
As of December 31, 2001 and 2000, our long-term debt, including current
portion, was $12.202 billion and $10.811 billion, respectively.
The $1.391 billion increase from December 31, 2000 to December 31, 2001
results principally from the effects of our net borrowings, offset by the $194.2
million aggregate reduction to the carrying value of our 2% Exchangeable
Subordinated Debentures due 2029 (the "ZONES") during 2001.
Excluding the effects of interest rate risk management instruments, 13.4%
and 28.5% of our long- term debt, including current portion, as of December 31,
2001 and 2000, respectively, was at variable rates. The decrease from December
31, 2000 to December 31, 2001 in the percentage of our variable rate debt was
due principally to the effects of our 2001 financings. See "Statement of Cash
Flows" below.
We have, and may from time to time in the future, depending on certain
factors including market conditions, make optional repayments on our debt
obligations, which may include open market repurchases of our outstanding public
notes and debentures.
Refer to Notes 7 and 8 to our financial statements included in Item 8 for a
discussion of our financing activities.
Interest Rate Risk Management
We are exposed to the market risk of adverse changes in interest rates. We
maintain a mix of fixed and variable rate debt and enter into various derivative
transactions pursuant to our policies to manage the volatility relating to these
exposures. We monitor our interest rate risk exposures using techniques
including market value and sensitivity analyses. We do not hold or issue any
derivative financial instruments for trading purposes and are not a party to
leveraged instruments. We manage the credit risks associated with our derivative
financial instruments through the evaluation and monitoring of the
creditworthiness of the counterparties. Although we may be exposed to losses in
the event of nonperformance by the counterparties, we do not expect such losses,
if any, to be significant.
We use interest rate exchange agreements ("Swaps") to exchange, at
specified intervals, the difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional principal amount. We use
interest rate cap agreements ("Caps") to lock in a maximum interest rate should
variable rates rise, but enable us to otherwise pay lower market rates. We use
interest rate collar agreements ("Collars") to limit our exposure to and
benefits from interest rate fluctuations on variable rate debt to within a
certain range of rates.
- 26 -
The table set forth below summarizes the fair values and contract terms of
financial instruments subject to interest rate risk maintained by us as of
December 31, 2001 (dollars in millions):
Fair
Expected Maturity Date Value at
2002 2003 2004 2005 2006 Thereafter Total 12/31/01
---- ---- ---- ---- ---- ---------- ----- --------
Debt
Fixed Rate.......................... $210.6 $11.9 $330.9 $708.7 $653.1 $8,656.4 $10,571.6 $10,928.4
Average Interest Rate............ 9.6% 8.6% 7.6% 8.4% 7.0% 5.8% 6.2%
Variable Rate....................... $249.6 $61.3 $0.1 $1,317.5 $0.1 $1.6 $1,630.2 $1,630.2
Average Interest Rate............ 2.4% 3.4% 5.8% 5.2% 6.9% 6.9% 4.7%
Interest Rate Instruments
Variable to Fixed Swaps............. $178.6 $71.7 $250.3 ($5.5)
Average Pay Rate................. 4.8% 4.9% 4.9%
Average Receive Rate............. 2.0% 3.0% 2.3%
Fixed to Variable Swaps (1)......... $300.0 $300.0 $350.0 $950.0 $46.8
Average Pay Rate................. 5.5% 5.9% 6.8% 6.1%
Average Receive Rate............. 8.1% 6.4% 7.9% 7.5%
(1) During January and February 2002, we settled all $950.0 million notional
amount of our Fixed to Variable Swaps and received proceeds of $56.8
million.
---------------------------
The notional amounts of interest rate instruments, as presented in the
table above, are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss. The estimated fair value
approximates the proceeds (costs) to settle the outstanding contracts. We
estimate interest rates on variable debt using the average implied forward
London Interbank Offer Rate ("LIBOR") rates for the year of maturity based on
the yield curve in effect at December 31, 2001, plus the borrowing margin in
effect for each credit facility at December 31, 2001. We estimate average
receive rates on the Variable to Fixed Swaps using the average implied forward
LIBOR rates for the year of maturity based on the yield curve in effect at
December 31, 2001. While Swaps, Caps and Collars represent an integral part of
our interest rate risk management program, their incremental effect on interest
expense for the years ended December 31, 2001, 2000 and 1999 was not
significant.
Equity Price Risk Management
During 1999, we entered into cashless collar agreements (the "Equity
Collars") covering $1.365 billion notional amount of our Sprint PCS common stock
which we account for at fair value. The Equity Collars limit our exposure to and
benefits from price fluctuations in the Sprint PCS common stock. During 2001,
$483.7 million notional amount of Equity Collars matured and we sold or entered
into prepaid forward sales of the related Sprint PCS common stock. Refer to Note
6 to our financial statements included in Item 8 for a discussion of our prepaid
forward sales of Sprint PCS common stock. The remaining $881.0 million notional
amount of Equity Collars mature between 2002 and 2003. As we had accounted for
the Equity Collars as a hedge, changes in the value of the Equity Collars were
substantially offset by changes in the value of the Sprint PCS common stock
which were also marked to market through accumulated other comprehensive income
in our balance sheet through December 31, 2000.
In connection with the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, on January 1, 2001, we reclassified our investment in
Sprint PCS from an available for sale security to a trading security. During
2001, the increase in the fair value of our investment in Sprint PCS common
stock of $284.4 million was partially offset by the decrease in the fair value
of the Equity Collars and the increase in the fair value of the derivative
components of the ZONES and prepaid forward sales. See "Results of Operations -
Investment Income" below.
Accumulated Other Comprehensive Income
The change in accumulated other comprehensive income from December 31, 2000
to December 31, 2001 is principally related to realized gains and losses on our
investments classified as available for sale, and reclassification adjustments
related to the effects of adoption of SFAS No. 133. The change in accumulated
other comprehensive income from December 31, 1999 to December 31, 2000 is
principally related to the decline in unrealized gains on our investments
classified as available
- 27 -
for sale held throughout the year.
Contractual Cash Obligations and Commitments
In January 2002, the Securities and Exchange Commission ("SEC") issued
Financial Reporting Release No. 61, "Commission Statement about Management's
Discussion and Analysis of Financial Condition and Results of Operations" ("FRR
No. 61"). While FRR No. 61 does not create new or modify existing requirements,
it does set forth certain views of the SEC regarding disclosure that should be
considered by registrants. Among other things, FRR No. 61 encourages registrants
to provide disclosure in one place, within Management's Discussion and Analysis
of Financial Condition and Results of Operations, of the on and off balance
sheet arrangements that may affect liquidity and capital resources. As there is
no prescribed format for this disclosure, we have segregated our arrangements
that may affect liquidity and capital resources between those contractual cash
obligations that are recorded in our financial statements and those commitments
that are disclosed in the notes to our financial statements in accordance with
accounting principles generally accepted in the United States. Future rulemaking
by the SEC could result in the form and content of this disclosure being
different from the information that we have presented below. The following
tables summarize our obligations and commitments as of December 31, 2001, and
the effect such obligations and commitments are expected to have on our
liquidity and cash flow in future periods.
Payments Due by Period
-------------------------------------------------
Less than 1 - 3 4 - 5 After 5
Total 1 year years years years
---------- ---------- ---------- ---------- ----------
(dollars in millions)
---------- ---------- ---------- ---------- ----------
Contractual Cash Obligations
Long-term debt (1).............................. $12,201.8 $460.2 $404.2 $2,679.4 $8,658.0
Other long-term obligations (2)................. 437.4 138.9 179.3 26.5 92.7
---------- ---------- ---------- ---------- ----------
Total contractual cash obligations......... $12,639.2 $599.1 $583.5 $2,705.9 $8,750.7
---------- ---------- ---------- ---------- ----------
Commitments
Operating leases (3)............................ $487.9 $98.6 $146.8 $93.9 $148.6
Programming agreements (4)...................... 844.0 95.4 166.6 168.4 413.6
Professional sports contracts (5)............... 403.3 122.5 193.3 79.5 8.0
Guarantees (6).................................. 75.0 75.0
---------- ---------- ---------- ---------- ----------
Total commitments.......................... $1,810.2 $316.5 $581.7 $341.8 $570.2
========== ========== ========== ========== ==========
- ------------
(1) The table presents maturities of long-term debt outstanding, including
capital lease obligations, as of December 31, 2001. Refer to Note 7 to our
financial statements included in Item 8 for a description of our long-term
debt.
(2) Other long-term obligations consist principally of the Company's deferred
compensation obligations, post- retirement and post-employment benefit
obligations, and program rights payable under license agreements.
(3) Operating leases include the Company's minimum annual rental commitments
for office space, equipment and transponder service agreements under
noncancellable operating leases.
(4) Certain of the Company's programming networks (CSN, CSN Mid-Atlantic, CSS,
E!, TGC, OLN and G4) have entered into license agreements for programs and
sporting events which will be available for telecast subsequent to December
31, 2001. Programming agreements represent the Company's minimum aggregate
commitments under these agreements.
(5) The Company, through Comcast Spectacor, has employment agreements with both
players and coaches of its professional sports teams. Certain of these
employment agreements, which provide for payments that are guaranteed
regardless of employee injury or termination, are covered by disability
insurance if certain conditions are met. Professional sports contracts
represent the Company's future commitments under these contracts.
(6) In connection with a license awarded to an affiliate, the Company is
contingently liable in the event of nonperformance by the affiliate to
reimburse a bank which has provided a performance guarantee. Refer to Note
11 to our financial statements included in Item 8 for a description of this
contingency.
---------------------------
- 28 -
Statement of Cash Flows
Cash and cash equivalents decreased $301.5 million as of December 31, 2001
from December 31, 2000. The decrease in cash and cash equivalents resulted from
cash flows from operating, financing and investing activities as explained
below.
Net cash provided by operating activities from continuing operations
amounted to $1.230 billion for the year ended December 31, 2001, due principally
to our operating income before depreciation and amortization (see "Results of
Operations"), offset by changes in working capital as a result of the timing of
receipts and disbursements and the effects of net interest and current income
tax expense.
Net cash provided by financing activities from continuing operations
includes borrowings and repayments of debt, as well as the issuances and
repurchases of our equity securities. Net cash provided by financing activities
from continuing operations was $1.476 billion for the year ended December 31,
2001. During 2001, we borrowed $5.686 billion, consisting of:
o $2.991 billion from Comcast Cable's senior notes offerings,
o $1.470 billion under Comcast Cable's commercial paper program,
o $1.075 billion under revolving credit facilities, and
o $150.3 million from our Zero Coupon Debentures offering.
During 2001, we repaid $4.188 billion of our long-term debt, consisting
of:
o $2.396 billion under Comcast Cable's commercial paper program,
o $1.612 billion on certain of our revolving credit facilities,
o $109.6 million of our senior subordinated debentures, and
o $70.3 million of our Zero Coupon Debentures.
In addition, during 2001, we received proceeds of $27.2 million related to
issuances of our common stock, we repurchased $27.1 million of our common stock,
and we incurred $22.5 million of deferred financing costs.
Net cash used in investing activities from continuing operations includes
the effects of acquisitions, net of cash acquired, purchases of investments,
capital expenditures and additions to intangible assets, offset by proceeds from
sales of investments. Net cash used in investing activities from continuing
operations was $3.007 billion for the year ended December 31, 2001.
During 2001, acquisitions, net of cash acquired, amounted to $1.329
billion, consisting primarily of:
o $518.7 million for the cable system serving Baltimore City,
o $305.9 million for a controlling interest in The Golf Channel, and
o $396.8 million for the acquisition of Outdoor Life Network.
Results of Operations
The effects of our recent acquisitions were to increase our revenues and
expenses, resulting in increases in our operating income before depreciation and
amortization. The increases in our property and equipment, intangible assets and
long-term debt, and the corresponding increases in depreciation expense,
amortization expense and interest expense from 2000 to 2001 and from 1999 to
2000 are primarily due to the effects of our acquisitions, our cable systems
exchanges and our increased levels of capital expenditures.
Refer to Notes 5 and 10 to our financial statements included in Item 8 for
a discussion of our acquisitions and cable systems exchanges, and of the effect
of these transactions on our balance sheet.
We adopted SFAS No. 142, "Goodwill and Other Intangible Assets," on January
1, 2002, as required by the new statement. We refer you to page 36 for a
discussion of the expected impact the adoption of the new statement will have on
our consolidated financial condition and results of operations.
- 29 -
Our summarized consolidated financial information for the three years ended
December 31, 2001 is as follows (dollars in millions, "NM" denotes percentage is
not meaningful):
Year Ended
December 31, Increase/(Decrease)
2001 2000 $ %
---------- --------- ---------- --------
Revenues........................................................ $9,674.2 $8,218.6 $1,455.6 17.7%
Cost of goods sold from electronic retailing.................... 2,514.0 2,284.9 229.1 10.0
Operating, selling, general and administrative expenses......... 4,458.4 3,463.4 995.0 28.7
Depreciation.................................................... 1,141.8 837.3 304.5 36.4
Amortization.................................................... 2,306.2 1,794.0 512.2 28.6
---------- --------- ---------- --------
Operating loss.................................................. (746.2) (161.0) 585.2 363.5
---------- --------- ---------- --------
Interest expense................................................ (731.8) (691.4) 40.4 5.8
Investment income............................................... 1,061.7 983.9 77.8 7.9
Income related to indexed debt.................................. 666.0 (666.0) (100.0)
Equity in net losses of affiliates.............................. (28.5) (21.3) 7.2 33.8
Other income.................................................... 1,301.0 2,825.5 (1,524.5) (54.0)
Income tax expense.............................................. (470.2) (1,441.3) (971.1) (67.4)
Minority interest............................................... (160.4) (115.3) 45.1 39.1
---------- --------- ---------- --------
Income from continuing operations before extraordinary items
and cumulative effect of accounting change................... $225.6 $2,045.1 ($1,819.5) (89.0%)
========== ========= ========== ========
Operating income before depreciation and amortization (1) ...... $2,701.8 $2,470.3 $231.5 9.4%
========== ========= ========== ========
Year Ended
December 31, Increase/(Decrease)
2000 1999 $ %
---------- --------- ---------- --------
Revenues........................................................ $8,218.6 $6,529.2 $1,689.4 25.9%
Cost of goods sold from electronic retailing.................... 2,284.9 2,060.0 224.9 10.9
Operating, selling, general and administrative expenses......... 3,463.4 2,589.2 874.2 33.8
Depreciation.................................................... 837.3 572.0 265.3 46.4
Amortization.................................................... 1,794.0 644.0 1,150.0 178.6
---------- --------- ---------- --------
Operating income (loss)......................................... (161.0) 664.0 (825.0) NM
---------- --------- ---------- --------
Interest expense................................................ (691.4) (538.3) 153.1 28.4
Investment income............................................... 983.9 629.5 354.4 56.3
Income (expense) related to indexed debt........................ 666.0 (666.0) 1,332.0 NM
Equity in net income (losses) of affiliates..................... (21.3) 1.4 (22.7) NM
Other income.................................................... 2,825.5 1,409.4 1,416.1 100.5
Income tax expense.............................................. (1,441.3) (723.7) 717.6 99.2
Minority interest............................................... (115.3) 4.6 (119.9) NM
---------- --------- ---------- --------
Income from continuing operations before
extraordinary items.......................................... $2,045.1 $780.9 $1,264.2 161.9%
========== ========= ========== ========
Operating income before depreciation and amortization (1) ...... $2,470.3 $1,880.0 $590.3 31.4%
========== ========= ========== ========
- ------------
(1) Operating income before depreciation and amortization is commonly referred
to in our businesses as "operating cash flow." Operating cash flow is a
measure of a company's ability to generate cash to service its obligations,
including debt service obligations, and to finance capital and other
expenditures. In part due to the capital intensive nature of our businesses
and the resulting significant level of non-cash depreciation and
amortization expense, operating cash flow is frequently used as one of the
bases for comparing businesses in our industries, although our measure of
operating cash flow may not be comparable to similarly titled measures of
other companies. Operating cash flow is the primary basis used by our
management to measure the operating performance of our businesses.
Operating cash flow does not purport to represent net income or net cash
provided by operating activities, as those terms are defined under
generally accepted accounting principles, and should not be considered as
an alternative to such measurements as an indicator of our performance. See
"Statement of Cash Flows" above for a discussion of net cash provided by
operating activities.
- 30 -
Consolidated Operating Results
Revenues
The increases in consolidated revenues from 2000 to 2001 and from 1999 to
2000 are primarily attributable to increases in service revenues in our Cable
segment and to increases in net sales in our Commerce segment (see "Operating
Results by Business Segment" below). The remaining increases are primarily the
result of increases in revenues from our content operations, principally due to
growth in our historical operations and the effects of our acquisitions in 2001.
Cost of goods sold from electronic retailing
Refer to the "Commerce" section of "Operating Results by Business Segment"
below for a discussion of the increases in cost of goods sold from electronic
retailing.
Operating, selling, general and administrative expenses
The increases in consolidated operating, selling, general and
administrative expenses from 2000 to 2001 and from 1999 to 2000 are primarily
attributable to increases in expenses in our Cable segment and, to a lesser
extent, to increases in expenses in our Commerce segment (see "Operating Results
by Business Segment" below). The remaining increases are primarily the result of
increased expenses in our content operations, principally due to growth in our
historical operations and the effects of our acquisitions in 2001.
Depreciation and amortization
The increases in depreciation expense and amortization expense from 2000 to
2001 and from 1999 to 2000 in our Cable segment are primarily due to the effects
of our recent acquisitions, our cable systems exchanges and our increased levels
of capital expenditures. The increases in depreciation expense and amortization
expense from 2000 to 2001 and from 1999 to 2000 in our Commerce segment are
primarily due to the effects of our increased levels of capital expenditures.
The remaining increases in depreciation expense and amortization expense from
2000 to 2001 are primarily the result of increases in depreciation and
amortization in our content operations, principally due to the effects of our
acquisitions and increased levels of capital expenditures. The remaining
increases in depreciation expense and amortization expense from 1999 to 2000 are
principally due to the effects of our increased levels of capital expenditures.
Operating Results by Business Segment
The following represent the operating results of our significant business
segments, "Cable" and "Commerce." Our regional sports programming networks,
which consist of Comcast SportsNet ("CSN"), Comcast SportsNet Mid- Atlantic
("CSN Mid-Atlantic") and Comcast Sports Southeast ("CSS"), derive a substantial
portion of their revenues from our cable operations. In 2001, as a result of a
change in our internal reporting structure, our regional sports programming
networks are now included in our Cable segment for all periods presented. Except
for the effects of our acquisitions, the change did not have a significant
effect on the comparisons of our operating results for the periods presented.
The remaining components of our operations are not independently significant to
our consolidated financial condition or results of operations. Refer to Note 12
to our financial statements included in Item 8 for a summary of our financial
data by business segment.
---------------------------
- 31 -
Cable
The following table presents financial information for the three years
ended December 31, 2001 for our Cable segment (dollars in millions):
Year Ended
December 31, Increase
2001 2000 $ %
---------- ---------- -------- ------
Video......................................................... $4,278.2 $3,651.3 $626.9 17.2%
High-speed Internet........................................... 294.3 114.4 179.9 157.3
Advertising sales............................................. 325.3 290.2 35.1 12.1
Other......................................................... 232.9 152.6 80.3 52.6
---------- ---------- -------- ------
Revenues................................................. 5,130.7 4,208.5 922.2 21.9
Operating, selling, general and administrative expenses....... 3,076.6 2,305.1 771.5 33.5
---------- ---------- -------- ------
Operating income before depreciation and amortization (a)..... $2,054.1 $1,903.4 $150.7 7.9%
========== ========== ======== ======
Year Ended
December 31, Increase
2000 1999 $ %
---------- ---------- -------- ------
Video......................................................... $3,651.3 $2,588.9 $1,062.4 41.0%
High-speed Internet........................................... 114.4 44.5 69.9 157.1
Advertising sales............................................. 290.2 190.3 99.9 52.5
Other......................................................... 152.6 146.2 6.4 4.4
---------- ---------- -------- ------
Revenues................................................. 4,208.5 2,969.9 1,238.6 41.7
Operating, selling, general and administrative expenses....... 2,305.1 1,611.9 693.2 43.0
---------- ---------- -------- ------
Operating income before depreciation and amortization (a)..... $1,903.4 $1,358.0 $545.4 40.2%
========== ========== ======== ======
- ---------------
(a) See footnote (1) on page 30.
Video revenue consists of our basic, expanded basic, premium, pay-per-view,
equipment and digital subscriptions. Of the $626.9 million and $1.062 billion
increases in video revenues from 2000 to 2001 and from 1999 to 2000, $339.2
million and $918.0 million are attributable to the effects of our acquisitions
and exchanges of cable systems and $287.7 million and $144.4 million relate to
changes in rates and subscriber growth in our historical operations, driven
principally by growth in digital subscriptions, and to a lesser extent, to the
effects of a higher-priced digital service offering made in the second half of
2000. During 2001, 2000 and 1999, through acquisitions and normal operations, we
added approximately 982,000, 839,000 and 437,000 digital subscriptions,
respectively.
The increases in high-speed Internet revenue from 2000 to 2001 and from
1999 to 2000 are primarily due to the addition of high-speed Internet
subscribers. During 2001, 2000 and 1999, through acquisitions and normal
operations, we added approximately 548,000, 258,000 and 91,000 high-speed
Internet subscribers, respectively (see below).
The increase in advertising sales revenue from 2000 to 2001 is attributable
to the effects of new advertising contracts, market-wide fiber interconnects and
the continued leveraging of our existing fiber networks, helping to offset an
otherwise weak advertising environment. Approximately one-half of the increase
from 1999 to 2000 in advertising sales revenue is attributable to the effects of
our acquisition of Lenfest Communications, Inc. in January 2000, with the
remaining increase attributable to the effects of the 2000 political campaigns
and increased cable viewership.
Other revenue includes installation revenues, guide revenues, commissions
from electronic retailing, revenues of our regional sports programming networks
and revenue from other product offerings. The increase from 2000 to 2001 in
other revenue is primarily attributable to the effects of our acquisition of
Home Team Sports (now known as CSN Mid-Atlantic), with the remaining increase
attributable to growth in our historical operations. The increase from 1999 to
2000 is primarily attributable to growth in our historical operations.
- 32 -
On September 28, 2001, At Home Corporation ("At Home"), our provider of
high-speed Internet services, filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. In October 2001, we amended our agreement with At Home to
continue service to our existing and new subscribers during October and November
2001. We agreed to be charged a higher rate than we had incurred under our
previous agreement. On December 3, 2001, we reached a definitive agreement,
approved by the Bankruptcy Court, with At Home pursuant to which At Home agreed
to continue to provide high-speed Internet services to our existing and new
subscribers through February 28, 2002. In December 2001, we began to transfer
our high-speed Internet subscribers from the At Home network to our new
Comcast-owned and managed network. We completed this transition in February
2002. Operating expenses in our consolidated statement of operations for the
year ended December 31, 2001 include $139.5 million of net incremental expenses
incurred in the fourth quarter of 2001 in the continuation of service to and
transition of our high-speed Internet subscribers from At Home's network to our
network.
The remaining increases from 2000 to 2001 and the increases from 1999 to
2000 in operating, selling, general and administrative expenses are primarily
due to the effects of our acquisitions and exchanges of cable systems, as well
as to the effects of increases in the costs of cable programming, high-speed
Internet subscriber growth, and, to a lesser extent, increases in labor costs
and other volume related expenses in our historical operations.
Our cost of programming increases as a result of changes in rates,
subscriber growth, additional channel offerings and our acquisitions and
exchanges of cable systems. We anticipate the cost of cable programming will
increase in the future as cable programming rates increase and additional
sources of cable programming become available.
Commerce
The following table sets forth the operating results for our Commerce
segment, which consists of QVC, Inc. and subsidiaries (dollars in millions):
Year Ended
December 31, Increase
2001 2000 $ %
--------- -------- ------- ------
Net sales from electronic retailing........................... $3,917.3 $3,535.9 $381.4 10.8%
Cost of goods sold from electronic retailing.................. 2,514.0 2,284.9 229.1 10.0
Operating, selling, general and administrative expenses....... 681.0 631.8 49.2 7.8
--------- -------- ------- ------
Operating income before depreciation and amortization (a)..... $722.3 $619.2 $103.1 16.7%
========= ======== ======= ======
Gross margin.................................................. 35.8% 35.4%
========= ========
Year Ended
December 31, Increase
2000 1999 $ %
--------- -------- ------- ------
Net sales from electronic retailing........................... $3,535.9 $3,167.4 $368.5 11.6%
Cost of goods sold from electronic retailing.................. 2,284.9 2,060.0 224.9 10.9
Operating, selling, general and administrative expenses....... 631.8 568.6 63.2 11.1
--------- -------- ------- ------
Operating income before depreciation and amortization (a)..... $619.2 $538.8 $80.4 14.9%
========= ======== ======= ======
Gross margin.................................................. 35.4% 35.0%
========= ========
- ---------------
(a) See footnote (1) on page 30.
- 33 -
Of the $381.4 million and $368.5 million increases in net sales from
electronic retailing from 2000 to 2001 and from 1999 to 2000, $332.1 million and
$358.3 million, respectively, is attributable to increases in net sales in the
United States. This growth is principally the result of increases in the average
number of homes receiving QVC services and in net sales per home as follows:
Year Ended December 31,
2001 2000
--------------------- ---------------------
Increase in average number of homes in U.S.................... 3.8% 4.7%
Increase in net sales per home in U.S......................... 6.5% 8.1%
It is unlikely that the number of homes receiving the QVC service
domestically will continue to grow at rates comparable to prior periods given
that the QVC service is already received by approximately 94% of all U.S. cable
television homes and substantially all satellite television homes in the U.S.
Future growth in sales will depend increasingly on continued additions of new
customers from homes already receiving the QVC service and continued growth in
repeat sales to existing customers.
The remaining increases of $49.3 million and $10.2 million in net sales
from electronic retailing from 2000 to 2001 and from 1999 to 2000 are primarily
attributable to increases in net sales in Germany and Japan offset, in part, by
decreases in net sales in the United Kingdom, and to the effects of fluctuations
in foreign currency exchange rates during the periods.
The increases in cost of goods sold from 2000 to 2001 and from 1999 to 2000
are primarily related to the growth in net sales. The increases in gross margin
are primarily due to the effects of increases in product margins across all
product categories, as well as to the effects of a shift in sales mix.
The increases in operating, selling, general and administrative expenses
from 2000 to 2001 and from 1999 to 2000 are primarily attributable to higher
variable costs and personnel costs associated with the increase in sales volume.
---------------------------
Consolidated Analysis
Interest Expense
The increase in interest expense from 2000 to 2001 is primarily due to the
increase in our net borrowings. The increase in interest expense from 1999 to
2000 is primarily due to the effects of our acquisitions of Lenfest in January
2000 and Jones Intercable in April 1999 and the issuance of the ZONES in October
and November 1999, offset, in part, by the net effects of our borrowings and
repayments and retirements of debt.
We anticipate that, for the foreseeable future, interest expense will be a
significant cost to us. We believe we will continue to be able to meet our
obligations through our ability both to generate operating income before
depreciation and amortization and to obtain external financing.
---------------------------
- 34 -
Investment Income
Investment income includes the following (in millions):
Year Ended December 31,
2001 2000 1999
--------- --------- ---------
Interest and dividend income........................................... $76.5 $171.6 $172.5
Gains on sales and exchanges of investments, net....................... 485.2 886.7 510.6
Investment impairment losses........................................... (972.4) (74.4) (35.5)
Reclassification of unrealized gains................................... 1,330.3
Unrealized gain on Sprint PCS common stock............................. 284.4
Mark to market adjustments on derivatives related
to Sprint PCS common stock........................................ (184.6)
Mark to market adjustments on derivatives and hedged items............. 42.3
Settlement of call options............................................. (18.1)
--------- --------- ---------
Investment income................................................. $1,061.7 $983.9 $629.5
========= ========= =========
The investment impairment loss for the year ended December 31, 2001 relates
principally to an other than temporary decline in the Company's investment in
AT&T, a portion of which was exchanged on April 30, 2001.
During the year ended December 31, 2001, we wrote-off our investment in At
Home common stock based upon a decline in the investment that was considered
other than temporary. In connection with the realization of this impairment
loss, we reclassified to investment income the accumulated unrealized gain of
$237.9 million on our investment in At Home common stock which was previously
recorded as a component of accumulated other comprehensive income. We recorded
this accumulated unrealized gain prior to our designation of our right under a
stockholders' agreement as a hedge of our investment in the At Home common
stock.
In connection with the reclassification of our investment in Sprint PCS
from an available for sale security to a trading security, we reclassified to
investment income the accumulated unrealized gain of $1.092 billion on our
investment in Sprint PCS which was previously recorded as a component of
accumulated other comprehensive income.
Income (Expense) Related to Indexed Debt
Prior to the adoption of SFAS No. 133 on January 1, 2001, we accounted for
the ZONES as an indexed debt instrument since the maturity value is dependent
upon the fair value of Sprint PCS common stock. During the years ended December
31, 2000 and 1999, we recorded income (expense) related to indexed debt of
$666.0 million and ($666.0) million, respectively, to reflect the fair value of
the underlying Sprint PCS stock.
Equity in Net Income (Losses) of Affiliates
The changes in equity in net losses of affiliates from 2000 to 2001 and
from 1999 to 2000 are primarily attributable to the effects of our additional
investments, as well as the effects of changes in the net income or loss of our
equity method investees.
Other Income
On October 30, 2001, we acquired from Fox Entertainment Group, Inc. ("Fox
Entertainment") the approximate 83.2% interest in Outdoor Life Network ("OLN")
not previously owned by us. Upon closing of the acquisition, we exchanged our
14.5% interest in Speedvision Network ("SVN"), together with a previously made
loan, for Fox Entertainment's interest in OLN. In connection with the exchange
of our interest in SVN, we recorded a pre-tax gain of $106.7 million,
representing the difference between the estimated fair value of our interest in
SVN as of the closing date of the transaction and our cost basis in SVN.
On January 1, 2001, we completed our cable systems exchange with Adelphia
Communications Corporation ("Adelphia"). We received cable systems serving
approximately 445,000 subscribers from Adelphia in exchange for certain of our
cable systems serving approximately 441,000 subscribers. We recorded a pre-tax
gain of $1.199 billion, representing the difference between the estimated fair
value of $1.799 billion as of the closing date of the transaction and our cost
basis in the systems exchanged.
On December 31, 2000, we completed our cable systems exchange with AT&T. We
received cable systems serving approximately 770,000 subscribers from
- 35 -
AT&T in exchange for certain of our cable systems serving approximately 700,000
subscribers. We recorded a pre-tax gain of $1.711 billion, representing the
difference between the estimated fair value of $2.840 billion as of the closing
date of the transaction and our cost basis in the systems exchanged.
In August 2000, we obtained the right to exchange our At Home Series A
Common Stock with AT&T and we waived certain of our At Home Board level and
shareholder rights under a stockholders' agreement. We also agreed to cause our
existing appointee to the At Home Board of Directors to resign. In connection
with the transaction, we recorded a pre-tax gain of $1.045 billion, representing
the estimated fair value of the investment as of the closing date.
In August 2000, we exchanged all of the capital stock of a wholly owned
subsidiary which held certain wireless licenses for approximately 3.2 million
shares of AT&T common stock. In connection with the exchange, we recognized a
pre-tax gain of $98.1 million, representing the difference between the fair
value of the AT&T shares received of $100.0 million and our cost basis in the
subsidiary.
In May 1999, we received a $1.5 billion termination fee as liquidated
damages from MediaOne Group, Inc. ("MediaOne") as a result of MediaOne's
termination of its Agreement and Plan of Merger with us dated March 1999. The
termination fee, net of transaction costs, was recorded to other income.
Income Tax Expense
The changes in income tax expense from 2000 to 2001 and from 1999 to 2000
are primarily the result of the effects of changes in our income before taxes
and minority interest, and non-deductible goodwill amortization.
Minority Interest
The increase in minority interest from 2000 to 2001 is primarily
attributable to the effects of changes in the net income or loss of our less
than 100% owned consolidated subsidiaries. The change in minority interest from
1999 to 2000 is attributable to the effects of our acquisition of a controlling
interest in Jones Intercable, Inc. in April 1999, our acquisition of the
California Public Employees Retirement System's 45% interest in Comcast MHCP
Holdings, L.L.C. in February 2000, and to the effects of changes in the net
income or loss of our less than 100% owned consolidated subsidiaries.
Extraordinary Items
Extraordinary items for the years ended December 31, 2001, 2000 and 1999
consist of unamortized debt issue costs and debt extinguishment
costs, net of related tax benefits, expensed in connection with the redemption
and refinancing of certain indebtedness.
Cumulative Effect of Accounting Change
Upon adoption of SFAS No. 133, we recognized as income a cumulative effect
of accounting change, net of related income taxes, of $384.5 million during the
year ended December 31, 2001. The income consisted of a $400.2 million
adjustment to record the debt component of our ZONES at a discount from its
value at maturity and $191.3 million principally related to the reclassification
of gains previously recognized as a component of accumulated other comprehensive
income on our equity derivative instruments, net of related deferred income
taxes of $207.0 million.
We believe that our operations are not materially affected by inflation.
Expected Impact of Adoption of SFAS No. 142
The Financial Accounting Standards Board ("FASB") issued SFAS No. 142,
"Goodwill and Other Intangible Assets," in June 2001. This statement addresses
how intangible assets that are acquired individually or with a group of other
assets other than in connection with a business combination should be accounted
for in financial statements upon their acquisition. The new statement also
addresses how goodwill and other intangible assets should be accounted for after
they have been initially recognized in the financial statements.
We adopted SFAS No. 142 on January 1, 2002, as required by the new
statement. Upon adoption, we will no longer amortize goodwill and other
indefinite lived intangible assets, which consist primarily of our cable
franchise operating rights. We will be required to test our goodwill and
intangible assets that are determined to have an indefinite life for impairment
at least annually. Other than in the period of adoption or in those periods in
which we may record an asset impairment, we expect that the adoption of SFAS No.
142 will result in increased income as a result of reduced amortization expense.
The Emerging Issues Task Force ("EITF") of the FASB is expected to provide
further guidance on certain implementation issues related to the adoption of
SFAS No. 142 as it relates to identifiable intangible assets other than
goodwill. Subject to further guidance to be provided,
- 36 -
based upon our interpretation of SFAS No. 142, we may record a charge as a
cumulative effect of accounting change, net of related deferred income taxes, in
an amount not expected to exceed $1.5 billion upon adoption of SFAS No. 142 on
January 1, 2002.
Based on our preliminary evaluation, the estimated effect of adoption of
SFAS No. 142 would have been to decrease amortization expense by approximately
$2.0 billion and to increase deferred income tax expense by approximately $600
million for the year ended December 31, 2001.
Expected Impact of Adoption of EITF 01-9
In November 2001, the EITF reached a consensus on EITF 01-9, "Accounting
for Consideration Given to a Customer (Including a Reseller of the Vendor's
Products)." EITF 01-9 requires, among other things, that consideration paid to
customers should be classified as a reduction of revenue unless certain criteria
are met. Certain of our content subsidiaries have paid or may pay distribution
fees to cable television and satellite broadcast systems for carriage of their
programming. We currently classify the amortization of these distribution fees
as expense in our statement of operations. Upon adoption of EITF 01-9 on January
1, 2002, we will reclassify certain of these distribution fees from expense to a
revenue reduction for all periods presented in our statement of operations. The
change in classification will have no impact on our reported operating loss or
financial condition and will not have a significant impact on our revenues.
Refer to Note 3 to our financial statements included in Item 8 for the effect of
adoption of EITF 01-9 on our results of operations.
Expected Impact of Adoption of EITF 01-14
In November 2001, the FASB staff announced EITF Topic D-103, "Income
Statement Characterization of Reimbursements Received for 'Out-of-Pocket'
Expenses Incurred," which has subsequently been recharacterized as EITF Issue
No. 01-14 ("EITF 01-14"). EITF 01-14 requires that reimbursements received for
out-of-pocket expenses incurred be characterized as revenue in the statement of
operations.
Under the terms of our franchise agreements, we are required to pay up to
5% of our gross revenues derived from providing cable services to the local
franchising authority. We normally pass these fees through to our cable
subscribers. We currently classify cable franchise fees collected from our cable
subscribers as a reduction of the related franchise fee expense included within
selling, general and administrative expenses in our statement of operations.
EITF 01-14, by analogy, applies to franchise fees. Upon adoption of EITF
01-14 on January 1, 2002, we will reclassify franchise fees collected from cable
subscribers from a reduction of selling, general and administrative expenses to
a component of service revenues in our statement of operations. The change in
classification will have no impact on our reported operating income (loss) or
financial condition. Refer to Note 3 to our financial statements included in
Item 8 for the effect of adoption of EITF 01-14 on our results of operations.
- 37 -
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Comcast Corporation
Philadelphia, Pennsylvania
We have audited the accompanying consolidated balance sheet of Comcast
Corporation and its subsidiaries (the "Company") as of December 31, 2001 and
2000, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Comcast Corporation and its
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America.
As discussed in Notes 2 and 3 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended, effective
January 1, 2001.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 5, 2002
- 38 -
COMCAST CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions, except share data)
December 31,
2001 2000
--------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................. $350.0 $651.5
Investments................................................................ 2,623.2 3,059.7
Accounts receivable, less allowance for doubtful accounts
of $153.9 and $141.7.................................................. 967.4 891.9
Inventories, net........................................................... 454.5 438.5
Other current assets....................................................... 153.7 102.8
--------- ---------
Total current assets................................................... 4,548.8 5,144.4
--------- ---------
INVESTMENTS................................................................... 1,679.2 2,661.9
--------- ---------
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $2,725.7 and $1,873.1.............................................. 7,011.1 5,519.9
--------- ---------
INTANGIBLE ASSETS
Goodwill................................................................... 7,507.3 6,945.1
Cable franchise operating rights........................................... 20,167.8 17,545.5
Other intangible assets.................................................... 2,833.4 1,485.6
--------- ---------
30,508.5 25,976.2
Accumulated amortization................................................... (5,999.2) (3,908.7)
--------- ---------
24,509.3 22,067.5
--------- ---------
OTHER NONCURRENT ASSETS, net.................................................. 383.4 350.8
--------- ---------
$38,131.8 $35,744.5
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable........................................................... $698.2 $813.2
Accrued expenses and other current liabilities............................. 1,695.5 1,576.5
Deferred income taxes...................................................... 275.4 789.9
Current portion of long-term debt.......................................... 460.2 293.9
--------- ---------
Total current liabilities.............................................. 3,129.3 3,473.5
--------- ---------
LONG-TERM DEBT, less current portion.......................................... 11,741.6 10,517.4
--------- ---------
DEFERRED INCOME TAXES......................................................... 6,375.7 5,786.7
--------- ---------
OTHER NONCURRENT LIABILITIES.................................................. 1,532.0 1,108.6
--------- ---------
MINORITY INTEREST............................................................. 880.2 717.3
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 11)
COMMON EQUITY PUT OPTIONS..................................................... 54.6
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 20,000,000 shares
5.25% series B mandatorily redeemable convertible, $1,000 par value;
issued, zero and 59,450 at redemption value.............................. 59.5
Class A special common stock, $1 par value - authorized,
2,500,000,000 shares; issued, 937,256,465 and 931,340,103; outstanding,
913,931,554 and 908,015,192.............................................. 913.9 908.0
Class A common stock, $1 par value - authorized,
200,000,000 shares; issued, 21,829,422 and 21,832,250.................... 21.8 21.8
Class B common stock, $1 par value - authorized,
50,000,000 shares; issued, 9,444,375.................................. 9.4 9.4
Additional capital......................................................... 11,752.0 11,598.8
Retained earnings.......................................................... 1,631.5 1,056.5
Accumulated other comprehensive income..................................... 144.4 432.4
--------- ---------
Total stockholders' equity............................................. 14,473.0 14,086.4
--------- ---------
$38,131.8 $35,744.5
========= =========
See notes to consolidated financial statements.
- 39 -
COMCAST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in millions, except per share data)
Year Ended December 31,
2001 2000 1999
-------- -------- --------
REVENUES
Service revenues...................................................................... $5,756.9 $4,682.7 $3,361.8
Net sales from electronic retailing................................................... 3,917.3 3,535.9 3,167.4
-------- -------- --------
9,674.2 8,218.6 6,529.2
-------- -------- --------
COSTS AND EXPENSES
Operating (excluding depreciation).................................................... 2,905.8 2,212.5 1,663.1
Cost of goods sold from electronic retailing (excluding depreciation)................. 2,514.0 2,284.9 2,060.0
Selling, general and administrative................................................... 1,552.6 1,250.9 926.1
Depreciation.......................................................................... 1,141.8 837.3 572.0
Amortization.......................................................................... 2,306.2 1,794.0 644.0
-------- -------- --------
10,420.4 8,379.6 5,865.2
-------- -------- --------
OPERATING INCOME (LOSS).................................................................. (746.2) (161.0) 664.0
OTHER INCOME (EXPENSE)
Interest expense...................................................................... (731.8) (691.4) (538.3)
Investment income..................................................................... 1,061.7 983.9 629.5
Income (expense) related to indexed debt.............................................. 666.0 (666.0)
Equity in net income (losses) of affiliates........................................... (28.5) (21.3) 1.4
Other income.......................................................................... 1,301.0 2,825.5 1,409.4
-------- -------- --------
1,602.4 3,762.7 836.0
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES, MINORITY INTEREST,
EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE........................ 856.2 3,601.7 1,500.0
INCOME TAX EXPENSE....................................................................... (470.2) (1,441.3) (723.7)
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST,
EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE........................ 386.0 2,160.4 776.3
MINORITY INTEREST........................................................................ (160.4) (115.3) 4.6
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEMS
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE............................................ 225.6 2,045.1 780.9
GAIN FROM DISCONTINUED OPERATIONS, net of income tax expense of $166.1................... 335.8
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE..................................................................... 225.6 2,045.1 1,116.7
EXTRAORDINARY ITEMS ..................................................................... (1.5) (23.6) (51.0)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE................................................... 384.5
-------- -------- --------
NET INCOME............................................................................... 608.6 2,021.5 1,065.7
PREFERRED DIVIDENDS...................................................................... (23.5) (29.7)
-------- -------- --------
NET INCOME FOR COMMON STOCKHOLDERS....................................................... $608.6 $1,998.0 $1,036.0
======== ======== ========
BASIC EARNINGS (LOSS) FOR COMMON STOCKHOLDERS PER COMMON SHARE
Income from continuing operations before extraordinary items and cumulative
effect of accounting change........................................................ $0.24 $2.27 $1.00
Discontinued operations............................................................... 0.45
Extraordinary items................................................................... (0.03) (0.07)
Cumulative effect of accounting change................................................ 0.40
-------- -------- --------
Net income............................................................................ $0.64 $2.24 $1.38
======== ======== ========
BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING.............................. 949.7 890.7 749.1
======== ======== ========
DILUTED EARNINGS (LOSS) FOR COMMON STOCKHOLDERS PER COMMON SHARE
Income from continuing operations before extraordinary items and cumulative
effect of accounting change........................................................ $0.23 $2.16 $0.95
Discontinued operations............................................................... 0.41
Extraordinary items................................................................... (0.03) (0.06)
Cumulative effect of accounting change................................................ 0.40
-------- -------- --------
Net income............................................................................ $0.63 $2.13 $1.30
======== ======== ========
DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING............................. 964.5 948.7 819.9
======== ======== ========
See notes to consolidated financial statements.
- 40 -
COMCAST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
Year Ended December 31,
2001 2000 1999
--------- --------- ---------
OPERATING ACTIVITIES
Net income........................................................... $608.6 $2,021.5 $1,065.7
Adjustments to reconcile net income to net cash provided
by operating activities from continuing operations:
Depreciation....................................................... 1,141.8 837.3 572.0
Amortization....................................................... 2,306.2 1,794.0 644.0
Non-cash interest (income) expense, net............................ 40.2 (22.6) (27.8)
Non-cash (income) expense related to indexed debt.................. (666.0) 666.0
Equity in net (income) losses of affiliates........................ 28.5 21.3 (1.4)
Gains on investments and other income, net......................... (2,303.3) (3,679.3) (1,917.0)
Minority interest.................................................. 160.4 115.3 (4.6)
Discontinued operations............................................ (335.8)
Extraordinary items................................................ 1.5 23.6 51.0
Cumulative effect of accounting change............................. (384.5)
Deferred income taxes.............................................. (240.7) 1,074.6 (73.4)
Other.............................................................. 23.6 51.2 41.5
--------- --------- ---------
1,382.3 1,570.9 680.2
Changes in working capital, net of effects of acquisitions
and divestitures
Increase in accounts receivable, net............................. (15.8) (195.8) (89.5)
Increase in inventories, net..................................... (16.0) (35.7) (91.9)
(Increase) decrease in other current assets...................... (27.1) 13.7 30.7
(Decrease) increase in accounts payable, accrued expenses
and other current liabilities................................. (93.9) (133.8) 719.9
--------- --------- ---------
(152.8) (351.6) 569.2
Net cash provided by operating activities from continuing
operations.................................................... 1,229.5 1,219.3 1,249.4
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings............................................. 5,686.4 5,435.3 2,786.6
Retirements and repayments of debt................................... (4,187.7) (5,356.5) (1,368.2)
Issuances of common stock and sales of put options on common stock... 27.2 30.5 17.1
Repurchases of common stock.......................................... (27.1) (324.9) (30.7)
Dividends............................................................ (9.4)
Deferred financing costs............................................. (22.5) (55.8) (51.0)
Other (3.0)
--------- --------- ---------
Net cash provided by (used in) financing activities from
continuing operations......................................... 1,476.3 (271.4) 1,341.4
--------- --------- ---------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired................................... (1,329.0) (187.3) (755.2)
Proceeds from liquidated damages, net................................ 1,460.0
Proceeds from sales of (purchases of) short-term investments, net.... (6.2) 1,028.1 (1,035.5)
Capital contributions to and purchases of investments................ (317.0) (1,010.7) (2,012.2)
Proceeds from sales of investments................................... 1,172.8 997.3 599.8
Capital expenditures................................................. (2,181.7) (1,636.8) (893.8)
Sale of subsidiary, net of cash sold................................. 361.1
Additions to intangible and other noncurrent assets.................. (346.2) (409.2) (263.5)
--------- --------- ---------
Net cash used in investing activities from continuing operations. (3,007.3) (1,218.6) (2,539.3)
--------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
- CONTINUING OPERATIONS............................................. (301.5) (270.7) 51.5
CASH AND CASH EQUIVALENTS, beginning of year............................ 651.5 922.2 870.7
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year.................................. $350.0 $651.5 $922.2
========= ========= =========
See notes to consolidated financial statements.
- 41 -
COMCAST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in millions)
Accumulated Other
Comprehensive
Income (Loss)
--------------------
Retained
Preferred Stock Common Stock Earnings Unreal- Cumul-
------------- ---------------------- (Accumu- ized ative
Series Series Class A Additional lated Gains Translation
A B Special Class A Class B Capital Deficit) (Losses) Adjustments Total
------ ------ ------- ------- ------ --------- ----------- --------- ---------- --------
BALANCE, JANUARY 1, 1999................ $31.9 $540.7 $698.4 $31.7 $9.4 $2,941.7 ($1,488.2) $1,049.5 $0.2 $3,815.3
Comprehensive income:
Net income........................... 1,065.7
Unrealized gains on
marketable securities,
net of deferred taxes of $2,891.9.. 5,370.6
Reclassification adjustments
for gains included in net income,
net of deferred taxes of $161.7.... (300.3)
Cumulative translation adjustments... (7.3)
Total comprehensive income.............. 6,128.7
Acquisition.......................... 8.5 283.2 291.7
Exercise of options.................. 2.2 23.7 25.9
Conversion of Series A preferred..... (31.9) 2.7 29.2
Retirement of common stock........... (0.8) (4.6) (25.3) (30.7)
Cash dividends, Series A preferred... (0.8) (0.8)
Series B preferred dividends......... 28.9 (28.9)
Share exchange....................... 4.6 (4.9) 172.3 (172.0)
Temporary equity related to put
options............................ 111.2 111.2
------ ------ ------- ------- ------ --------- ----------- --------- ---------- --------
BALANCE, DECEMBER 31, 1999 ............. 569.6 716.4 26.0 9.4 3,527.0 (619.8) 6,119.8 (7.1) 10,341.3
Comprehensive income:
Net income........................... 2,021.5
Unrealized losses on
marketable securities,
net of deferred taxes of $2,789.3.. (5,180.1)
Reclassification adjustments
for gains included in net income,
net of deferred taxes of $266.0.... (494.0)
Cumulative translation adjustments... (6.2)
Total comprehensive loss................ (3,658.8)
Acquisitions......................... 155.7 7,585.2 7,740.9
Exercise of options.................. 2.6 53.9 (27.7) 28.8
Retirement of common stock........... (6.0) (3.1) (42.3) (273.5) (324.9)
Conversion of Series B preferred..... (533.6) 38.3 495.3
Series B preferred dividends......... 23.5 (23.5)
Share exchange....................... 1.0 (1.1) 44.1 (44.0)
Temporary equity related to put
options............................ (40.9) (40.9)
------ ------ ------- ------- ------ --------- ----------- --------- ---------- --------
BALANCE, DECEMBER 31, 2000.............. 59.5 908.0 21.8 9.4 11,598.8 1,056.5 445.7 (13.3) 14,086.4
Comprehensive income:
Net income........................... 608.6
Unrealized gains on
marketable securities,
net of deferred taxes of $114.4.... 212.5
Reclassification adjustments
for gains included in net income,
net of deferred taxes of $264.4.... (491.1)
Unrealized losses on effective
portion of cash flow hedges,
net of deferred taxes of $0.3...... (0.6)
Cumulative translation adjustments... (8.8)
Total comprehensive income.............. 320.6
Exercise of options.................. 2.5 53.3 (17.3) 38.5
Retirement of common stock........... (0.8) (10.0) (16.3) (27.1)
Conversion of Series B preferred..... (59.5) 4.2 55.3
Temporary equity related to put
options............................ 54.6 54.6
------ ------ ------- ------- ------ --------- ----------- --------- ---------- --------
BALANCE, DECEMBER 31, 2001.............. $ $ $913.9 $21.8 $9.4 $11,752.0 $1,631.5 $166.5 ($22.1) $14,473.0
====== ====== ======= ======= ====== ========= =========== ========= ========== =========
See notes to consolidated financial statements.
- 42 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
1. BUSINESS
Comcast Corporation and its subsidiaries (the "Company") is involved in
three principal lines of business: cable, commerce and content.
The Company's cable business is principally involved in the development,
management and operation of broadband communications networks in the United
States ("US"). The Company's consolidated cable operations served
approximately 8.5 million subscribers and passed approximately 13.9 million
homes as of December 31, 2001.
The Company's commerce operations consist of the Company's consolidated
subsidiary, QVC, Inc. and subsidiaries ("QVC"). Through QVC, an electronic
retailer, the Company markets a wide variety of products directly to
consumers primarily on merchandise-focused television programs. QVC was
available, on a full and part- time basis, to approximately 82.1 million
homes in the US, approximately 9.5 million homes in the United Kingdom
("UK"), approximately 23.6 million homes in Germany and approximately 3.6
million homes in Japan as of December 31, 2001.
Content is provided through the Company's consolidated subsidiaries
including Comcast Spectacor, Comcast SportsNet ("CSN"), Comcast SportsNet
Mid-Atlantic ("CSN Mid-Atlantic"), Comcast Sports Southeast ("CSS"), E!
Entertainment Television, Inc. ("E! Entertainment"), The Golf Channel
("TGC"), Outdoor Life Network ("OLN") and G4 Media, LLC ("G4 Media"), and
through other programming investments (see Note 5).
The Company's cable and commerce operations represent the Company's two
reportable segments under accounting principles generally accepted in the
United States. The Company's three 24-hour regional sports programming
networks, which consist of CSN, CSN Mid-Atlantic and CSS, derive a
substantial portion of their revenues from the Company's cable operations.
In 2001, as a result of a change in its internal reporting structure, the
Company's regional sports programming networks are included in the
Company's cable segment for all periods presented. See Note 12 for a
summary of the Company's financial data by business segment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all entities that the Company directly or indirectly controls. All
significant intercompany accounts and transactions among consolidated
entities have been eliminated.
Management's Use of Estimates
The Company prepares its financial statements in conformity with accounting
principles generally accepted in the United States which require management
to make estimates and assumptions that affect the reported amounts and
disclosures. Actual results could differ from those estimates. Estimates
are used when accounting for certain items such as sales returns and
allowances, allowances for doubtful accounts, reserves for inventory
obsolescence, investments and derivative financial instruments,
depreciation and amortization, asset impairment, non-monetary transactions
and contingencies.
Fair Values
The Company has determined the estimated fair value amounts presented in
these consolidated financial statements using available market information
and appropriate methodologies. However, considerable judgment is required
in interpreting market data to develop the estimates of fair value. The
estimates presented in these consolidated financial statements are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts. The Company based these fair value estimates on pertinent
information available
- 43 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
to management as of December 31, 2001 and 2000. The Company has not
comprehensively updated these fair value estimates for purposes of these
consolidated financial statements since such dates.
Cash Equivalents
Cash equivalents consist principally of commercial paper, money market
funds, US Government obligations and certificates of deposit with
maturities of three months or less when purchased. The carrying amounts of
the Company's cash equivalents approximate their fair values.
Inventories - Electronic Retailing
Inventories are stated at the lower of cost or market. Cost is determined
by the average cost method, which approximates the first-in, first-out
method.
Investments
Investments consist principally of equity securities.
Investments in entities in which the Company has the ability to exercise
significant influence over the operating and financial policies of the
investee are accounted for under the equity method. Equity method
investments are recorded at original cost and adjusted periodically to
recognize the Company's proportionate share of the investees' net income or
losses after the date of investment, additional contributions made and
dividends received. The differences between the Company's recorded
investments and its proportionate interests in the book value of the
investees' net assets are being amortized to equity in net income or loss,
primarily over a period of 20 years, which is consistent with the estimated
lives of the underlying assets.
Unrestricted publicly traded investments are classified as available for
sale or trading securities and recorded at their fair value. Unrealized
gains or losses resulting from changes in fair value between measurement
dates for available for sale securities are recorded as a component of
other comprehensive income. Unrealized gains or losses resulting from
changes in fair value between measurement dates for trading securities are
recorded as a component of investment income.
Restricted publicly traded investments and investments in privately held
companies are stated at cost, adjusted for any known diminution in value
(see Note 6).
Property and Equipment
The Company records property and equipment at cost. Depreciation is
provided by the straight-line method over estimated useful lives as
follows:
Buildings and improvements.........................4-40 years
Operating facilities...............................2-12 years
Other equipment....................................2-15 years
The Company capitalizes improvements that extend asset lives and expenses
other repairs and maintenance charges as incurred. The cost and related
accumulated depreciation applicable to assets sold or retired are removed
from the accounts and the gain or loss on disposition is recognized as a
component of depreciation expense.
The Company capitalizes the costs associated with the construction of cable
transmission and distribution facilities and new cable service
installations. Costs include all direct labor and materials, as well as
certain indirect costs.
Intangible Assets
Goodwill is the excess of the acquisition cost of an acquired entity over
the fair value of the identifiable net assets acquired. The Company
amortizes goodwill over estimated useful lives ranging principally from 20
to 30 years.
- 44 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Cable franchise operating rights represent the value attributed to
agreements with local authorities that allow access to homes in cable
service areas acquired in connection with a business combination. The
Company capitalizes these contractual rights and amortizes them over the
term of the related franchise agreements. Costs incurred by the Company in
negotiating and renewing franchise agreements are included in other
intangible assets and are amortized on a straight-line basis over the term
of the franchise renewal period, generally 10 to 15 years.
Other intangible assets consist principally of cable and satellite
television distribution rights, cable system franchise renewal costs,
contractual operating rights, computer software, programming costs and
rights, license acquisition costs and non-competition agreements. The
Company capitalizes these costs and amortizes them on a straight-line basis
over the term of the related agreements or estimated useful life.
Certain of the Company's content subsidiaries and QVC have entered into
multi-year affiliation agreements with various cable and satellite system
operators for carriage of their respective programming. The Company
capitalizes cable or satellite distribution rights and amortizes them on a
straight-line basis over the term of the related distribution agreements of
5 to 15 years.
See Note 3 for a discussion of the expected impact of adoption of Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations"
("SFAS No. 141") and SFAS No. 142, "Goodwill and Other Intangible Assets"
("SFAS No. 142").
Valuation of Long-Lived Assets
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and intangible assets, whenever
events or changes in circumstances indicate that the carrying amount may
not be recoverable. Such evaluations include analyses based on the cash
flows generated by the underlying assets, profitability information,
including estimated future operating results, trends or other determinants
of fair value. If the total of the expected future undiscounted cash flows
is less than the carrying amount of the asset, a loss is recognized for the
difference between the fair value and the carrying value of the asset.
Unless presented separately, the loss is included as a component of either
depreciation expense or amortization expense, as appropriate.
Foreign Currency Translation
The Company translates assets and liabilities of its foreign subsidiaries,
where the functional currency is the local currency, into US dollars at the
December 31 exchange rate and records the related translation adjustments
as a component of other comprehensive income. The Company translates
revenues and expenses using average exchange rates prevailing during the
year. Foreign currency transaction gains and losses are included in other
income (expense).
Revenue Recognition
The Company recognizes video, high-speed Internet, and programming revenues
as service is provided. The Company manages credit risk by disconnecting
services to cable and high-speed Internet customers who are delinquent. The
Company recognizes advertising sales revenue at estimated realizable values
when the advertising is aired. Revenues derived from other sources are
recognized when services are provided or events occur.
The Company recognizes net sales from electronic retailing at the time of
shipment to customers. The Company classifies all amounts billed to a
customer for shipping and handling within net sales from electronic
retailing. The Company's policy is to allow customers to return merchandise
for up to thirty days after date of shipment. An allowance for returned
merchandise is provided as a percentage of sales based on historical
experience.
See Note 3 for a discussion of the expected impact of adoption of Emerging
Issues Task Force ("EITF") 01-9, "Accounting for Consideration Given to a
Customer (Including a Reseller of the Vendor's Products)" ("EITF 01-9") and
EITF 01-14, "Income Statement Characterization of Reimbursements Received
for 'Out-of-Pocket' Expenses Incurred" ("EITF 01-14").
- 45 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations, as permitted by SFAS No.
123, "Accounting for Stock-Based Compensation." Compensation expense for
stock options is measured as the excess, if any, of the quoted market price
of the Company's stock at the date of the grant over the amount an employee
must pay to acquire the stock. The Company records compensation expense for
restricted stock awards based on the quoted market price of the Company's
stock at the date of the grant and the vesting period. The Company records
compensation expense for stock appreciation rights based on the changes in
quoted market prices of the Company's stock or other determinants of fair
value at the end of the year (see Note 8).
Postretirement and Postemployment Benefits
The Company charges to operations the estimated costs of retiree benefits
and benefits for former or inactive employees, after employment but before
retirement, during the years the employees provide services.
Investment Income
Investment income includes interest income, dividend income and gains, net
of losses, on the sales and exchanges of marketable securities and
long-term investments. The Company recognizes gross realized gains and
losses using the specific identification method. Investment income also
includes unrealized gains or losses on trading securities, mark to market
adjustments on derivatives and hedged items, and impairment losses
resulting from adjustments to the net realizable value of certain of the
Company's investments (see Note 6).
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities and expected benefits of utilizing net
operating loss carryforwards. The impact on deferred taxes of changes in
tax rates and laws, if any, applied to the years during which temporary
differences are expected to be settled, are reflected in the consolidated
financial statements in the period of enactment (see Note 9).
Derivative Financial Instruments
The Company uses derivative financial instruments for a number of purposes.
The Company manages its exposure to fluctuations in interest rates by
entering into interest rate exchange agreements ("Swaps"), interest rate
cap agreements ("Caps") and interest rate collar agreements ("Collars").
The Company manages the cost of its share repurchases through the sale of
equity put option contracts ("Comcast Put Options"). The Company manages
its exposure to fluctuations in the value of certain of its investments by
entering into equity collar agreements ("Equity Collars") and equity put
option agreements ("Equity Put Options"). The Company makes investments in
businesses, to some degree, through the purchase of equity call option or
call warrant agreements ("Equity Warrants"). The Company has issued indexed
debt instruments and entered into prepaid forward sale agreements ("Prepaid
Forward Sales") whose value, in part, is derived from the market value of
Sprint PCS common stock, and has also sold call options on certain of its
investments in equity securities ("Covered Call Options") in order to
monetize a portion of those investments.
Prior to the adoption on January 1, 2001 of SFAS No. 133, "Accounting for
Derivatives and Hedging Activities," as amended ("SFAS No. 133"), Swaps,
Caps and Collars were matched with either fixed or variable rate debt and
periodic cash payments were accrued on a settlement basis as an adjustment
to interest expense. Any premiums associated with these instruments were
amortized over their term and realized gains or losses as a result of the
termination of the instruments were deferred and amortized over the
remaining term of the underlying debt. Unrealized gains and losses as a
result of these instruments were recognized when the underlying hedged item
was extinguished or otherwise terminated.
Equity Collars, Equity Put Options and Equity Warrants were marked to
market on a current basis with the result included in accumulated other
comprehensive income in the Company's consolidated balance sheet. Covered
Call
- 46 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Options are marked to market on a current basis with the result included in
investment income in the Company's consolidated statement of operations.
On January 1, 2001, the Company adopted SFAS No. 133. SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and
hedging activities. SFAS No. 133 requires that all derivative instruments,
whether designated in hedging relationships or not, be recorded on the
balance sheet at their fair values.
For derivative instruments designated and effective as fair value hedges,
such as the Company's Equity Collars, Equity Put Options and Fixed to
Variable Swaps, changes in the fair value of the derivative instrument are
substantially offset in the consolidated statement of operations by changes
in the fair value of the hedged item. For derivative instruments designated
as cash flow hedges, such as the Company's Variable to Fixed Swaps, the
effective portion of any hedge is reported in other comprehensive income
until it is recognized in earnings during the same period in which the
hedged item affects earnings. The ineffective portion of all hedges is
recognized in current earnings each period. Changes in the fair value of
derivative instruments that are not designated as a hedge are recorded each
period in current earnings.
When a fair value hedge is terminated, sold, exercised or has expired, the
adjustment in the carrying amount of the fair value hedged item is deferred
and recognized into earnings when the hedged item is recognized in
earnings. When a hedged item is extinguished or sold, the adjustment in the
carrying amount of the hedged item is recognized in earnings. When hedged
variable rate debt is extinguished, the previously deferred effective
portion of the hedge is written off similar to debt extinguishment costs.
Subsequent to the adoption of SFAS No. 133, Equity Warrants are marked to
market on a current basis with the result included in investment income in
the Company's consolidated statement of operations.
Subsequent to the adoption of SFAS No. 133, derivative instruments embedded
in other contracts, such as the Company's indexed debt instruments and
Prepaid Forward Sale, are bifurcated into their host and derivative
financial instrument components. The derivative component is recorded at
its estimated fair value in the Company's consolidated balance sheet with
changes in estimated fair value recorded in investment income.
Proceeds from sales of Comcast Put Options are recorded in stockholders'
equity and an amount equal to the redemption price of the common stock is
reclassified from permanent equity to temporary equity. Subsequent changes
in the market value of Comcast Put Options are not recorded.
The Company periodically examines those instruments that have been entered
into by the Company to hedge exposure to interest rate and equity price
risks to ensure that the instruments are matched with underlying assets or
liabilities, reduce the Company's risks relating to interest rates or
equity prices and, through market value and sensitivity analysis, maintain
a high correlation to the risk inherent in the hedged item. For those
instruments that do not meet the above criteria, variations in their fair
value are marked-to-market on a current basis in the Company's consolidated
statement of operations.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to leveraged instruments (see Note 7).
The Company manages the credit risks associated with its derivative
financial instruments through the evaluation and monitoring of the
creditworthiness of the counterparties. Although the Company may be exposed
to losses in the event of nonperformance by the counterparties, the Company
does not expect such losses, if any, to be significant.
See Note 3 for a discussion of the impact of adoption of SFAS No. 133.
- 47 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Sale of Stock by a Subsidiary or Equity Method Investee
Changes in the Company's proportionate share of the underlying equity of a
consolidated subsidiary or equity method investee which result from the
issuance of additional securities by such subsidiary or investee are
recognized as gains or losses in the Company's consolidated statement of
operations unless gain realization is not assured in the circumstances.
Gains for which realization is not assured are credited directly to
additional capital.
Securities Lending Transactions
The Company may enter into securities lending transactions pursuant to
which the Company requires the borrower to provide cash collateral equal to
the value of the loaned securities, as adjusted for any changes in the
value of the underlying loaned securities. Loaned securities for which the
Company maintains effective control are included in investments in the
Company's consolidated balance sheet.
Reclassifications
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to those classifications used in 2001.
3. RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, as Amended
On January 1, 2001, the Company adopted SFAS No. 133. SFAS No. 133
establishes accounting and reporting standards for derivatives and hedging
activities. SFAS No. 133 requires that all derivative instruments be
reported on the balance sheet at their fair values.
Upon adoption of SFAS No. 133, the Company recognized as income a
cumulative effect of accounting change, net of related income taxes, of
$384.5 million and a cumulative decrease in other comprehensive income, net
of related income taxes, of $127.0 million.
The increase in income consisted of a $400.2 million adjustment to record
the debt component of indexed debt at a discount from its value at maturity
(see Note 7) and $191.3 million principally related to the reclassification
of gains previously recognized as a component of accumulated other
comprehensive income on the Company's equity derivative instruments, net of
related deferred income taxes of $207.0 million (see Note 9).
The decrease in other comprehensive income consisted principally of the
reclassification of the gains noted above.
SFAS No's. 141 and 142
The Financial Accounting Standards Board ("FASB") issued SFAS No. 141 and
SFAS No. 142 in June 2001. These statements address how intangible assets
that are acquired individually, with a group of other assets or in
connection with a business combination should be accounted for in financial
statements upon and subsequent to their acquisition. The new statements
require that all business combinations initiated after June 30, 2001 be
accounted for using the purchase method and establish specific criteria for
the recognition of intangible assets separately from goodwill.
The Company adopted SFAS No. 141 on July 1, 2001, as required by the new
statement. The adoption of SFAS No. 141 did not have a material impact on
the Company's financial condition or results of operations.
The Company adopted SFAS No. 142 on January 1, 2002, as required by the new
statement. Upon adoption, the Company will no longer amortize goodwill and
other indefinite lived intangible assets, which consist primarily of cable
franchise operating rights. The Company will be required to test its
goodwill and intangible assets that are determined to have an indefinite
life for impairment at least annually. Other than in the period of adoption
or in those periods in which the Company may record an asset impairment,
the Company expects that the adoption of SFAS No. 142 will result in
increased income as a result of reduced amortization expense.
- 48 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
The EITF of the FASB is expected to provide further guidance on certain
implementation issues related to the adoption of SFAS No. 142 as it relates
to identifiable intangible assets other than goodwill. Subject to further
guidance to be provided, based upon the Company's interpretation of SFAS
No. 142, the Company may record a charge as a cumulative effect of
accounting change, net of related deferred income taxes, in an amount not
expected to exceed $1.5 billion upon adoption of SFAS No. 142 on January 1,
2002.
Based on the Company's preliminary evaluation, the estimated effect of
adoption of SFAS No. 142 would have been to decrease amortization expense
by approximately $2.0 billion and to increase deferred income tax expense
by approximately $600 million for the year ended December 31, 2001.
SFAS No. 143
The FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," in June 2001. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. SFAS No. 143
is effective for fiscal years beginning after June 15, 2002. While the
Company is currently evaluating the impact the adoption of SFAS No. 143
will have on its financial condition and results of operations, it does not
expect such impact to be material.
SFAS No. 144
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," in August 2001. SFAS No. 144, which addresses financial
accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of, supercedes SFAS No. 121 and is
effective for fiscal years beginning after December 15, 2001. While the
Company is currently evaluating the impact the adoption of SFAS No. 144
will have on its financial condition and results of operations, it does not
expect such impact to be material.
EITF 01-9
In November 2001, the EITF reached a consensus on EITF 01-9. EITF 01-9
requires, among other things, that consideration paid to customers should
be classified as a reduction of revenue unless certain criteria are met.
Certain of the Company's content subsidiaries have paid or may pay
distribution fees to cable television and satellite broadcast systems for
carriage of their programming. The Company currently classifies the
amortization of these distribution fees as expense in its consolidated
statement of operations. Upon adoption of EITF 01-9 on January 1, 2002, the
Company will reclassify certain of these distribution fees from expense to
a revenue reduction for all periods presented in its consolidated statement
of operations. The change in classification will have no impact on the
Company's reported operating loss or financial condition. The effect of the
reclassification of cable television and satellite broadcast distribution
fees from expense to a reduction of revenue is to decrease the amounts
reported in the Company's consolidated statement of operations as follows
(in millions):
Year Ended December 31,
2001 2000 1999
------- ------- -------
Service revenues...................................... $35.8 $17.3 $4.6
Selling, general and administrative expense........... $4.7 $5.3 $4.2
Amortization expense.................................. $31.1 $12.0 $0.4
EITF 01-14
In November 2001, the FASB staff announced EITF Topic D-103, "Income
Statement Characterization of Reimbursements Received for 'Out-of-Pocket'
Expenses Incurred," which has subsequently been recharacterized as EITF
01-14. EITF 01-14 requires that reimbursements received for out-of-pocket
expenses incurred be characterized as revenue in the statement of
operations.
- 49 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Under the terms of its franchise agreements, the Company is required to pay
up to 5% of its gross revenues derived from providing cable services to the
local franchising authority. The Company normally passes these fees through
to its cable subscribers. The Company currently classifies cable franchise
fees collected from its cable subscribers as a reduction of the related
franchise fee expense included within selling, general and administrative
expenses in its consolidated statement of operations.
EITF 01-14, by analogy, applies to franchise fees. Upon adoption of EITF
01-14 on January 1, 2002, the Company will reclassify franchise fees
collected from cable subscribers from a reduction of selling, general and
administrative expenses to a component of service revenues in its
consolidated statement of operations. The change in classification will
have no impact on the Company's reported operating income (loss) or
financial condition. The effect of the reclassification of cable franchise
fees is to increase the amounts reported in the Company's consolidated
statement of operations as follows (in millions):
Year Ended December 31,
2001 2000 1999
-------- -------- --------
Service revenues......................................... $192.3 $152.3 $105.6
Selling, general and administrative expense.............. $192.3 $152.3 $105.6
4. EARNINGS PER SHARE
Earnings for common stockholders per common share is computed by dividing
net income, after deduction of preferred stock dividends, when applicable,
by the weighted average number of common shares outstanding during the
period on a basic and diluted basis.
The following table reconciles the numerator and denominator of the
computations of diluted earnings for common stockholders per common share
("Diluted EPS") for the years presented.
(Amounts in millions, except per share data)
Year Ended
December 31,
2001 2000 1999
---- ---- ----
Net income for common stockholders........................... $608.6 $1,998.0 $1,036.0
Preferred dividends.......................................... 23.5 29.7
------------ ------------ -----------
Net income for common stockholders used for
Diluted EPS............................................... $608.6 $2,021.5 $1,065.7
============ ============ ===========
Basic weighted average number of common shares
outstanding............................................... 949.7 890.7 749.1
Dilutive securities:
Series A and B convertible preferred stock.............. 1.0 42.5 44.0
Stock option and restricted stock plans................. 13.8 15.4 26.8
Put options on Class A Special Common Stock............. 0.1
------------ ------------ -----------
Diluted weighted average number of common shares
outstanding............................................... 964.5 948.7 819.9
============ ============ ===========
Diluted earnings for common stockholders per
common share.............................................. $0.63 $2.13 $1.30
============ ============ ===========
- 50 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Comcast Put Options on a weighted average 0.2 million shares, 1.5 million
shares and 2.7 million shares of its Class A Special Common Stock (see Note
8) were outstanding during the years ended December 31, 2001, 2000 and
1999, respectively. Comcast Put Options outstanding during the years ended
December 31, 2001 and 1999 were not included in the computation of Diluted
EPS as the Comcast Put Options' exercise price was less than the average
market price of the Company's Class A Special Common Stock during the
periods.
In December 2000 and January 2001, the Company issued $1.478 billion
principal amount at maturity of Zero Coupon Convertible Debentures due 2020
(the "Zero Coupon Debentures" - see Note 7). The Zero Coupon Debentures may
be converted at any time prior to maturity if the closing sale price of the
Company's Class A Special Common Stock is greater than 110% of the accreted
conversion price (as defined). The Zero Coupon Debentures were excluded
from the computation of Diluted EPS in 2001 and 2000 as the weighted
average closing sale price of the Company's Class A Special Common Stock
was not greater than 110% of the accreted conversion price.
5. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
Agreement and Plan of Merger with AT&T Broadband
On December 19, 2001, the Company entered into an Agreement and Plan of
Merger with AT&T Corp. ("AT&T") pursuant to which the Company agreed to a
transaction which will result in the combination of the Company and a
holding company of AT&T's broadband business ("AT&T Broadband") that AT&T
will spin off to its shareholders immediately prior to the combination. As
of December 31, 2001, AT&T Broadband served approximately 13.6 million
subscribers. Under the terms of the transaction, the combined company will
issue approximately 1.235 billion shares of its voting common stock to AT&T
Broadband shareholders in exchange for all of AT&T's interests in AT&T
Broadband, and approximately 115 million shares of its common stock to
Microsoft Corporation ("Microsoft") in exchange for AT&T Broadband shares
that Microsoft will receive immediately prior to the completion of the
transaction for settlement of their $5 billion aggregate principal amount
in quarterly income preferred securities. The combined company will also
assume or incur approximately $20 billion of AT&T Broadband debt. For each
share of a class of common stock of Comcast that they hold at the time of
the merger, each Comcast shareholder will receive one share of a
corresponding class of stock of the combined company. The Company expects
that the transaction will qualify as tax-free to both the Company and to
AT&T.
The Company will account for the transaction as an acquisition under the
purchase method of accounting, with the Company as the acquiring entity.
The identification of the Company as the acquiring entity was made after
careful consideration of all facts and circumstances, as follows:
Voting Rights in the New Combined Company. Former AT&T shareholders will
own approximately 53.7% of the combined company's economic interest and
approximately 60.6% of the combined company's voting interest following the
merger. Microsoft will own shares representing approximately 5.2% of the
combined company's economic interest and 4.95% of the combined company's
voting interest following the merger. No individual former AT&T shareholder
will have any significant ownership or voting interest following the
merger. Brian L. Roberts, the Company's controlling shareholder and
President ("Mr. Roberts"), either directly or through his control of a
family holding company, will own an approximately 33.34% voting interest in
the combined company following the merger (including a 33.33% non-
dilutable voting interest through ownership of the Class B common stock of
the combined company), and an approximately .8% economic interest. Mr.
Roberts will hold the largest minority voting interest in the combined
company. The next largest voting interest held by an individual shareholder
will be 4.95%, held by Microsoft. Under the governing documents of the
combined company, as a result of his ownership of the Class B stock, Mr.
Roberts will have the right to approve any merger involving the combined
company or any other transaction in which any other person would own more
than 10 percent of the stock of the combined company, the right to approve
any issuances of Class B stock, and any charter amendments or other actions
that would limit the rights of the Class B stock.
- 51 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Governance Arrangements Relating to the Board of Directors. The initial
Board of the combined company will have twelve members, five of whom will
be designated by the Company from its existing Board, five of whom will be
designated by AT&T from its existing Board, and two of whom will be jointly
designated by the Company and AT&T and will be independent persons. Except
for pre-approved designees, the individuals designated by each of the
Company and AT&T will be mutually agreed upon by the Company and AT&T.
Pursuant to the terms of the merger agreement, existing Company directors
Ralph J. Roberts, Mr. Roberts, Sheldon M. Bonovitz, Julian A. Brodsky and
Decker Anstrom have been pre-approved as Company director designees of the
combined company and existing AT&T director and Chairman C. Michael
Armstrong ("Mr. Armstrong") is the sole pre-approved AT&T director
designee. The remaining four AT&T designees are subject to the approval of
the Company. All of the initial director designees will hold office until
the 2005 annual meeting of the combined company shareholders. After this
initial term, the entire Board will be elected annually. During the period
before the 2005 annual meeting, Mr. Roberts will be the chairman of the
Board committee that nominates the slate of directors for the combined
company (the "Directors Nominating Committee") if he is the Chairman or the
CEO of the combined company. The remaining four members of the Directors
Nominating Committee will consist of one director designee who is an
independent director selected by the Company's director designees, and
three independent directors selected by the Company's director designees
from the AT&T director designees and the Company/AT&T joint director
designees. Since the initial director designees will hold office until the
2005 annual meeting, the Directors Nominating Committee would be expected
to act only in order to fill vacancies that may occur in director positions
prior to that meeting. After the 2005 annual meeting of shareholders, Mr.
Roberts will continue to be the chairman of the Directors Nominating
Committee of the combined company. The remaining four members of the
Directors Nominating Committee will be selected by Mr. Roberts from among
the combined company's independent directors. Nominations of the Directors
Nominating Committee will be submitted directly to the shareholders without
any requirement of Board approval or ratification.
Governance Arrangements Relating to Management. The combined company will
have an Office of the Chairman, comprised of the Chairman of the Board and
the CEO, from the closing of the merger until the earlier to occur of: (i)
the 2005 annual meeting of the shareholders, and (ii) the date on which Mr.
Armstrong ceases to be Chairman of the Board. The Office of the Chairman
will be the combined company's principal executive deliberative body with
responsibility for corporate strategy, policy and direction, governmental
affairs and other significant matters. While the Office of the Chairman is
in effect, the Chairman of the Board and the CEO will advise and consult
with each other with respect to those matters. Mr. Armstrong, AT&T's
Chairman of the Board, will be Chairman of the Board of the combined
company. Mr. Armstrong may serve as Chairman of the Board until the 2005
annual meeting of shareholders. After the 2005 annual meeting of
shareholders, or if Mr. Armstrong ceases to serve as Chairman of the Board
prior to that date, Mr. Roberts will become the Chairman of the Board of
the combined company. Removal of the Chairman of the Board will require the
vote of at least 75% of the entire Board until the earlier to occur of: (i)
the date on which neither Mr. Armstrong nor Mr. Roberts is Chairman of the
Board, and (ii) the fifth anniversary of the 2005 annual meeting of
shareholders. Mr. Roberts will be the CEO of the combined company. Mr.
Roberts will also be President of the combined company for as long as he is
the CEO. The CEO's powers and responsibilities will include: (i) the
supervision and management of the combined company's business and
operations, (ii) all matters related to officers and employees, including
hiring and termination, (iii) all rights and powers typically exercised by
the chief executive officer and president of a corporation, and (iv) the
authority to call special meetings of the combined company Board. Removal
of Mr. Roberts as CEO will require the vote of at least 75% of the entire
Board until the earlier to occur of: (i) the date on which Mr. Roberts
ceases to be CEO, and (ii) the fifth anniversary of the 2005 annual meeting
of the combined company shareholders. Under the terms of the merger
agreement, Mr. Roberts has the right to fill all senior management
positions of the combined company after consultation with Mr. Armstrong.
Other Factors. The Company made an unsolicited offer to purchase all of
AT&T Broadband. Subsequent to the Company's offer, AT&T solicited bids from
other potential purchasers.
- 52 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
The headquarters of the combined company will be in Philadelphia,
Pennsylvania, the current headquarters of the Company. An executive office
will be maintained in the New York City metropolitan area until at least
April 2005.
The Company's current investment in shares of AT&T common stock, to the
extent still held by the Company at the time of the AT&T Broadband spin-off
and merger, will be exchanged into AT&T shares (representing its Consumer
Services and Business Services Groups). Therefore, the Company will
continue to have an investment in the "selling company." Conversely, AT&T
Broadband's current investment in the Company will either be retired to
treasury after the merger or used to settle related debt.
*****
Notwithstanding that the former AT&T Broadband shareholders will, in the
aggregate, receive the majority of the voting common stock of the combined
company, the Company believes that this fact is outweighed by the totality
of the other facts and circumstances described above, with the most
significance being given to Mr. Roberts' non-dilutable minority voting
interest, Mr. Roberts' role on the Nominating Committee of the Board of
Directors, Mr. Roberts position as CEO and President, and Mr. Roberts'
right to appoint other members of senior management.
The transaction is subject to customary closing conditions and shareholder,
regulatory and other approvals. The Company expects to close the
transaction by the end of 2002.
At Home Services
On September 28, 2001, At Home Corporation ("At Home"), the Company's
provider of high-speed Internet services, filed for protection under
Chapter 11 of the U.S. Bankruptcy Code. In October 2001, the Company
amended its agreement with At Home to continue service to the Company's
existing and new subscribers during October and November 2001. The Company
agreed to be charged a higher rate than it had incurred under its previous
agreement. On December 3, 2001, the Company and At Home reached a
definitive agreement, approved by the Bankruptcy Court, pursuant to which
the Company paid $160 million to At Home and At Home agreed to continue to
provide high-speed Internet services to existing and new subscribers
through February 28, 2002. In December 2001, the Company began to transfer
its high-speed Internet subscribers from the At Home network to the
Company's new Company-owned and managed network. The Company completed this
transition in February 2002.
In the fourth quarter of 2001, the Company recognized $139.5 million of net
incremental expenses incurred in the continuation of service to and
transition of the Company's high-speed Internet subscribers from At Home's
network to the Company's own network. This charge is included in operating
expenses in the Company's consolidated statement of operations.
Acquisition of Outdoor Life Network
On October 30, 2001, the Company acquired from Fox Entertainment Group,
Inc. ("Fox Entertainment"), a subsidiary of The News Corporation Limited
("News Corp.") the approximate 83.2% interest in OLN not previously owned
by the Company. OLN is a 24-hour network devoted exclusively to adventure
and the outdoor lifestyle with distribution to approximately 41 million
subscribers. The Company made the acquisition to increase its investment in
programming content. The estimated fair value of the additional interest of
OLN acquired by the Company as of the closing date of the transaction was
approximately $512 million, substantially all of which was allocated to
affiliation agreements and goodwill in connection with the preliminary
purchase price allocation. Upon closing of the acquisition, the Company
exchanged its 14.5% interest in the Speedvision Network ("SVN"), together
with a previously made loan, for Fox Entertainment's interest in OLN. In
connection with the exchange of its interest in SVN, the Company recorded
to other income a pre-tax gain of $106.7 million, representing the
difference between the estimated fair value of the Company's interest in
SVN as of the closing date of the transaction and the Company's cost basis
in SVN. The Company no longer owns any interest in SVN and now owns 100% of
OLN.
- 53 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Baltimore, Maryland System Acquisition
On June 30, 2001, the Company acquired the cable system serving
approximately 112,000 subscribers in Baltimore City, Maryland from AT&T for
$518.7 million in cash. The purchase price is subject to adjustment.
Acquisition of Controlling Interest in The Golf Channel
On June 8, 2001, the Company acquired the approximate 30.8% interest in TGC
held by Fox Entertainment. In addition, Fox Entertainment and News Corp.
agreed to a five-year non-competition agreement. The Company paid aggregate
consideration of $364.9 million in cash. The Company previously accounted
for TGC under the equity method. The Company now owns approximately 91.0%
of TGC and consolidates TGC.
AT&T Cable Systems Acquisition
On April 30, 2001, the Company acquired cable systems serving approximately
585,000 subscribers from AT&T in exchange for approximately 63.9 million
shares of AT&T common stock then held by the Company. The market value of
the AT&T shares was approximately $1.423 billion, based on the price of the
AT&T common stock on the closing date of the transaction. The transaction
is expected to qualify as tax free to both the Company and to AT&T.
Home Team Sports Acquisition
On February 14, 2001, the Company acquired Home Team Sports (now known as
CSN Mid-Atlantic), a regional sports programming network with distribution
to approximately 4.8 million homes in the Mid-Atlantic region, from Viacom,
Inc. ("Viacom") and Affiliated Regional Communications, Ltd. (an affiliate
of Fox Cable Network Services, LLC ("Fox")). The Company also agreed to
increase the distribution of certain of Viacom's and Fox's programming
networks on certain of the Company's cable systems. The estimated fair
value of Home Team Sports as of the closing date of the acquisition was
$240.0 million.
Adelphia Cable Systems Exchange
On January 1, 2001, the Company completed its cable systems exchange with
Adelphia Communications Corporation ("Adelphia"). The Company received
cable systems serving approximately 445,000 subscribers from Adelphia and
Adelphia received certain of the Company's cable systems serving
approximately 441,000 subscribers. The Company recorded to other income a
pre-tax gain of $1.199 billion, representing the difference between the
estimated fair value of $1.799 billion as of the closing date of the
transaction and the Company's cost basis in the systems exchanged.
AT&T Cable Systems Exchange
On December 31, 2000, the Company completed its cable systems exchange with
AT&T. The Company received cable systems serving approximately 770,000
subscribers from AT&T and AT&T received certain of the Company's cable
systems serving approximately 700,000 subscribers. The Company recorded to
other income a pre-tax gain of $1.711 billion, representing the difference
between the estimated fair value of $2.840 billion as of the closing date
of the transaction and the Company's cost basis in the systems exchanged.
Acquisition of Prime Communications LLC
In December 1998, the Company agreed to invest in Prime Communications LLC
("Prime"), a cable communications company serving approximately 406,000
subscribers. Pursuant to the terms of this agreement, in December 1998 the
Company acquired from Prime a $50.0 million 12.75% subordinated note due
2008 issued by Prime. In July 1999, the Company made a loan to Prime in the
form of a $733.5 million 6% ten year note, convertible into 90% of the
equity of Prime. The Company made an additional $70.0 million in loans to
Prime (on the same terms as the original loan). In August 2000, the note,
plus accrued interest of $51.7 million on the note and the loans, was
converted and the owners of Prime sold their remaining 10% equity interest
in Prime to the Company for $87.7 million. As a result, the Company owns
100% of Prime and has assumed management control of Prime's operations.
Upon closing, the Company assumed and immediately repaid $532.0 million of
Prime's debt with proceeds from borrowings under existing credit
facilities.
- 54 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Acquisition of Jones Intercable, Inc.
In April 1999, the Company acquired a controlling interest in Jones
Intercable, Inc. ("Jones Intercable"), a cable communications company
serving approximately 1.1 million subscribers, for aggregate consideration
of $706.3 million in cash. In June 1999, the Company purchased an
additional 1.0 million shares of Jones Intercable Class A Common Stock for
$50.0 million in cash in a private transaction. The Company contributed its
interest in Jones Intercable to Comcast Cable Communications, Inc.
("Comcast Cable"), an indirect wholly owned subsidiary of the Company.
In March 2000, the Jones Intercable shareholders approved a merger
agreement pursuant to which the Jones Intercable shareholders, including
Comcast Cable, received 1.4 shares of the Company's Class A Special Common
Stock in exchange for each share of Jones Intercable Class A Common Stock
and Common Stock (the "Jones Merger") and Jones Intercable was merged with
and into a wholly owned subsidiary of the Company. In connection with the
closing of the Jones Merger, the Company issued approximately 58.9 million
shares of its Class A Special Common Stock to the Jones Intercable
shareholders, including approximately 23.3 million shares to a subsidiary
of the Company and 35.6 million shares with a value of $1.727 billion to
the public shareholders. As required under accounting principles generally
accepted in the United States, the shares held by the subsidiary of the
Company are presented as issued but not outstanding (held in treasury) in
the Company's December 31, 2001 and 2000 consolidated balance sheet.
Acquisition of CalPERS' Interest in Jointly Owned Cable Properties
In February 2000, the Company acquired the California Public Employees
Retirement System's ("CalPERS") 45% interest in Comcast MHCP Holdings,
L.L.C. ("Comcast MHCP"), formerly a 55% owned consolidated subsidiary of
the Company which serves subscribers in Michigan, New Jersey and Florida.
As a result, the Company owns 100% of Comcast MHCP. The consideration was
$750.0 million in cash.
Acquisition of Lenfest Communications, Inc.
In January 2000, the Company acquired Lenfest Communications, Inc.
("Lenfest"), a cable communications company serving approximately 1.1
million subscribers primarily in the Philadelphia area from AT&T and the
other Lenfest stockholders for approximately 120.1 million shares of the
Company's Class A Special Common Stock with a value of $6.014 billion (the
"Lenfest Acquisition"). In connection with the Lenfest Acquisition, the
Company assumed approximately $1.326 billion of debt.
Consolidation of Comcast Cablevision of Garden State, L.P.
Comcast Cablevision of Garden State, L.P. ("Garden State Cable") (formerly
Garden State Cablevision L.P.), a cable communications company serving
approximately 216,000 subscribers in New Jersey, is a partnership which was
owned 50% by Lenfest and 50% by the Company. The Company had accounted for
its interest in Garden State Cable under the equity method. As a result of
the Lenfest Acquisition, the Company owns 100% of Garden State Cable. As
such, the operating results of Garden State Cable have been included in the
Company's consolidated statement of operations from the date of the Lenfest
Acquisition.
Acquisition of Greater Philadelphia Cablevision, Inc.
In June 1999, the Company acquired Greater Philadelphia Cablevision, Inc.
("Greater Philadelphia"), a cable communications company serving
approximately 79,000 subscribers in Philadelphia from Greater Media, Inc.
for approximately 8.5 million shares of the Company's Class A Special
Common Stock with a value of $291.7 million.
The acquisitions completed by the Company during the three years in the
period ended December 31, 2001 were accounted for under the purchase method
of accounting. As such, the Company's results include the operating results
of the acquired businesses from the dates of acquisition. During the fourth
quarter of 2001, the Company recorded the final purchase price allocation
related to the Company's cable systems exchange with AT&T and related to
the Company's acquisitions of Home Team Sports and TGC. The allocation of
the purchase price for the other 2001 acquisitions and the cable systems
exchange with Adelphia made by the Company is preliminary
- 55 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
pending completion of final appraisals. The Company's cable systems
exchanges with Adelphia and AT&T and certain of the Company's acquisitions
had no significant impact on the Company's consolidated statement of cash
flows due to their noncash nature (see Note 10).
Unaudited Pro Forma Information
The following unaudited pro forma information has been presented as if the
acquisitions and cable systems exchanges made by the Company in 2001 each
occurred on January 1, 2000, the acquisitions and cable systems exchanges
made by the Company in 2000 each occurred on January 1, 1999, and the
acquisitions made by the Company in 1999 each occurred on January 1, 1998.
This information is based on historical results of operations, adjusted for
acquisition costs, and, in the opinion of management, is not necessarily
indicative of what the results would have been had the Company operated the
entities acquired since such dates.
(Amounts in millions,
except per share data)
Year Ended December 31,
2001 2000 1999
--------- --------- ----------
Revenues......................................................... $9,926.9 $9,012.2 $7,566.5
Income before extraordinary items and cumulative
effect of accounting change................................. $150.2 $1,652.3 $252.2
Net income....................................................... $533.2 $1,628.7 $201.2
Diluted EPS...................................................... $0.55 $1.68 $0.21
Sale of Comcast Cellular Corporation
In July 1999, the Company sold Comcast Cellular Corporation ("Comcast
Cellular") to SBC Communications, Inc. for $361.1 million in cash and the
assumption of $1.315 billion of Comcast Cellular debt, and recognized a
gain on the sale of $355.9 million, net of income tax expense. The results
of operations of Comcast Cellular have been presented as a discontinued
operation in accordance with APB Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." During the year ended December 31, 1999, the Company
recognized losses from discontinued operations of $20.1 million.
Other Income
In August 2000, the Company obtained the right to exchange its At Home
Series A Common Stock with AT&T and waived certain of its At Home Board
level and shareholder rights under a stockholders agreement (the "Share
Exchange Agreement"- see Note 6). The Company also agreed to cause its
existing appointee to the At Home Board of Directors to resign. In
connection with the transaction, the Company recorded to other income a
pre-tax gain of $1.045 billion, representing the estimated fair value of
the investment as of the closing date.
In August 2000, the Company exchanged all of the capital stock of a wholly
owned subsidiary which held certain wireless licenses for approximately 3.2
million shares of AT&T common stock. In connection with the exchange, the
Company recorded to other income a pre-tax gain of $98.1 million,
representing the difference between the fair value of the AT&T shares
received of $100.0 million and the Company's cost basis in the subsidiary.
In May 1999, the Company received a $1.5 billion termination fee as
liquidated damages from MediaOne Group, Inc. ("MediaOne") as a result of
MediaOne's termination of its Agreement and Plan of Merger with the Company
dated March 1999. The termination fee, net of transaction costs, was
recorded to other income in the Company's consolidated statement of
operations.
- 56 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
6. INVESTMENTS
December 31,
2001 2000
----------- -----------
(Dollars in millions)
Fair value method
AT&T Corp.................................................... $1,514.9 $1,174.3
Sprint Corp. PCS Group....................................... 2,109.5 2,149.8
Other........................................................ 136.1 1,873.0
----------- -----------
3,760.5 5,197.1
Cost method....................................................... 155.2 128.4
Equity method..................................................... 386.7 396.1
----------- -----------
Total investments........................................ 4,302.4 5,721.6
Less, current investments......................................... 2,623.2 3,059.7
----------- -----------
Non-current investments........................................... $1,679.2 $2,661.9
=========== ===========
Fair Value Method
The Company holds unrestricted equity investments in certain publicly
traded companies, which it accounts for as available for sale or trading
securities. The unrealized pre-tax gains on these investments as of
December 31, 2001 and 2000 of $280.3 million and $707.1 million,
respectively, have been reported in the Company's consolidated balance
sheet principally as a component of other comprehensive income, net of
related deferred income taxes of $95.3 million and $240.0 million,
respectively.
The cost, fair value and gross unrealized gains and losses related to the
Company's available for sale securities are as follows:
December 31,
2001 2000
----------- -----------
(Dollars in millions)
Cost............................................................. $1,355.0 $4,490.0
Gross unrealized gains........................................... 283.2 1,887.6
Gross unrealized losses.......................................... (2.9) (1,180.5)
----------- -----------
Fair value....................................................... $1,635.3 $5,197.1
=========== ===========
In June 2001, the Company and AT&T entered into an Amended and Restated
Share Issuance Agreement (the "Share Issuance Agreement"). AT&T issued to
the Company approximately 80.3 million unregistered shares of AT&T common
stock and the Company agreed to settle its right under the Share Exchange
Agreement (see Note 5 - Other Income) to exchange an aggregate 31.2 million
At Home shares and warrants held by the Company for shares of AT&T common
stock. The Company has registration rights, subject to customary
restrictions, which allow the Company to require AT&T to register the AT&T
shares received. Under the terms of the Share Issuance Agreement, the
Company retained the At Home shares and warrants held by it. The Company
recorded to investment income a pre-tax gain of $296.3 million,
representing the fair value of the increased consideration received by the
Company to settle its right under the Share Exchange Agreement.
In August 2001, the Company entered into a ten year Prepaid Forward Sale of
4.0 million shares of Sprint PCS common stock held by the Company with a
fair value of approximately $98 million and the Company received $78.3
million in cash. At maturity, the counterparty is entitled to receive
between 2.5 million and 4.0 million shares
- 57 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
of Sprint PCS common stock, or an equivalent amount of cash at the
Company's option, based upon the market value of Sprint PCS common stock at
that time. The Company split the Prepaid Forward Sale into its liability
and derivative components and recorded both components of the Prepaid
Forward Sale obligation in other long-term liabilities. The Company records
the change in the fair value of the derivative component and the accretion
of the liability component to investment income.
Investment Income
Investment income includes the following (in millions):
Year Ended December 31,
2001 2000 1999
--------- --------- ---------
Interest and dividend income........................................... $76.5 $171.6 $172.5
Gains on sales and exchanges of investments, net....................... 485.2 886.7 510.6
Investment impairment losses........................................... (972.4) (74.4) (35.5)
Reclassification of unrealized gains................................... 1,330.3
Unrealized gain on Sprint PCS common stock............................. 284.4
Mark to market adjustments on derivatives related
to Sprint PCS common stock........................................ (184.6)
Mark to market adjustments on derivatives and hedged items............. 42.3
Settlement of call options............................................. (18.1)
--------- --------- ---------
Investment income................................................. $1,061.7 $983.9 $629.5
========= ========= =========
The investment impairment loss for the year ended December 31, 2001 relates
principally to an other than temporary decline in the Company's investment
in AT&T, a portion of which was exchanged on April 30, 2001 (see Note 5 -
AT&T Cable Systems Acquisition).
During the year ended December 31, 2001, the Company wrote-off its
investment in At Home common stock based upon a decline in the investment
that was considered other than temporary. In connection with the
realization of this impairment loss, the Company reclassified to investment
income the accumulated unrealized gain of $237.9 million on the Company's
investment in At Home common stock which was previously recorded as a
component of accumulated other comprehensive income. The Company recorded
this accumulated unrealized gain prior to the Company's designation of its
right under the Share Exchange Agreement as a hedge of the Company's
investment in the At Home common stock (see Note 5 - Other Income).
The Company reclassified its investment in Sprint PCS from an available for
sale security to a trading security in connection with the adoption of SFAS
No. 133. As a result, the Company reclassified to investment income the
accumulated unrealized gain of $1.092 billion on the Company's investment
in Sprint PCS which was previously recorded as a component of accumulated
other comprehensive income.
Equity Price Risk
During 1999, the Company entered into Equity Collars covering $1.365
billion notional amount of the Company's Sprint PCS common stock, which are
accounted for at fair value. The Equity Collars limit the Company's
exposure to and benefits from price fluctuations in the underlying Sprint
PCS common stock. During 2001, $483.7 million notional amount of Equity
Collars matured and the Company sold or entered into Prepaid Forward Sales
of the related Sprint PCS common stock. The remaining $881.0 million
notional amount of Equity Collars mature between 2002 and 2003. As the
Company had accounted for the Equity Collars as a hedge, changes in the
value of the Equity Collars were substantially offset by changes in the
value of the Sprint PCS common stock which was also
- 58 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
marked-to-market through accumulated other comprehensive income in the
Company's consolidated balance sheet through December 31, 2000.
Equity Method
The Company records its proportionate interests in the net income (loss) of
certain of its equity method investees in arrears. The Company's recorded
investments exceed its proportionate interests in the book value of the
investees' net assets by $188.7 million as of December 31, 2001
(principally related to the Company's investment in Susquehanna Cable).
Such excess is being amortized to equity in net income or loss, over a
period of twenty years, which is consistent with the estimated lives of the
underlying assets. The original cost of investments accounted for under the
equity method totaled $479.8 million and $506.5 million as of December 31,
2001 and 2000, respectively. Upon adoption of SFAS No. 142, the Company
will no longer amortize this excess but rather will continue to test such
excess for impairment in accordance with APB Opinion 18, "The Equity Method
of Accounting for Investments in Common Stock."
The Company does not have any additional significant contractual
commitments with respect to any of its investments. However, to the extent
the Company does not fund its investees' capital calls, it exposes itself
to dilution of its ownership interests.
Cost Method
It is not practicable to estimate the fair value of the Company's
investments in privately held companies, accounted for under the cost
method, due to a lack of quoted market prices.
- 59 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
7. LONG-TERM DEBT
December 31,
2001 2000
---------- ----------
(in millions)
Commercial Paper............................................................. $397.3 $1,323.5
Notes payable to banks due in installments through 2009...................... 1,222.7 1,751.4
9-5/8% Senior notes, due 2002................................................ 200.0 200.0
8-1/8% Senior notes, due 2004................................................ 320.4 299.9
8-3/8% Senior notes, due 2005................................................ 697.0 696.3
6-3/8% Senior notes, due 2006................................................ 511.3
8-3/8% Senior notes, due 2007................................................ 597.5 597.2
8-7/8% Senior notes, due 2007................................................ 249.1 249.0
6.20% Senior notes, due 2008................................................. 798.4 798.2
7-5/8% Senior notes, due 2008................................................ 206.1 197.1
7-5/8% Senior notes, due 2008................................................ 147.7 147.4
6-7/8% Senior notes, due 2009................................................ 751.5
6-3/4% Senior notes, due 2011................................................ 993.1
7-1/8% Senior notes, due 2013................................................ 748.4
8-7/8% Senior notes, due 2017................................................ 545.9 545.8
8-1/2% Senior notes, due 2027................................................ 249.6 249.6
10-1/4% Senior subordinated debentures, due 2001............................. 100.4
10-1/2% Senior subordinated debentures, due 2006............................. 133.0 123.8
8-1/4% Senior subordinated debentures, due 2008.............................. 154.3 149.1
10-5/8% Senior subordinated debentures, due 2012............................. 247.8 257.0
Zero Coupon Convertible Debentures, due 2020................................. 1,096.4 1,002.0
7% Disney Notes, due 2007.................................................... 132.8 132.8
ZONES at principal amount, due 2029.......................................... 1,612.6 1,806.8
Other, including capital lease obligations................................... 188.9 184.0
---------- ----------
12,201.8 10,811.3
Less current portion......................................................... 460.2 293.9
---------- ----------
$11,741.6 $10,517.4
========== ==========
Maturities of long-term debt outstanding as of December 31, 2001 for the
four years after 2002 are as follows (in millions):
2003............................... $73.2
2004............................... 331.0
2005............................... 2,026.2
2006............................... 653.2
Senior Notes Offerings
During 2001, Comcast Cable sold an aggregate of $3.0 billion of public
debt. The Company used substantially all of the net proceeds from the
offerings to repay a portion of the amounts outstanding under Comcast
Cable's commercial paper program and revolving credit facility, and to fund
acquisitions.
- 60 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Zero Coupon Convertible Debentures
In December 2000, the Company issued $1.285 billion principal amount at
maturity of Zero Coupon Debentures for proceeds of $1.002 billion. In
January 2001, the Company issued an additional $192.8 million principal
amount at maturity of Zero Coupon Debentures for proceeds of $150.3
million. The Company used substantially all of the net proceeds from the
offering to repay a portion of the amounts outstanding under Comcast
Cable's commercial paper program and revolving credit facility.
The Zero Coupon Debentures have a yield to maturity of 1.25%, computed on a
semi-annual bond equivalent basis. The Zero Coupon Debentures may be
converted, subject to certain restrictions, into shares of the Company's
Class A Special Common Stock at the option of the holder at a conversion
rate of 14.2566 shares per $1,000 principal amount at maturity,
representing an initial conversion price of $54.67 per share. The Zero
Coupon Debentures are senior unsecured obligations. The Company may redeem
for cash all or part of the Zero Coupon Debentures on or after December 19,
2005.
On December 17, 2001, the Company amended the terms of the Zero Coupon
Debentures to permit holders of the Zero Coupon Debentures to require the
Company to repurchase the Zero Coupon Debentures on December 19, 2002.
Holders may require the Company to repurchase the Zero Coupon Debentures on
December 19, 2001, 2002, 2003, 2005, 2010 and 2015. The Company may choose
to pay the repurchase price for 2001, 2002, 2003 and 2005 repurchases in
cash or shares of its Class A Special Common Stock or a combination of cash
and shares of its Class A Special Common Stock. The Company may pay the
repurchase price for the 2010 and 2015 repurchases in cash only.
On December 19, 2001, holders of an aggregate of $70.3 million accreted
value of Zero Coupon Debentures exercised their right to have the Company
repurchase their Zero Coupon Debentures for cash. The Company financed the
redemption with available cash.
Holders may surrender the Zero Coupon Debentures for conversion at any time
prior to maturity if the closing price of the Company's Class A Special
Common Stock is greater than 110% of the accreted conversion price for at
least 20 trading days of the 30 trading days prior to conversion.
Amounts outstanding under the Zero Coupon Debentures are classified as
long-term in the Company's consolidated balance sheet as of December 31,
2001 and 2000 as the Company has both the ability and the intent to
refinance the Zero Coupon Debentures on a long-term basis with amounts
available under the Comcast Cable Revolver (see "Commercial Paper" below)
in the event holders of the Zero Coupon Debentures exercise their rights to
require the Company to repurchase the Zero Coupon Debentures in December
2002.
Commercial Paper
The Company's senior bank credit facility consists of a $2.25 billion,
five-year revolving credit facility and a $2.25 billion, 364-day revolving
credit facility (together, the "Comcast Cable Revolver"). The 364-day
revolving credit facility supports Comcast Cable's commercial paper
program. Amounts outstanding under the commercial paper program are
classified as long-term in the Company's consolidated balance sheet as of
December 31, 2001 and 2000 as the Company has both the ability and the
intent to refinance these obligations, if necessary, on a long-term basis
with amounts available under the Comcast Cable Revolver.
ZONES
At maturity, holders of the Company's 2.0% Exchangeable Subordinated
Debentures due 2029 (the "ZONES") are entitled to receive in cash an amount
equal to the higher of the principal amount of the ZONES or the market
value of Sprint PCS Stock. Prior to maturity, each ZONES is exchangeable at
the holder's option for an amount of cash equal to 95% of the market value
of Sprint PCS Stock.
- 61 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Prior to the adoption of SFAS No. 133 on January 1, 2001, the Company
accounted for the ZONES as an indexed debt instrument since the maturity
value is dependent upon the fair value of Sprint PCS Stock. Therefore, the
carrying value of the ZONES was adjusted each balance sheet date to reflect
the fair value of the underlying Sprint PCS Stock with the change included
in income (expense) related to indexed debt in the Company's consolidated
statement of operations. As of December 31, 2001, the number of Sprint PCS
shares held by the Company exceeded the number of ZONES outstanding.
Upon adoption of SFAS No. 133, the Company split the ZONES into their
derivative and debt components. In connection with the adoption of SFAS No.
133, the Company recorded the debt component of the ZONES at a discount
from its value at maturity resulting in a reduction in the outstanding
balance of the ZONES of $400.2 million (see Note 3).
The Company recorded the increase in the fair value of the ZONES (see Note
6) and the increase in the carrying value of the debt component of the
ZONES as follows (in millions):
Year Ended
December 31, 2001
-----------------------
Increase in derivative component to investment expense............ $183.8
Increase in debt component to interest expense.................... $22.2
Extraordinary Items
Extraordinary items consist of unamortized debt issue costs and debt
extinguishment costs, net of related tax benefits, expensed principally in
connection with the redemptions and refinancings of certain indebtedness.
Interest Rates
Bank debt interest rates vary based upon one or more of the following rates
at the option of the Company:
Prime rate to prime plus .75%;
Federal Funds rate plus .5% to 1.25%; and
LIBOR plus .19% to 1.875%.
As of December 31, 2001 and 2000, the Company's effective weighted average
interest rate on its variable rate debt outstanding was 2.70% and 7.34%,
respectively.
Interest Rate Risk Management
The Company is exposed to the market risk of adverse changes in interest
rates. To manage the volatility relating to these exposures, the Company's
policy is to maintain a mix of fixed and variable rate debt and to enter
into various interest rate derivative transactions as described below.
Using Swaps, the Company agrees to exchange, at specified intervals, the
difference between fixed and variable interest amounts calculated by
reference to an agreed-upon notional principal amount. Caps are used to
lock in a maximum interest rate should variable rates rise, but enable the
Company to otherwise pay lower market rates. Collars limit the Company's
exposure to and benefits from interest rate fluctuations on variable rate
debt to within a certain range of rates.
All derivative transactions must comply with a board-approved derivatives
policy. In addition to prohibiting the use of derivatives for trading
purposes or that increase risk, this policy requires quarterly monitoring
of the portfolio, including portfolio valuation, measuring counterparty
exposure and performing sensitivity analyses.
- 62 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
The following table summarizes the terms of the Company's existing Swaps
(dollars in millions):
Notional Average Estimated
Amount Maturities Interest Rate Fair Value
As of December 31, 2001
Variable to Fixed Swaps $250.3 2002-2003 4.9% ($5.5)
Fixed to Variable Swaps $950.0 2004-2008 7.5% $46.8
As of December 31, 2000
Variable to Fixed Swaps $377.7 2001-2003 5.2% $3.7
Fixed to Variable Swaps $450.0 2004-2008 7.7% $3.2
The notional amounts of interest rate instruments, as presented in the
above table, are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss. The estimated fair value
approximates the proceeds (costs) to settle the outstanding contracts.
While Swaps, Caps and Collars represent an integral part of the Company's
interest rate risk management program, their incremental effect on interest
expense for the years ended December 31, 2001, 2000 and 1999 was not
significant.
During January and February 2002, the Company settled all $950.0 million
notional amount of its Fixed to Variable Swaps and received proceeds of
$56.8 million.
Estimated Fair Value
The Company's long-term debt had estimated fair values of $12.559 billion
and $10.251 billion as of December 31, 2001 and 2000, respectively. The
estimated fair value of the Company's publicly traded debt is based on
quoted market prices for that debt. Interest rates that are currently
available to the Company for issuance of debt with similar terms and
remaining maturities are used to estimate fair value for debt issues for
which quoted market prices are not available.
Debt Covenants
Certain of the Company's subsidiaries' loan agreements contain restrictive
covenants which, for example, limit the subsidiaries' ability to enter into
arrangements for the acquisition of property and equipment, investments,
mergers and the incurrence of additional debt. Certain of these agreements
contain financial covenants which require that certain ratios and cash flow
levels be maintained and contain certain restrictions on dividend payments
and advances of funds to the Company. The Company and its subsidiaries were
in compliance with all financial covenants for all periods presented.
As of December 31, 2001, $246.9 million of the Company's cash, cash
equivalents and short-term investments is restricted to use by subsidiaries
of the Company under contractual or other arrangements. Restricted net
assets of the Company's subsidiaries were approximately $1.233 billion as
of December 31, 2001.
Lines and Letters of Credit
As of December 31, 2001, certain subsidiaries of the Company had unused
lines of credit of $3.460 billion under their respective credit facilities.
As of December 31, 2001, the Company and certain of its subsidiaries had
unused irrevocable standby letters of credit totaling $96.1 million to
cover potential fundings under various agreements.
- 63 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
8. STOCKHOLDERS' EQUITY
Preferred Stock
The Company is authorized to issue, in one or more series, up to a maximum
of 20.0 million shares of preferred stock. The shares can be issued with
such designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights and other special or related
rights as the Company's board of directors shall from time to time fix by
resolution.
The Company's Series B Preferred Stock had a 5.25% pay-in-kind annual
dividend. Dividends were paid quarterly through the issuance of additional
shares of Series B Preferred Stock (the "Additional Shares") and were
cumulative from the issuance date (except that dividends on the Additional
Shares accrued from the date such Additional Shares were issued). The
Series B Preferred Stock, including the Additional Shares, was convertible,
at the option of the holder, into approximately 42.5 million shares of the
Company's Class A Special Common Stock, subject to adjustment in certain
limited circumstances, which equaled an initial conversion price of $11.77
per share, increasing as a result of the Additional Shares to $16.96 per
share on June 30, 2004. The Series B Preferred Stock was mandatorily
redeemable on June 30, 2017, or, at the option of the Company beginning on
June 30, 2004 or at the option of the holder on June 30, 2004 or on June
30, 2012. Upon redemption, the Company, at its option, could redeem the
Series B Preferred Stock with cash, Class A Special Common Stock or a
combination thereof. The Series B Preferred Stock was generally non-voting.
In December 2000, the Company issued approximately 38.3 million shares of
its Class A Special Common Stock to the holder in connection with the
holder's election to convert $533.6 million at redemption value of Series B
Preferred Stock. In March 2001, the Company issued approximately 4.2
million shares of its Class A Special Common Stock to the holder in
connection with the holder's election to convert the remaining $59.5
million at redemption value of Series B Preferred Stock.
Common Stock
The Company's Class A Special Common Stock is generally nonvoting and each
share of the Company's Class A Common Stock is entitled to one vote. Each
share of the Company's Class B Common Stock is entitled to fifteen votes
and is convertible, share for share, into Class A or Class A Special Common
Stock, subject to certain restrictions.
Board-Authorized Repurchase Programs
The following table summarizes the Company's repurchases and sales of
Comcast Put Options under its Board- authorized share repurchase programs
(shares and dollars in millions):
Year Ended December 31,
2001 2000 1999
--------- --------- ---------
Shares repurchased........................................................ 0.8 9.1 1.0
Aggregate consideration................................................... $27.1 $324.9 $30.7
Comcast Put Options sold.................................................. 2.0 5.5
As part of the Company's Board-authorized repurchase programs, the Company
sold Comcast Put Options on shares of its Class A Special Common Stock. The
Comcast Put Options give the holder the right to require the Company to
repurchase such shares at specified prices on specific dates. All Comcast
Put Options sold expired unexercised. The Company reclassified the amount
it would have been obligated to pay to repurchase such shares had the
Comcast Put Options been exercised, from common equity put options to
additional capital upon expiration of the Comcast Put Options. The
difference between the proceeds from the sale of the Comcast Put Options
and their estimated fair value was not significant as of December 31, 2000.
- 64 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Stock-Based Compensation Plans
As of December 31, 2001, the Company and its subsidiaries have several
stock-based compensation plans for certain employees, officers, directors
and other persons designated by the applicable compensation committees of
the boards of directors of the Company and its subsidiaries. These plans
are described below.
Comcast Option Plans. The Company maintains qualified and nonqualified
stock option plans for certain employees, directors and other persons under
which fixed stock options are granted and the option price is generally not
less than the fair value of a share of the underlying stock at the date of
grant (collectively, the "Comcast Option Plans"). Under the Comcast Option
Plans, 55.9 million shares of Class A Special Common Stock were reserved as
of December 31, 2001. Option terms are generally from five to 10 1/2 years,
with options generally becoming exercisable between two and 9 1/2 years
from the date of grant.
The following table summarizes the activity of the Comcast Option Plans
(options in thousands):
2001 2000 1999
--------------------- --------------------- -----------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------- ----------- --------- ----------- --------- -----------
Class A Special Common Stock
Outstanding at beginning of year 49,618 $23.69 40,416 $16.01 43,002 $11.09
Granted 10,084 37.52 15,300 39.43 7,403 34.16
Exercised (3,360) 10.62 (4,805) 8.60 (7,527) 6.76
Canceled (821) 30.69 (1,293) 25.98 (2,462) 12.90
--------- --------- ---------
Outstanding at end of year 55,521 26.89 49,618 23.69 40,416 16.01
========= ========= =========
Exercisable at end of year 16,892 15.57 13,267 11.35 10,947 8.19
========= ========= =========
The following table summarizes information about the Class A Special Common
Stock options outstanding under the Comcast Option Plans as of December 31,
2001 (options in thousands):
Options Outstanding Options Exercisable
------------------------------------------ -------------------------
Weighted-
Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/31/01 Life Price at 12/31/01 Price
------------------- ------------- --------------- ----------- ----------- ------------
$4.96 - $6.04 2,229 1 year $5.74 2,067 $5.71
$6.71 - $10.06 7,095 3.3 years 8.70 4,829 8.95
$10.11 - $14.94 4,267 4.9 years 13.13 2,428 13.04
$15.66 - $22.88 10,490 6.4 years 17.01 4,809 17.01
$27.59 - $34.48 6,112 7.4 years 32.29 2,042 31.96
$34.50 - $41.38 21,745 8.9 years 37.78 490 38.52
$41.44 - $53.13 3,583 8.3 years 46.05 227 45.71
--------- ---------
55,521 16,892
========= =========
- 65 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
The weighted-average fair value at date of grant of a Class A Special
Common Stock option granted under the Comcast Option Plans during 2001,
2000 and 1999 was $19.07, $21.20 and $20.41, respectively. The fair value
of each option granted during 2001, 2000 and 1999 was estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
Year Ended December 31,
2001 2000 1999
--------- --------- -------
Dividend yield................................................ 0% 0% 0%
Expected volatility........................................... 35.7% 35.8% 36.1%
Risk-free interest rate....................................... 5.1% 6.3% 5.8%
Expected option lives (in years).............................. 8.0 8.0 9.9
Forfeiture rate............................................... 3.0% 3.0% 3.0%
Subsidiary Option Plans. Certain of the Company's subsidiaries maintain
qualified and nonqualified combination stock option/stock appreciation
rights ("SAR") plans (collectively, the "Tandem Plans") for employees,
officers, directors and other designated persons. Under the Tandem Plans,
the option price is generally not less than the fair value, as determined
by an independent appraisal, of a share of the underlying common stock at
the date of grant. If the eligible participant elects the SAR feature of
the Tandem Plans, the participant receives 75% of the excess of the fair
value of a share of the underlying common stock over the exercise price of
the option to which it is attached at the exercise date. Option holders
have stated an intention not to exercise the SAR feature of the Tandem
Plans. Because the exercise of the option component is more likely than the
exercise of the SAR feature, compensation expense is measured based on the
stock option component. Under the Tandem Plans, option/SAR terms are ten
years from the date of grant, with options/SARs generally becoming
exercisable over four to five years from the date of grant.
The QVC Tandem Plan is the most significant of the Tandem Plans. The
following table summarizes information related to the QVC Tandem Plan
(options/SARs in thousands):
At December 31,
2001 2000 1999
----------- ---------- -----------
Options/SARs outstanding at end
of year...................................................... 253 219 200
=========== ========== ===========
Weighted-average exercise price of
options/SARs outstanding
at end of year............................................... $913.88 $789.51 $618.02
=========== ========== ===========
Options/SARs exercisable at end
of year...................................................... 113 79 80
=========== ========== ===========
Weighted-average exercise price
of options/SARs exercisable
at end of year............................................... $706.51 $606.92 $505.86
=========== ========== ===========
As of the latest valuation date, the fair value of a share of QVC Common
Stock was $1,492.00.
- 66 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
Had compensation expense for the Company's aforementioned stock-based
compensation plans been determined based on the fair value at the grant
dates for awards under those plans under the provisions of SFAS No. 123,
the Company's net income and net income per share would have changed to the
pro forma amounts indicated below (dollars in millions, except per share
data):
Year Ended December 31,
2001 2000 1999
---------- ---------- ----------
Net income:
As reported................................................ $608.6 $2,021.5 $1,065.7
Pro forma.................................................. $482.0 $1,918.1 $1,005.5
Net income for common stockholders:
As reported................................................ $608.6 $1,998.0 $1,036.0
Pro forma.................................................. $482.0 $1,894.6 $975.8
Basic earnings for common stockholders per common share:
As reported................................................ $0.64 $2.24 $1.38
Pro forma.................................................. $0.51 $2.13 $1.30
Diluted earnings for common stockholders per common share:
As reported................................................ $0.63 $2.13 $1.30
Pro forma.................................................. $0.50 $2.02 $1.23
The pro forma effect on net income and net income per share for the years
ended December 31, 2001, 2000 and 1999 by applying SFAS No. 123 may not be
indicative of the pro forma effect on net income or loss in future years
since SFAS No. 123 does not take into consideration pro forma compensation
expense related to awards made prior to January 1, 1995 and since
additional awards in future years are anticipated.
Other Stock-Based Compensation Plans
The Company maintains a restricted stock plan under which management
employees may be granted restricted shares of the Company's Class A Special
Common Stock (the "Restricted Stock Plan"). The shares awarded vest
annually, generally over a period not to exceed five years from the date of
the award, and do not have voting rights. At December 31, 2001, there were
714,000 unvested shares granted under the Restricted Stock Plan, of which
158,000 vested in January 2002.
The Company maintains a deferred stock option plan for certain employees,
officers and directors which provides the optionees with the opportunity to
defer the receipt of shares of the Company's Class A Special Common Stock
which would otherwise be deliverable upon exercise by the optionees of
their stock options. As of December 31, 2001 and 2000, 5.9 million and 5.0
million shares were issuable under options exercised but the receipt of
which was irrevocably deferred by the optionees pursuant to the Company's
deferred stock option plan.
Certain of the Company's subsidiaries have SAR plans for certain employees,
officers, directors and other persons (the "SAR Plans"). Under the SAR
Plans, eligible participants are entitled to receive a cash payment equal
to 100% of the excess, if any, of the fair value of a share of the
underlying common stock at the exercise date over the fair value of such a
share at the grant date. The SARs have a term of ten years from the date of
grant and become exercisable over four to five years from the date of
grant.
- 67 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
The following table summarizes information related to the Company's
Restricted Stock Plan and subsidiary SAR Plans:
Year Ended December 31,
2001 2000 1999
--------- --------- -------
Restricted Stock Plan
Shares granted (in thousands)............................... 157 504 170
Weighted-average fair value per share at date of grant...... $39.52 $37.80 $43.22
Compensation expense (in millions).......................... $8.9 $9.2 $4.7
SAR Plans
Compensation expense (in millions).......................... $3.5 $2.2 $6.4
9. INCOME TAXES
The Company joins with its 80% or more owned subsidiaries (the
"Consolidated Group") in filing consolidated federal income tax returns.
QVC and E! Entertainment, each file separate consolidated federal income
tax returns. Income tax expense consists of the following components (in
millions):
Year Ended December 31,
2001 2000 1999
--------- --------- --------
Current expense
Federal......................................................... $623.2 $321.4 $606.7
State........................................................... 84.8 42.8 188.4
Foreign......................................................... 2.9 2.5 2.0
--------- --------- --------
710.9 366.7 797.1
--------- --------- --------
Deferred expense (benefit)
Federal......................................................... (255.8) 998.6 (65.2)
State........................................................... 15.1 76.0 (8.2)
--------- --------- --------
(240.7) 1,074.6 (73.4)
--------- --------- --------
Income tax expense.............................................. $470.2 $1,441.3 $723.7
========= ========= ========
The Company's effective income tax expense differs from the statutory
amount because of the effect of the following items (in millions):
Year Ended December 31,
2001 2000 1999
--------- --------- --------
Federal tax at statutory rate................................... $299.7 $1,260.6 $525.0
Non-deductible depreciation and amortization.................... 106.6 102.1 49.8
State income taxes, net of federal benefit...................... 64.9 77.2 117.1
Foreign (income) losses and equity in net losses of affiliates.. 7.2 8.0 (2.0)
Other........................................................... (8.2) (6.6) 33.8
--------- --------- --------
Income tax expense.............................................. $470.2 $1,441.3 $723.7
========= ========= ========
- 68 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
The Company's net deferred tax liability consists of the following
components (in millions):
December 31,
2001 2000
--------- ---------
Deferred tax assets:
Net operating loss carryforwards........................ $242.8 $289.8
Allowances for doubtful accounts and excess
and obsolete inventory............................... 108.7 109.0
Other................................................... 167.0 163.5
--------- ---------
518.5 562.3
--------- ---------
Deferred tax liabilities:
Temporary differences, principally book and tax basis
of property and equipment and intangible assets....... 6,329.0 5,851.7
Differences between book and tax basis
in investments........................................ 644.9 1,221.3
Differences between book and tax basis of
indexed debt securities............................... 195.7 65.9
--------- ---------
7,169.6 7,138.9
--------- ---------
Net deferred tax liability................................. $6,651.1 $6,576.6
========= =========
The Company recorded $212.3 million of deferred income tax liabilities in
2001 in connection with acquisitions principally related to basis
differences in property and equipment and intangible assets. The Company
recorded a decrease of ($148.6) million and ($3.055) billion, and an
increase of $2.730 billion to deferred income tax liabilities in 2001, 2000
and 1999, respectively, in connection with unrealized gains (losses) on
marketable securities which are included in other comprehensive income. The
Company recorded $207.0 million of deferred income tax liabilities in 2001
in connection with the cumulative effect of accounting change related to
the adoption of SFAS No. 133 (see Note 3).
The Company has recorded net deferred tax liabilities of $275.4 million and
$789.9 million, as of December 31, 2001 and 2000, respectively, which have
been included in current liabilities, related primarily to current
investments. The Company has net operating loss carryforwards of
approximately $250.0 million which expire primarily in periods through
2019.
- 69 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
10. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The following table summarizes the fair values of the assets and
liabilities acquired by the Company through noncash transactions (see Note
5) (in millions):
Year Ended December 31,
2001 2000 1999
--------- ---------- --------
Current assets.................................................... $56.6 $216.2 $6.4
Investments....................................................... 437.3
Property, plant & equipment....................................... 580.4 1,295.8 74.0
Intangible assets................................................. 3,042.7 15,399.4 337.0
Current liabilities............................................... (37.0) (277.3) (11.1)
Long-term debt.................................................... (2,146.5)
Deferred income taxes............................................. (76.9) (3,308.0) (114.6)
--------- ---------- --------
Net assets acquired.......................................... $3,565.8 $11,616.9 $291.7
========= ========== ========
The following table summarizes the Company's cash payments for interest and
income taxes (in millions):
Year Ended December 31,
2001 2000 1999
-------- -------- --------
Interest................................................................. $660.4 $705.8 $529.2
Income taxes............................................................. $561.2 $708.9 $190.5
11. COMMITMENTS AND CONTINGENCIES
Commitments
The Company's programming networks have entered into license agreements for
programs and sporting events which will be available for telecast
subsequent to December 31, 2001. In addition, the Company, through Comcast-
Spectacor, has employment agreements with both players and coaches of its
professional sports teams. Certain of these employment agreements, which
provide for payments that are guaranteed regardless of employee injury or
termination, are covered by disability insurance if certain conditions are
met. The following table summarizes the Company's minimum annual
programming commitments under these license agreements, the Company's
future commitments under long-term professional sports contracts, and the
Company's minimum annual rental commitments for office space, equipment and
transponder service agreements under noncancellable operating leases as of
December 31, 2001 (in millions):
Professional
Programming Sports Operating
Agreements Contracts Leases Total
-------------- --------------- ----------- ---------
2002..................................... $95.4 $122.5 $98.6 $316.5
2003..................................... 82.6 108.8 78.0 269.4
2004..................................... 84.0 84.5 68.8 237.3
2005..................................... 82.6 50.8 54.3 187.7
2006..................................... 85.8 28.7 39.6 154.1
Thereafter............................... 413.6 8.0 148.6 570.2
- 70 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
The following table summarizes the Company's rental expense charged to
operations (in millions):
Year Ended December 31,
2001 2000 1999
-------- -------- --------
Rental expense............................................................. $120.9 $97.6 $88.5
Contingencies
The Company and the owners of the 34% interest in Comcast Spectacor that
the Company does not own (the "Minority Group") each have the right to
initiate an "exit" process under which the fair market value of Comcast
Spectacor would be determined by appraisal. Following such determination,
the Company would have the option to acquire the interests in Comcast
Spectacor owned by the Minority Group based on the appraised fair market
value. In the event the Company did not exercise this option, the Company
and the Minority Group would then be required to use their best efforts to
sell Comcast Spectacor.
The Walt Disney Company ("Disney"), in certain circumstances, is entitled
to cause Comcast Entertainment Holdings LLC ("Entertainment Holdings"),
which is owned 50.1% by the Company and 49.9% by Disney, to purchase
Disney's entire interest in Entertainment Holdings at its then fair market
value (as determined by an appraisal process). If Entertainment Holdings
elects not to purchase Disney's interests, Disney has the right, at its
option, to purchase either the Company's entire interest in Entertainment
Holdings or all of the shares of stock of E! Entertainment held by
Entertainment Holdings in each case at fair market value. In the event that
Disney exercises its rights, as described above, a portion or all of the
Disney Notes (see Note 7) may be replaced with a three year note due to
Disney.
Liberty Media Group ("Liberty") may, at certain times, trigger the exercise
of certain exit rights with respect to its investment in QVC. If Liberty
Media triggers its exit rights, the Company has first right to purchase the
stock in QVC held by Liberty at Liberty's pro rata portion of the fair
market value (on a going concern or liquidation basis, whichever is higher,
as determined by an appraisal process) of QVC. The Company may pay Liberty
for such stock, subject to certain rights of Liberty to consummate the
purchase in the most tax-efficient method available, in cash, the Company's
promissory note maturing not more than three years after issuance, the
Company's equity securities or any combination thereof. If the Company
elects not to purchase the stock of QVC held by Liberty, then Liberty will
have a similar right to purchase the stock of QVC held by the Company. If
Liberty elects not to purchase the stock of QVC held by the Company, then
Liberty and the Company will use their best efforts to sell QVC.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to such actions is not expected to
materially affect the financial condition, results of operations or
liquidity of the Company.
In connection with a license awarded to an affiliate, the Company is
contingently liable in the event of nonperformance by the affiliate to
reimburse a bank which has provided a performance guarantee. The amount of
the performance guarantee is approximately $200 million; however the
Company's current estimate of the amount of expenditures (principally in
the form of capital expenditures) that will be made by the affiliate
necessary to comply with the performance requirements will not exceed $75
million.
- 71 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Continued)
12. FINANCIAL DATA BY BUSINESS SEGMENT
The following represents the Company's significant business segments,
"Cable" and "Commerce." The Company's regional sports programming networks,
which derive a substantial portion of their revenues from the Company's
cable operations, were previously included in "Other." In 2001, as a result
of a change in the Company's internal reporting structure, the Company's
regional sports programming networks are now included in the Company's
Cable segment for all periods presented (see Note 1). The components of net
income (loss) below operating income (loss) are not separately evaluated by
the Company's management on a segment basis (dollars in millions).
Corporate
Cable Commerce and Other(1) Total
-------------- ------------ ------------ -----------
2001
Revenues (2).................................................... $5,130.7 $3,917.3 626.2 $9,674.2
Operating income (loss) before depreciation and amortization (3) 2,054.1 722.3 (74.6) 2,701.8
Depreciation and amortization................................... 3,043.6 143.3 261.1 3,448.0
Operating income (loss)......................................... (989.5) 579.0 (335.7) (746.2)
Interest expense................................................ 546.4 25.9 159.5 731.8
Assets.......................................................... 29,084.6 2,680.5 6,366.7 38,131.8
Long-term debt.................................................. 8,363.2 62.7 3,315.7 11,741.6
Capital expenditures............................................ 1,855.3 142.9 183.5 2,181.7
2000
Revenues (2).................................................... $4,208.5 $3,535.9 $474.2 $8,218.6
Operating income (loss) before depreciation and amortization (3) 1,903.4 619.2 (52.3) 2,470.3
Depreciation and amortization................................... 2,419.5 125.9 85.9 2,631.3
Operating income (loss)......................................... (516.1) 493.3 (138.2) (161.0)
Interest expense................................................ 515.9 34.9 140.6 691.4
Assets.......................................................... 25,763.9 2,503.0 7,477.6 35,744.5
Long-term debt.................................................. 6,711.0 302.0 3,504.4 10,517.4
Capital expenditures............................................ 1,248.9 155.9 232.0 1,636.8
1999
Revenues (2).................................................... $2,969.9 $3,167.4 $391.9 $6,529.2
Operating income (loss) before depreciation and amortization (3) 1,358.0 538.8 (16.8) 1,880.0
Depreciation and amortization................................... 1,028.3 117.2 70.5 1,216.0
Operating income (loss)......................................... 329.7 421.6 (87.3) 664.0
Interest expense................................................ 353.5 39.6 145.2 538.3
Assets.......................................................... 10,863.6 2,243.6 15,578.4 28,685.6
Long-term debt.................................................. 4,735.5 476.7 3,495.0 8,707.2
Capital expenditures............................................ 739.9 80.1 73.8 893.8
- --------------
(1) Other includes segments not meeting certain quantitative guidelines for
reporting including the Company's content (see Note 1) and business
communications operations, as well as elimination entries related to the
segments presented. Corporate and other assets consist primarily of the
Company's investments (see Note 6).
(2) Revenues include $508.1 million, $458.4 million and $448.2 million in 2001,
2000 and 1999, respectively, of non-US revenues, principally related to the
Company's Commerce segment. No single customer accounted for a significant
amount of the Company's revenues in any period.
(3) Operating income (loss) before depreciation and amortization is commonly
referred to in the Company's businesses as "operating cash flow (deficit)."
Operating cash flow is a measure of a company's ability to generate cash to
service its obligations, including debt service obligations, and to finance
capital and other expenditures. In part due to the capital intensive nature
of the Company's businesses and the resulting significant level of non-cash
depreciation and amortization expense, operating cash flow is frequently
used as one of the bases for comparing businesses in the Company's
industries, although the Company's measure of operating cash flow may not
be comparable to similarly titled measures of other companies. Operating
cash flow is the primary basis used by the Company's management to measure
the operating performance of its businesses. Operating cash flow does not
purport to represent net income or net cash
- 72 -
COMCAST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Concluded)
provided by operating activities, as those terms are defined under
generally accepted accounting principles, and should not be considered as
an alternative to such measurements as an indicator of the Company's
performance.
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
--------- --------- --------- ------------ ---------
(Dollars in millions, except per share data)
2001
Revenues.................................................. $2,196.1 $2,298.5 $2,355.5 $2,824.1 $9,674.2
Operating loss............................................ (100.5) (133.3) (178.2) (334.2) (746.2)
Income (loss) before extraordinary items and cumulative
effect of accounting change.......................... 616.7 36.7 (106.8) (321.0) 225.6
Basic earnings (loss) for common
stockholders per common share
Income (loss) before extraordinary items and cumulative
effect of accounting change.......................... 0.65 0.04 (0.11) (0.34) 0.24
Net income (loss)....................................... 1.06 0.04 (0.11) (0.34) 0.64
Diluted earnings (loss) for common
stockholders per common share
Income (loss) before extraordinary items and cumulative
effect of accounting change.......................... 0.64 0.04 (0.11) (0.34) 0.23
Net income (loss)....................................... 1.04 0.04 (0.11) (0.34) 0.63
Operating income before depreciation and amortization (1). 640.9 700.4 705.8 654.7 2,701.8
2000
Revenues.................................................. $1,938.9 $1,912.1 $1,960.0 $2,407.6 $8,218.6
Operating income (loss)................................... 41.2 (31.6) (56.4) (114.2) (161.0)
Income (loss) before extraordinary items.................. (186.4) 198.8 1,249.1 783.6 2,045.1
Basic earnings (loss) for common
stockholders per common share
Income (loss) before extraordinary items.................. (0.23) 0.21 1.37 0.87 2.27
Net income (loss)....................................... (0.24) 0.20 1.37 0.86 2.24
Diluted earnings (loss) for common
stockholders per common share
Income (loss) before extraordinary items.................. (0.23) 0.20 1.29 0.81 2.16
Net income (loss)....................................... (0.24) 0.19 1.29 0.80 2.13
Operating income before depreciation and amortization (1). 586.9 602.8 605.7 674.9 2,470.3
- --------------
(1) See Note 12, note 3.
- 73 -
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Except for the information regarding executive officers required by Item
401 of Regulation S-K, which is included in Part I of this Annual Report on Form
10-K as Item 4A in accordance with General Instruction G(3), the following
required information is incorporated by reference to our definitive Proxy
Statement for our Annual Meeting of Shareholders presently scheduled to be held
in June 2002:
Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management
Item 13 Certain Relationships and Related Transactions
We will file our definitive Proxy Statement for our Annual Meeting of
Shareholders with the Securities and Exchange Commission on or before April 30,
2002.
- 74 -
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following consolidated financial statements of ours are included in
Part II, Item 8:
Independent Auditors' Report...................................38
Consolidated Balance Sheet--December 31, 2001 and 2000.........39
Consolidated Statement of Operations--Years
Ended December 31, 2001, 2000 and 1999.......................40
Consolidated Statement of Cash Flows--Years
Ended December 31, 2001, 2000 and 1999.......................41
Consolidated Statement of Stockholders' Equity--
Years Ended December 31, 2001, 2000 and 1999.................42
Notes to Consolidated Financial Statements.....................43
(b) (i) The following financial statement schedules required to be
filed by Items 8 and 14(d) of Form 10-K are included in Part IV:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable,
not required or the required information is included in the
consolidated financial statements or notes thereto.
(c) Reports on Form 8-K:
(i) We filed a Current Report on Form 8-K under Item 5 and 7(c) on
December 20, 2001 relating to our announcement that we had entered
into an Agreement and Plan of Merger with AT&T Corp. pursuant to
which we agreed to a transaction which will result in the
combination of Comcast Corporation and AT&T Broadband, a holding
company of AT&T's broadband business.
(d) Exhibits required to be filed by Item 601 of Regulation S-K:
2.1 Agreement and Plan of Merger dated as of December 19, 2001
by and among AT&T Corp., AT&T Broadband Corp., Comcast
Corporation, AT&T Broadband Acquisition Corp., Comcast
Acquisition Corp. and AT&T Comcast Corporation
(incorporated by reference to Exhibit 2.1 to our Current
Report on Form 8-K filed on December 20, 2001).
3.1(a) Amended and Restated Articles of Incorporation filed on
July 24, 1990 (incorporated by reference to Exhibit 3.1(a)
to our Annual Report on Form 10-K for the year ended
December 31, 1995).
3.1(b) Amendment to Restated Articles of Incorporation filed on
July 14, 1994 (incorporated by reference to Exhibit 3.1(b)
to our Annual Report on Form 10-K for the year ended
December 31, 1995).
3.1(c) Amendment to Restated Articles of Incorporation filed on
July 12, 1995 (incorporated by reference to Exhibit 3.1(c)
to our Annual Report on Form 10-K for the year ended
December 31, 1995).
3.1(d) Amendment to Restated Articles of Incorporation filed on
June 24, 1996 (incorporated by reference to Exhibit 4.1(d)
to our Registration Statement on Form S-3, as amended,
filed on July 16, 1996).
3.1(e) Form of Statement of Designations, Preferences and Rights
of Series B Convertible Preferred Stock of the Company
(incorporated by reference to Exhibit 3.1 to our Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997).
3.1(f) Amendment to Restated Articles of Incorporation
(incorporated by reference to Exhibit 3.1(f) to our Annual
Report on Form 10-K for the year ended December 31, 2000).
- 75 -
3.2 Amended and Restated By-Laws (incorporated by reference to
Exhibit 3.1 to our Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999).
4.1 Specimen Class A Common Stock Certificate (incorporated by
reference to Exhibit 2(a) to our Registration Statement on
Form S-7 filed on September 17, 1980).
4.2 Specimen Class A Special Common Stock Certificate
(incorporated by reference to Exhibit 4(2) to our Annual
Report on Form 10-K for the year ended December 31, 1986).
4.3 Indenture, dated as of October 17, 1991, between the
Company and Bank of Montreal/Harris Trust (successor to
Morgan Guaranty Trust Company of New York), as Trustee
(incorporated by reference to Exhibit 2 to our Current
Report on Form 8-K filed on October 31, 1991).
4.4 Form of Debenture relating to our $300,000,000 10-5/8%
Senior Subordinated Debentures due 2012 (incorporated by
reference to Exhibit 4(17) to our Annual Report on Form
10-K for the year ended December 31, 1992).
4.5 Form of Debenture relating to our $1,477,750,000 Principal
Amount at Maturity of Zero Coupon Convertible Debentures
due 2020 (incorporated by reference to Exhibit 4.7 to our
Annual Report on Form 10-K for the year ended December 31,
2000).
10.1* Comcast Corporation 1987 Stock Option Plan, as amended and
restated, effective December 15, 1998 (incorporated by
reference to Exhibit 10.2 to our Annual Report on Form 10-K
for the year ended December 31, 1998).
10.2* Comcast Corporation 1996 Stock Option Plan, as amended and
restated, effective June 5, 2001 (incorporated by reference
to Exhibit 10.1 to our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001).
10.3* Comcast Corporation 1996 Deferred Compensation Plan, as
amended and restated, effective December 19, 2000
(incorporated by reference to Exhibit 10.4 to our Annual
Report on Form 10-K for the year ended December 31, 2000).
10.4* Comcast Corporation 1990 Restricted Stock Plan, as amended
and restated, effective June 21, 1999 (incorporated by
reference to Exhibit 10.3 to our Quarterly Report on Form
10-Q for the quarter ended June 30, 1999).
10.5* 1992 Executive Split Dollar Insurance Plan (incorporated by
reference to Exhibit 10(12) to our Annual Report on Form
10-K for the year ended December 31, 1992).
10.6* Comcast Corporation 1996 Cash Bonus Plan, as amended and
restated, effective December 19, 2000 (incorporated by
reference to Exhibit 10.7 to our Annual Report on Form 10-K
for the year ended December 31, 2000).
10.7* Comcast Corporation 1996 Executive Cash Bonus Plan, as
amended through October 1, 2001.
10.8* Compensation and Deferred Compensation Agreement by and
between Comcast Corporation and Ralph J. Roberts, as
amended and restated effective June 5, 2001.
10.9* Compensation Agreement by and between Comcast Corporation
and Brian L. Roberts (incorporated by reference to Exhibit
10.1 to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000).
10.10* Comcast Corporation Supplemental Executive Retirement Plan,
as amended and restated effective June 5, 2001.
10.11 The Comcast Corporation Retirement-Investment Plan, as
amended and restated (incorporated by reference to Exhibit
10.3 to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000).
10.12 Defined Contribution Plans Master Trust Agreement, between
Comcast Corporation and State Street Bank and Trust Company
(incorporated by reference to Exhibit 10.2 to our
Registration Statement on Form S-8 filed on October 5,
1995).
- ----------
* Constitutes a management contract or compensatory plan or arrangement.
- 76 -
10.13 Tax Sharing Agreement, dated as of December 2, 1992, among
Storer Communications, Inc., TKR Cable I, Inc., TKR Cable
II, Inc., TKR Cable III, Inc., AT&T Corp. (as successor to
Tele-Communications, Inc.), the Company and each of the
Departing Subsidiaries that are signatories thereto
(incorporated by reference to Exhibit 4 to our Current
Report on Form 8-K filed on December 17, 1992, as amended
by Form 8 filed January 8, 1993).
10.14* Comcast Corporation 1997 Deferred Stock Option Plan, as
amended and restated, effective November 29, 2001
(incorporated by reference to Exhibit 4.1 to our
Registration Statement on Form S-8 filed on January 22,
2002).
10.15 Amended and Restated Stockholders Agreement, dated as of
February 9, 1995, among the Company, Comcast QVC, Inc., QVC
Programming Holdings, Inc., Liberty Media Corporation, QVC
Investment, Inc. and Liberty QVC, Inc. (incorporated by
reference to Exhibit 10.5 to our Quarterly Report on Form
10-Q for the quarter ended March 31, 1995).
10.16 Indenture dated as of May 1, 1997, between Comcast Cable
Communications, Inc. and The Bank of New York (as successor
in interest to Bank of Montreal Trust Company), as Trustee,
in respect of Comcast Cable Communications, Inc.'s 8-1/8%
Notes due 2004, 8-3/8% Notes due 2007, 8-7/8% Notes due
2017, 8-1/2% Notes due 2027, 6.20% Notes due 2008, 6.375%
Notes due 2006, 6.75% Notes due 2011, 6.875% Notes due 2009
and 7.125% Notes due 2013 (incorporated by reference to
Exhibit 4.1(a) to the Registration Statement on Form S-4 of
Comcast Cable Communications, Inc.).
10.17 Purchase and Sale Agreement dated as of January 19, 1999
among SBC Communications Inc., Comcast Cellular Holdings
Corporation, Comcast Financial Corporation and Comcast
Corporation (incorporated by reference to Exhibit 10.34 to
our Annual Report on Form 10-K for the year ended December
31, 1998).
10.18 Agreement and Plan of Merger, dated as of November 16,
1999, by and among Comcast Corporation, Comcast LCI
Holdings, Inc., a wholly owned subsidiary of Comcast,
Lenfest Communications, Inc. ("Lenfest") and Lenfest's
stockholders as named therein. (incorporated by reference
to Exhibit 10.1 to our Current Report on Form 8-K filed on
December 13, 1999).
10.19 Asset Exchange Agreement, dated as of August 11, 2000,
among AT&T Corp. and Comcast Corporation (incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form
10-Q for the quarter ended September 30, 2000).
10.20 Agreement and Plan of Reorganization, dated as of August
11, 2000, among Comcast Corporation, Comcast Cable
Communications, Inc., Comcast CCCI II, LLC, Comcast
Teleport, Inc., Comcast Heritage, Inc., Comcast
Communications Properties, Inc., and AT&T Corp
(incorporated by reference to Exhibit 10.2 to our Quarterly
Report on Form 10-Q for the quarter ended September 30,
2000).
10.21 Five-Year Revolving Credit Agreement, dated as of August
24, 2000, among Comcast Cable Communications, Inc. and the
Financial Institutions Party Hereto, Banc of America
Securities LLC and Chase Securities Inc., as Joint Lead
Arrangers and Joint Book Managers, BNY Capital Markets,
Inc. and Salomon Smith Barney Inc., as Co-Arrangers, Bank
of America, N.A., as Administrative Agent, Swing Line
Lender and Letter of Credit Issuing Lender, Chase
Securities Inc., as Syndication Agent and Citibank, N.A.
and The Bank of New York, as Co- Documentation Agents
(incorporated by reference to Exhibit 10.4 to the Comcast
Cable Communications, Inc. Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000).
10.22 364-Day Revolving Credit Agreement, dated as of July 17,
2001, among Comcast Cable Communications, Inc. and the
Financial Institutions Party Hereto, Banc of America
Securities LLC and Chase Securities Inc., as Joint Lead
Arrangers and Joint Book Managers, BNY Capital Markets,
Inc. and Salomon Smith Barney Inc., as Co-Arrangers, Bank
of America, N.A., as Administrative Agent, Chase Securities
Inc., as Syndication Agent and Citibank, N.A. and The Bank
of New York, as Co-Documentation Agents.
- ----------
* Constitutes a management contract or compensatory plan or arrangement.
- 77 -
10.23 Asset Exchange Closing Agreement dated as of January 1,
2001 among Comcast Corporation, the Comcast Parties,
Adelphia Communications Corporation and the Adelphia
Parties (incorporated by reference to Exhibit 10.24 to our
Annual Report on Form 10-K for the year ended December 31,
2000).
21 List of Subsidiaries.
23.1 Consent of Deloitte & Touche LLP.
- 78 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in Philadelphia,
Pennsylvania on March 29, 2002.
Comcast Corporation
By: /s/ Brian L. Roberts
-------------------------
Brian L. Roberts
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Ralph J. Roberts Chairman of the Board of Directors; Director March 29, 2002
- -----------------------------
Ralph J. Roberts
/s/ Julian A. Brodsky Vice Chairman of the Board of Directors; March 29, 2002
- ----------------------------- Director
Julian A. Brodsky
/s/ Brian L. Roberts President; Director (Principal Executive March 29, 2002
- ----------------------------- Officer)
Brian L. Roberts
/s/ John R. Alchin Executive Vice President, Treasurer March 29, 2002
- ----------------------------- (Principal Financial Officer)
John R. Alchin
/s/ Lawrence J. Salva Senior Vice President March 29, 2002
- ----------------------------- (Principal Accounting Officer)
Lawrence J. Salva
/s/ Decker Anstrom Director March 29, 2002
- -----------------------------
Decker Anstrom
/s/ Sheldon M. Bonovitz Director March 29, 2002
- -----------------------------
Sheldon M. Bonovitz
/s/ Joseph L. Castle II Director March 29, 2002
- -----------------------------
Joseph L. Castle II
/s/ Felix G. Rohatyn Director March 29, 2002
- -----------------------------
Felix G. Rohatyn
/s/ Bernard C. Watson Director March 29, 2002
- -----------------------------
Bernard C. Watson
/s/ Irving A. Wechsler Director March 29, 2002
- -----------------------------
Irving A. Wechsler
/s/ Anne Wexler Director March 29, 2002
- -----------------------------
Anne Wexler
-79-
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Comcast Corporation
Philadelphia, Pennsylvania
Our audits of the financial statements referred to in our report dated February
5, 2002 (which report expresses an unqualified opinion and includes an
explanatory paragraph related to the adoption of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, effective January 1, 2001) appearing in the Annual
Report on Form 10-K of Comcast Corporation (the "Company") for the year ended
December 31, 2001 also included the financial statement schedule of the Company,
listed in Item 14(b)(i). This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 5, 2002
- 80 -
COMCAST CORPORATION AND SUBSIDIARIES
------------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
--------------------------------------------
(In millions)
Additions
Balance at Charged to Deductions Balance
Beginning Costs and from at End
of Year Expenses Reserves(A) of Year
---------- ---------- ----------- --------
Allowance for Doubtful Accounts
2001 $141.7 $86.3 $74.1 $153.9
2000 136.6 65.9 60.8 141.7
1999 120.7 48.6 32.7 136.6
Allowance for Excess and Obsolete
Electronic Retailing Inventories
2001 $105.5 $55.1 $46.3 $114.3
2000 89.2 46.3 30.0 105.5
1999 60.9 61.9 33.6 89.2
(A) Uncollectible accounts and excess and obsolete inventory written off.
- 81 -
COMCAST CORPORATION
1996 EXECUTIVE CASH BONUS PLAN
(as amended through October 1, 2001)
1. PURPOSE
The purpose of the Plan is to provide, subject to shareholder approval
and approval by the Committee (as defined below), performance-based cash bonus
compensation for certain employees of Comcast Corporation, a Pennsylvania
corporation (the "Company") in accordance with a formula that is based on the
financial success of the Company as part of an integrated compensation program
which is intended to assist the Company in motivating and retaining employees of
superior ability, industry and loyalty.
2. DEFINITIONS
The following words and phrases as used herein shall have the following
meanings, unless a different meaning is plainly required by the context:
"Board of Directors" shall mean the Board of Directors of the Company.
"Cash Flow" shall mean the operating income before depreciation and
amortization for the Company and those of its affiliates which are included with
the Company in its consolidated financial statements as prepared by the Company
in accordance with generally accepted accounting principles.
"Committee" shall mean the Subcommittee on Performance-Based
Compensation of the Compensation Committee of the Board of Directors.
"Company" shall mean Comcast Corporation, a Pennsylvania corporation,
and any successor thereto.
"First Tier Goal" shall mean the performance goal, measured in terms of
level of Cash Flow, as established by the Committee for each Plan Year. The
First Tier Goal is the performance measure which, if achieved, permits payment
to each Participant of 66"% of the Participant's Target Bonus. The Committee
shall in all events establish the First Tier Goal for each Plan Year no later
than 90 days after the first day of the Plan Year or, if sooner, within the
first 25% of the Plan Year. The First Tier Goal shall be established at the
discretion of the Committee, provided, however, that the Committee must
determine that, as of the date the First Tier Goal is established, it is
substantially uncertain whether the level of Cash Flow required to meet the
First Tier Goal will be achieved.
"Participant" shall mean those persons eligible to participate in the
Plan in accordance with Section 3.
"Plan" shall mean the Comcast Corporation 1996 Executive Cash Bonus
Plan.
"Plan Year" shall mean the calendar year, except that the first Plan
Year shall be the period from July 1, 1996 through December 31, 1996.
"Second Tier Goal" shall mean the performance goal, measured in terms
of level of Cash Flow, as established by the Committee for each Plan Year. The
Second Tier Goal is the performance measure which, if achieved, permits payment
to each Participant of 100% of the Participant's Target Bonus. The Committee
shall establish the Second Tier Goal for each Plan Year at the same time that it
establishes the First Tier Goal for such Plan Year. The Second Tier Goal shall
be a level of Cash Flow chosen at the discretion of the Committee that is higher
than the level of Cash Flow chosen for the Plan Year as the First Tier Goal.
"Target Bonus" shall mean, with respect to any Participant for any Plan
Year, the sum of (a) the Target Percentage of the Participant's base salary and
any guaranteed bonus (other than any bonus awarded on account of the termination
as of December 31, 1993, of the Company's discretionary cash bonus plan) as of
the first day of the Plan Year and (b) the amount, if any, of such Participant's
Target Bonus for any prior Plan Year which was not earned due to failure to meet
the First Tier Goal or the Second Tier Goal; provided, however, that in no event
shall any Participant's Target Bonus for any Plan Year exceed $3,000,000.
"Target Percentage" shall mean, with respect to any Participant for any
Plan Year, a percentage, not to exceed 150%, established by the Committee with
respect to such Participant and such Plan Year. If no other percentage is
selected by the Committee, the Target Percentage shall be 50%.
3. PARTICIPATION
The Participants in the Plan shall be
(a) Brian L. Roberts, Lawrence S. Smith, John R. Alchin and Stanley
Wang;
(b) Effective for Plan Years beginning after 1999, Brian L. Roberts,
Lawrence S. Smith, John R. Alchin, Stanley Wang, Stephen B. Burke, Michael A.
Tallent, Bradley P. Dusto and David N. Watson;
(c) Effective for Plan Years beginning after 2000, Brian L. Roberts,
Lawrence S. Smith, John R. Alchin, Stanley Wang, Stephen B. Burke, Michael A.
Tallent, Bradley P. Dusto, David N. Watson, Arthur R. Block, Mark A. Coblitz and
Robert A. Pick; and
(d) Effective as of October 1, 2001, Terry S. Bienstock, provided that
the amount of Terry S. Bienstock's bonus payable under this Plan for the 2001
Plan Year, if any, shall be 25 percent of the amount it would have been if he
had been designated as a Participant in the Plan for the whole 2001 Plan Year;
and
(e) Effective for Plan Years beginning after 2003, Brian L. Roberts,
Lawrence S. Smith, John R. Alchin, Stanley Wang, Stephen B. Burke, Michael A.
Tallent, Bradley P. Dusto, David N. Watson, Arthur R. Block, Mark A. Coblitz,
Robert A. Pick, Lawrence J. Salva and Terry S. Bienstock.
In addition, Participants in the Plan shall include such other key executives as
may be designated by the Committee to participate in the Plan from time to time.
4. TERM OF PLAN
The original effective date of the Plan was July 1, 1996. Subject to
approval of the shareholders of the Company, the Plan shall continue until all
amounts required to be paid with respect to all Plan Years up through and
including the Plan Year ending December 31, 2006 are paid by the Company, unless
the Plan is sooner terminated by the Board of Directors.
5. BONUS ENTITLEMENT
Each Participant shall be entitled to receive a bonus in accordance
with the provisions of Section 6 of the Plan only after certification by the
Committee that the performance goals set forth in Section 6 have been satisfied.
The bonus payment under the Plan shall be paid to each Participant as soon as
practicable following the close of the Plan Year with respect to which the bonus
is to be paid. Notwithstanding anything contained herein to the contrary, no
bonus shall be payable under the Plan without the prior disclosure of the terms
of the Plan to the shareholders of the Company and the approval of the Plan by
such shareholders.
6. AMOUNT OF PERFORMANCE-BASED COMPENSATION BONUS
(a) Each Participant in the Plan shall be entitled to a bonus with
respect to a Plan Year which is equal to 66"% of the Participant's Target Bonus
if the Company's Cash Flow for the Plan Year is at least equal to the First Tier
Goal, and 100% of the Target Bonus if the Company's Cash Flow for the Plan Year
is at least equal to the Second Tier Goal. If the level of Cash Flow for the
Plan Year is higher than the First Tier Goal and lower than the Second Tier
Goal, the bonus with respect to such Plan Year shall be such percentage of the
Participant's Target Bonus in excess of 66"% as is determined by prorating the
difference between 100% and 66"% according to the level of Cash Flow in excess
of the First Tier Goal divided by the difference between the levels of Cash Flow
represented by the Second Tier Goal and the First Tier Goal. If the level of
Cash Flow for a Plan Year is below the First Tier Goal established with respect
to such Plan Year, no bonus shall be payable under the Plan for that Plan Year.
(b) In the event any payment of a bonus otherwise payable under the
Plan occurs more than two months after the close of the Plan Year with respect
to which the bonus is paid because the required disclosure of the terms of the
Plan to the shareholders of the Company and the approval of the Plan by such
shareholders delays such bonus payment, the amount of the bonus otherwise
payable shall be increased by the amount such bonus payment would earn if it
were invested in an investment bearing a 7% annual rate of return, compounded
daily, or such other reasonable rate of interest as may be determined by the
Committee, during the period from the close of the Plan Year with respect to
which such bonus is paid and the date the bonus is actually paid.
(c) Notwithstanding anything contained herein to the contrary, in the
event there is a significant acquisition or disposition of any assets, business
division, company or other business operations of the Company that is reasonably
expected to have an effect on Cash Flow as otherwise determined under the terms
of the Plan, the First Tier Goal and the Second Tier Goal shall be adjusted to
take into account the impact of such acquisition or disposition by increasing or
decreasing such goals in the same proportion as Cash Flow of the Company would
have been affected for the prior Plan Year on a pro forma basis had such an
acquisition or disposition occurred on the same date during the prior Plan Year
(except in the case of the first Plan Year the adjustment shall be made by
reference to the effect such an acquisition or disposition on the same date
during the prior calendar year would have had on Cash Flow for the period
commencing July 1, 1995 and ending December 31, 1995). Such adjustment shall be
based upon the historical equivalent of Cash Flow of the assets so acquired or
disposed of for the prior Plan Year, as shown by such records as are available
to the Company, as further adjusted to reflect any aspects of the transaction
that should be taken into account to ensure comparability between amounts in the
prior Plan Year and the current Plan Year.
(d) Notwithstanding the determination of the amount of a Participant's
bonus payable with respect to any Plan Year under Section 6(a), the Committee
shall have the discretion to reduce or eliminate the bonus otherwise payable to
a Participant if it determines that such a reduction or elimination of the bonus
is in the best interests of the Company.
7. COMMITTEE
(a) Powers. The Committee shall have the power and duty to do all
things necessary or convenient to effect the intent and purposes of the Plan and
not inconsistent with any of the provisions hereof, whether or not such powers
and duties are specifically set forth herein, and, by way of amplification and
not limitation of the foregoing, the Committee shall have the power to:
(i) provide rules and regulations for the management, operation
and administration of the Plan, and, from time to time, to amend or supplement
such rules and regulations;
(ii) construe the Plan, which construction, as long as made in
good faith, shall be final and conclusive upon all parties hereto; and
(iii) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan in such manner and to such extent as it shall deem
expedient to carry the same into effect, and it shall be the sole and final
judge of when such action shall be appropriate.
The resolution of any questions with respect to payments and
entitlements pursuant to the provisions of the Plan shall be determined by the
Committee, and all such determinations shall be final and conclusive.
(b) Indemnity. No member of the Committee shall be directly or
indirectly responsible or under any liability by reason of any action or default
by him as a member of the Committee, or the exercise of or failure to exercise
any power or discretion as such member. No member of the Committee shall be
liable in any way for the acts or defaults of any other member of the Committee,
or any of its advisors, agents or representatives. The Company shall indemnify
and save harmless each member of the Committee against any and all expenses and
liabilities arising out of his own membership on the Committee.
(c) Compensation and Expenses. Members of the Committee shall receive
no separate compensation for services other than compensation for their services
as members of the Board of Directors, which compensation can include
compensation for services at any committee meeting attended in their capacity as
members of the Board of Directors. Members of the Committee shall be entitled to
receive their reasonable expenses incurred in administering the Plan. Any such
expenses, as well as extraordinary expenses authorized by the Company, shall be
paid by the Company.
(d) Participant Information. The Company shall furnish to the Committee
in writing all information the Company deems appropriate for the Committee to
exercise its powers and duties in administration of the Plan. Such information
shall be conclusive for all purposes of the Plan and the Committee shall be
entitled to rely thereon without any investigation thereof; provided, however,
that the Committee may correct any errors discovered in any such information.
(e) Inspection of Documents. The Committee shall make available to each
Participant, for examination at the principal office of the Company (or at such
other location as may be determined by the Committee), a copy of the Plan and
such of its records, or copies thereof, as may pertain to any benefits of such
Participant under the Plan.
8. TERMINATION AND AMENDMENT
The Plan may be terminated or revoked by the Company at any time and
amended by the Company from time to time, provided that neither the termination,
revocation or amendment of the Plan may, without the written approval of the
Participant, reduce the amount of a bonus payment that is due, but has not yet
been paid, and provided further that no changes that would increase the amount
of bonuses determined under provisions of the Plan shall be effective without
approval by the Committee and without disclosure to and approval by the
shareholders of the Company in a separate vote prior to payment of such bonuses.
In addition, the Plan may be modified or amended by the Committee, as it deems
appropriate, in order to comply with any rules, regulations or other guidance
promulgated by the Internal Revenue Service with respect to applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), as
they relate to the exemption for "performance-based compensation" under the
limitations on the deductibility of compensation imposed under Code Section
162(m).
9. MISCELLANEOUS PROVISIONS
(a) Unsecured Creditor Status. A Participant entitled to a bonus
payment hereunder, shall rely solely upon the unsecured promise of the Company,
as set forth herein, for the payment thereof, and nothing herein contained shall
be construed to give to or vest in a Participant or any other person now or at
any time in the future, any right, title, interest, or claim in or to any
specific asset, fund, reserve, account, insurance or annuity policy or contract,
or other property of any kind whatever owned by the Company, or in which the
Company may have any right, title, or interest, nor or at any time in the
future.
(b) Other Company Plans. It is agreed and understood that any benefits
under this Plan are in addition to any and all benefits to which a Participant
may otherwise be entitled under any other contract, arrangement, or voluntary
pension, profit sharing or other compensation plan of the Company, whether
funded or unfunded, and that this Plan shall not affect or impair the rights or
obligations of the Company or a Participant under any other such contract,
arrangement, or voluntary pension, profit sharing or other compensation plan.
(c) Separability. If any term or condition of the Plan shall be invalid
or unenforceable to any extent or in any application, then the remainder of the
Plan, with the exception of such invalid or unenforceable provision, shall not
be affected thereby, and shall continue in effect and application to its fullest
extent.
(d) Continued Employment. Neither the establishment of the Plan, any
provisions of the Plan, nor any action of the Committee shall be held or
construed to confer upon any Participant the right to a continuation of
employment by the Company. The Company reserves the right to dismiss any
employee (including a Participant), or otherwise deal with any employee
(including a Participant) to the same extent as though the Plan had not been
adopted.
(e) Incapacity. If the Committee determines that a Participant is
unable to care for his affairs because of illness or accident, any benefit due
such Participant under the Plan may be paid to his spouse, child, parent, or any
other person deemed by the Committee to have incurred expense for such
Participant (including a duly appointed guardian, committee, or other legal
representative), and any such payment shall be a complete discharge of the
Company's obligation hereunder.
(g) Jurisdiction. The Plan shall be construed, administered, and
enforced according to the laws of the Commonwealth of Pennsylvania, except to
the extent that such laws are preempted by the Federal laws of the United States
of America.
(h) Withholding. The Participant shall make appropriate arrangements
with the Company for satisfaction of any federal, state or local income tax
withholding requirements and Social Security or other tax requirements
applicable to the accrual or payment of benefits under the Plan. If no other
arrangements are made, the Company may provide, at its discretion, for any
withholding and tax payments as may be required.
Executed as of the 1st day of October, 2001.
COMCAST CORPORATION
BY:/s/ Stanley Wang
------------------------------
ATTEST: /s/ Arthur Block
--------------------------
AMENDMENT TO COMPENSATION
AND DEFERRED COMPENSATION AGREEMENT BETWEEN
COMCAST CORPORATION AND RALPH J. ROBERTS
----------------------------------------
This Amendment is made as of this 5th day of June, 2001, by and between
COMCAST CORPORATION, a Pennsylvania corporation (the "Company") and RALPH J.
ROBERTS ("Roberts").
RECITALS
--------
WHEREAS, Roberts and the Company entered into an amended and restated
Compensation and Deferred Compensation Agreement effective August 31, 1998 (the
"Agreement"); and
WHEREAS, Roberts and the Company amended the Agreement by Amendment
Agreement dated as of August 19, 1999 (the Agreement as thus amended being
referred to herein as the "Amended Agreement"); and
WHEREAS, the Company's board of directors desires to further modify the
provisions of the Amended Agreement concerning the beneficiaries of Roberts who
would be entitled to receive certain benefits pursuant to the Amended Agreement
in the event of Roberts' death; and
WHEREAS, Roberts is agreeable to accepting the Company's proposed
modifications to the Amended Agreement;
NOW THEREFORE, in consideration of the foregoing and of the provisions
set forth herein, the parties agree as follows:
1. Section 3.9 of the Amended Agreement is modified as follows:
(a) All references to the SERP (as therein defined) shall be
deemed refer to the SERP as amended and restated through the date hereof; and
-1-
(b) The last sentence of Section 3.9 is replaced with the
following new sentence:
"In the event Roberts dies while a consultant for the Company: (i)
Roberts' Designated Beneficiary (as defined in Section 7.2 (c)(1)
of the SERP) shall be entitled to receive an annual death benefit
equal to one hundred percent (100%) of the annual pension Roberts
was receiving immediately prior to his death for a period equal to
the greater of (A) the life of Roberts' Spouse (as defined in the
SERP) or (B) five (5) years; and (ii) for purposes of Sections 7.2
and 7.4 of the SERP (relating to the payment of benefits to
Roberts' Designated Beneficiary), Roberts' death shall be treated
as having occurred before the commencement of his Normal
Retirement Pension (as defined in the SERP) while employed by the
Company."
2. Paragraph (a) of Section 3.11 of the Amended Agreement is replaced
with the following new paragraph (a):
"(a) Death Benefit. In addition to the other
payments provided or referred to herein, in the event of Roberts'
death during the term of this Agreement or thereafter the Company
shall pay a supplemental death benefit (the "Death Benefit") as
calculated herein to Roberts' beneficiary within six (6) months
following Roberts' date of death. As used in this Section 3.11,
"Roberts' beneficiary" shall be such one or more individuals,
trusts or other entities (including but not limited to
organizations which are described in Section 501(c)(3) of the
-2-
Internal Revenue Code of 1986, as amended) as Roberts shall
designate in a writing delivered to the Company prior to his death
for that purpose and, if Roberts designates more than one
beneficiary, then the Death Benefit shall be paid among them in
such manner as Roberts specifies or, in the absence of such
specification, then in equal parts; however, to the extent Roberts
fails to so designate a beneficiary of the Death Benefit who
survives him, then the Death Benefit shall be paid to Roberts'
personal representatives. Any beneficiary designation may be
amended or revoked at any time prior to Roberts' death by filing a
new beneficiary designation with the Company."
3. Paragraph (b) of Section 3.11 of the Amended Agreement is modified
by replacing the phrase "Roberts' personal representatives" wherever it appears
with the phrase "Roberts' beneficiary".
4. Paragraph (g) of Section 3.11 of the Amended Agreement is modified
by adding the following sentence at the end thereof:
"The Company shall furnish to Roberts' beneficiary copies of all
written reports and information provided to Roberts' personal
representatives pursuant to this paragraph (g) following Roberts'
death."
5. Section 5.1 of the Amended Agreement is replaced with the following
new Section 5.1:
"5.1 If during the Service Period Roberts' services
as an executive or a consultant shall be terminated by reason of
his death, the Company shall continue to pay to Roberts'
beneficiary Roberts' then Base Payment, on a monthly basis for a
period of five (5) years. As used in this Section 5, "Roberts'
-3-
beneficiary" shall be such one or more individuals, trusts or
other entities (including but not limited to organizations which
are described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended) as Roberts shall designate in a writing
delivered to the Company prior to his death for that purpose and,
if Roberts designates more than one beneficiary, then the said
Base Payment shall be paid among them in such manner as Roberts
specifies or, in the absence of such specification, then in equal
parts; however, to the extent Roberts fails to so designate a
beneficiary who survives him, then the said Base Payment shall be
paid to Roberts' personal representatives. Any beneficiary
designation may be amended or revoked at any time prior to
Roberts' death by filing a new beneficiary designation with the
Company. This death benefit shall be in addition to (x) the
Company's obligation to provide to Roberts' spouse during her
lifetime all health plan benefits which are available from time to
time to the Company's highest paid employee, and (y) any other
payments Roberts' spouse, beneficiaries or estate may be entitled
to receive pursuant to this Agreement (including, but not limited
to, Roberts' Cash Bonus with respect to any period then ended
which would have accrued to him on the basis of the Company's
performance but which has not yet been paid (the "Accrued Cash
Bonus") and the Death Benefit provided in Section 3.11), as well
as under any Deferred Compensation Arrangements, Split-Dollar
Arrangements or any other pension or employee benefit plans
(collectively these arrangements and plans shall be referred to
herein as the "Benefit Plans"). In the event of Roberts' death the
-4-
Accrued Cash Bonus shall be paid to Roberts' beneficiary
determined pursuant to this Section 5.1."
6. The third sentence of Section 5.2 of the Amended Agreement, which
begins in line 9 of that Section, is replaced with the following new sentence:
"In the event Roberts dies before the end of the five (5) year
payment period: (i) Roberts' beneficiary shall be entitled to
receive the remaining payments for the period as a death benefit;
and (ii) all benefits described in the second-to-last sentence of
Section 5.1 shall be paid as if Roberts' services had been
terminated by reason of his death."
7. Section 5.4 (ii) of the Amended Agreement is modified by replacing
clause (x) thereof with the following new clause (x):
"(x) should Roberts die before the end of the Service Period,
Roberts' beneficiary shall be entitled to the death benefit
provided in Section 5.1 hereof, and all benefits described in the
second-to-last sentence of Section 5.1 shall be paid as if
Roberts' services had been terminated by reason of his death;".
8. Notwithstanding any other provision of the Amended Agreement (as
herein amended) to the contrary, unless Roberts affirmatively has elected, in
writing, filed with the Company, to waive the application of this provision:
(a) The Company shall withhold and defer payment until the "Death
Tax Clearance Date" (as hereinafter defined) of any benefit otherwise payable as
a result of Roberts' death (i) to Roberts' beneficiary under Section 3.11, (ii)
to Roberts' beneficiary under Section 5, or (iii) to Roberts' Designated
Beneficiary under the SERP (as modified by Section 3.9) (all such death benefits
-5-
being referred to herein collectively as the "Benefits" and individually as a
"Benefit").
(b) The Company shall pay to Roberts' personal representatives
from any one or more of the Benefits of a beneficiary such amount as Roberts'
personal representatives shall certify to the Company as being necessary to pay
the Death Taxes apportioned against all Benefits of such beneficiary.
(c) To the extent any payment made pursuant to paragraph (b) above
causes the recognition of income to a beneficiary, the Company shall pay to the
beneficiary from any one or more Benefits of such beneficiary, within thirty
(30) days of such beneficiary's request, the amount necessary to enable such
beneficiary to pay the beneficiary's income tax liability resulting from such
recognition of income; additionally, the Company shall pay to such beneficiary
from any one or more Benefits of such beneficiary, within thirty (30) days of
such beneficiary's request, such additional amounts as are required to enable
such beneficiary to pay the beneficiary's income tax liability attributable to
such beneficiary's recognition of income resulting from a distribution pursuant
to this paragraph (c).
(d) All payments made pursuant to paragraphs (b) and (c) above
shall be charged against the earliest distribution of the Benefit to which the
beneficiary otherwise would be entitled. Within a reasonable time after the
Death Tax Clearance Date, the Company shall pay to each beneficiary the balance
of each Benefit of such beneficiary in accordance with the terms and conditions
which govern such Benefit.
-6-
(e) The Company may, in its discretion, accelerate the time of
payment of any part or all of any one or more Benefits of a beneficiary if
necessary to enable the Company to make the payments which are described in
paragraphs (b) and (c) above.
(f) As used herein, "Death Taxes" shall mean any and all estate,
inheritance, generation-skipping transfer, and other death taxes as well as any
interest and penalties thereon imposed by any governmental entity with respect
to the Benefits as a result of Roberts' death.
(g) As used herein, "Death Tax Clearance Date" shall mean the date
upon which Roberts' personal representatives certify to the Company that (i)
Roberts' Death Taxes have been finally determined, (ii) all of Roberts' Death
Taxes apportioned against all Benefits of a beneficiary as a result of Roberts'
death have been paid in full, and (iii) all potential liability for Death Taxes
with respect to all Benefits of a beneficiary as a result of Roberts' death has
been satisfied.
9. Except as amended hereby, the Amended Agreement remains in full
force and effect.
-7-
IN WITNESS WHEREOF, the parties have executed this Amendment on the
dates set forth below.
Attest: COMCAST CORPORATION
/s/ Arthur Block By: /s/ Stanley Wang June 5, 2001
- -------------------------- -----------------
Assistant Secretary Title: Executive Vice President
Witness:
/s/ Joan M. French /s/ Ralph J. Roberts June 5, 2001
- -------------------------- --------------------
Ralph J. Roberts
-8-
COMCAST CORPORATION
-------------------
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------------------------
(AS AMENDED AND RESTATED EFFECTIVE JUNE 5, 2001)
------------------------------------------------
COMCAST CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
PAGE
ARTICLE I - CONTINUATION OF PLAN AND PURPOSE...................................1
1.1 Continuation of Plan.........................................1
1.2 Purpose of Plan..............................................1
ARTICLE II - DEFINITIONS.......................................................1
2.1 "Affiliated Company".........................................1
2.2 "Board" ...................................................1
2.3 "Disability".................................................1
2.4 "Disability Pension".........................................1
2.5 "Early Retirement Date"......................................1
2.6 "Early Retirement Pension"...................................1
2.7 "Employer"...................................................1
2.8 "Final Average Compensation".................................1
2.9 "Normal Pension".............................................2
2.10 "Normal Retirement Date".....................................2
2.11 "Plan".......................................................2
2.12 "Retirement Benefit Reductions"..............................2
2.13 "Senior Executive"...........................................2
2.14 "Service"....................................................2
2.15 "Spouse" 2
2.16 "Termination of Employment"..................................2
ARTICLE III- NORMAL RETIREMENT PENSION.........................................2
ARTICLE IV - EARLY RETIREMENT PENSION..........................................3
4.1 Pension Amount...............................................3
4.2 Waiver of Actuarial Reduction................................3
4.3 Payment of Pension...........................................3
4.4 Deferral of Commencement.....................................3
ARTICLE V - DISABILITY PENSION.................................................3
ARTICLE VI - NO VESTING........................................................3
ARTICLE VII - DEATH............................................................4
7.1 Death Benefit before Normal Retirement.......................4
7.2 Death after Age 65...........................................4
7.3 Discretionary Death Benefit..................................5
7.4 Death after Benefit Commencement.............................5
7.5 Spouse as Exclusive Beneficiary..............................5
-i-
ARTICLE VIII - ALTERNATIVE PENSION.............................................5
8.1. Forms of Alternative Pension.................................5
8.2 Payment of Alternative Pension...............................6
8.3 Election Procedure...........................................6
8.4 Determination of Actuarial Equivalence.......................6
ARTICLE IX - FORFEITURES.......................................................6
9.1 Competitive Activities.......................................6
9.2 Unclaimed Benefits...........................................6
ARTICLE X - PROHIBITION AGAINST FUNDING........................................7
ARTICLE XI - GENERAL PROVISIONS................................................7
11.1 Nonalienation................................................7
11.2 No Employment Contract.......................................7
11.3 Incompetent Recipient........................................7
11.4 Questions of Identity........................................7
11.5 Effect on Other Benefits.....................................7
11.6 Waiver of Liability..........................................8
11.7 Amendment and Termination....................................8
11.8 Claims Procedure.............................................8
11.9 Notices......................................................8
11.10 Governing Law. .............................................8
11.11 Binding Effect...............................................8
11.12 Severability.................................................8
11.13 Headings.....................................................8
11.14 Counterparts.................................................8
11.15 Special Provision with respect to Ralph J. Roberts...........9
EXHIBIT A.....................................................................10
EXHIBIT B.....................................................................11
-ii-
COMCAST CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE JUNE 5, 2001)
------------------------------------------------
ARTICLE I - CONTINUATION OF PLAN AND PURPOSE
--------------------------------------------
1.1 Continuation of Plan. Comcast Corporation, a Pennsylvania corporation,
hereby amends and restates the Comcast Corporation Supplemental Executive
Retirement Plan (the "Plan"), effective June 5, 2001. The Plan was initially
adopted effective July 31, 1989.
1.2 Purpose of Plan. The purpose of this Plan is to provide for the
payment of supplemental retirement, death and disability benefits to or in
respect of certain selected senior executives of Comcast Corporation and its
affiliated companies as part of an integrated executive compensation program
which is intended to assist those employers in attracting, motivating and
retaining senior executives of superior ability, industry and loyalty.
ARTICLE II - DEFINITIONS
------------------------
The following terms when used in this Plan shall have the following
designated meanings unless a different meaning is clearly required by the
context:
2.1 "Affiliated Company" means (a) any other corporation which is included
within a "controlled group of corporations" within which Comcast Corporation is
also included, as determined under Section 1563 of the Internal Revenue Code of
1986 (the "Code"), without regard to subsections (a)(4) and (e)(3)(C) of Section
1563; (b) any other trades or businesses (whether or not incorporated) which,
based on principles similar to those defining a "controlled group of
corporations" for purposes of (a) above, are under common control; and (c) any
other organization so designated by the Board.
2.2 "Board" means the Board of Directors of Comcast Corporation.
2.3 "Disability" means a disability due to bodily or mental injury or
disease, either occupationally or non-occupationally caused, which is likely to
be permanent and will prevent a Senior Executive from performing the duties of
any occupation for which the Senior Executive is reasonably suited in light of
his professional experience and prior achievements. The Senior Executive shall
be deemed to have satisfied these conditions if he becomes eligible for benefits
under any insured long-term disability plan maintained by the Employer.
2.4 "Disability Pension" means the annual benefit payable under Article V
of this Plan.
2.5 "Early Retirement Date" means the first day of the month following a
Senior Executive's 55th birthday or the completion of twenty (20) years of
Service, whichever occurs later.
2.6 "Early Retirement Pension" means the annual benefit payable under
Article IV of this Plan.
2.7 "Employer" means Comcast Corporation and each of its Affiliated
Companies which, upon the approval of the Board, has agreed to participate in
this Plan by executing a written declaration of joinder. The use of the singular
form shall be considered a reference to each Employer individually.
2.8 "Final Average Compensation" means one-fifth (1/5) times the total of
the Senior Executive's compensation for the five (5) highest, consecutive
complete calendar years during the ten (10) calendar years immediately preceding
the Senior Executive's Termination of Employment. For this purpose, compensation
shall mean the total earnings paid by the Employer to a Senior Executive,
including his salary, bonuses (regardless of
-1-
whether the Senior Executive elects to defer receipt of all or some portion of
any such bonus pursuant to the Employer's deferred compensation plan), and any
other supplementary or discretionary remuneration, exclusive of any
reimbursement of expenses, the cost to the Employer of fringe benefit payments,
any amount paid to a Senior Executive for the purpose of reimbursing him for the
income taxes incurred upon the exercise of a non-qualified stock option and
income arising from the exercise of stock options.
2.9 "Normal Pension" means an annual pension equal to the product of 2% of
the Senior Executive's Final Average Compensation and the number of the Senior
Executive's years of Service, but in no event shall such annual pension exceed
60% of Final Average Compensation.
2.10 "Normal Retirement Date" means the first day of the month following a
Senior Executive's 65th birthday.
2.11 "Plan" means the Comcast Corporation Supplemental Executive Retirement
Plan set forth herein, as the same may be amended from time to time.
2.12 "Retirement Benefit Reductions" means the sum of (i) the Senior
Executive's annual single-life retirement benefit, if any, which is the
actuarial equivalent of the single sum benefit payable from the Employer's
special nonqualified deferred compensation plan and (ii) the annual primary
Social Security benefit which the Senior Executive is eligible to receive upon
his Termination of Employment under the Federal Social Security Act, as in
effect as of the Senior Executive's Termination of Employment. However, if the
Senior Executive is not eligible to receive an annual benefit from Social
Security upon the Senior Executive's Termination of Employment, the Senior
Executive's annual primary Social Security benefit shall be an amount equivalent
to the annual benefit payable to the Senior Executive upon reaching age 65,
calculated under the law in effect at the time of the Senior Executive's
Termination of Employment and without considering any amounts, subject to tax
under the Federal Insurance Contributions Act, that may be earned after the
Termination of Employment. For purposes of this Section 2.12, actuarial
equivalence shall be determined in the same manner as provided in Section 8.4.
2.13 "Senior Executive" means each individual who is employed by the
Employer as a senior executive employee and who is designated by the Board as
being eligible to participate in this Plan. The initial group of Senior
Executives is listed on Exhibit A attached at the end hereof.
2.14 "Service" means the most recent period of uninterrupted employment
with the Employer and any predecessor company which is listed on Exhibit B at
the end hereof, provided that an approved leave of absence shall not be deemed
to cause an interruption in employment. Service shall be measured in full years
as determined by the Employer from its personnel records. No service credit
shall be given for any period of less than a year of employment. For purposes of
this definition, each Senior Executive shall be deemed to have been employed as
of the first day of the month during which he was actually employed.
2.15 "Spouse" means a Senior Executive's husband or wife who was lawfully
married to the Senior Executive at the time of the Senior Executive's death.
2.16 "Termination of Employment" means any cessation of the Senior
Executive's employment by the Employer, including any such cessation by reason
of death or Disability. Termination of Employment shall be deemed to occur on
the last day on which the Senior Executive is employed by the Employer.
ARTICLE III- NORMAL RETIREMENT PENSION
--------------------------------------
In the event of the Termination of Employment of a Senior Executive on or
after his Normal Retirement Date, he shall be entitled to a Normal Retirement
Pension in an amount equal to the difference between the Senior Executive's
Normal Pension and the Retirement Benefit Reductions. Payment of the Normal
Retirement Pension shall be made in equal, monthly installments, commencing on
the first day of the month following the month in
-2-
which the Senior Executive's retirement occurs. Such payments shall be made
through the first day of the month in which the death of the Senior Executive
occurs.
ARTICLE IV - EARLY RETIREMENT PENSION
-------------------------------------
4.1 Pension Amount In the event of the Termination of Employment of the
Senior Executive prior to his Normal Retirement Date, but after his Early
Retirement Date, for a reason other than Disability or death, he shall be
entitled to an Early Retirement Pension, commencing on the first day of the
month following the month in which his Termination of Employment occurs, in an
amount equal to the difference between the Senior Executive's Normal Pension and
the Retirement Benefit Reductions, with such amount being reduced by the
percentage determined in accordance with the table set forth below, based on the
age of the Senior Executive when his benefit is scheduled to commence:
Age on
Benefit Commencement Date Reduction Percentage
------------------------- --------------------
64 10.8%
63 20.19%
62 28.39%
61 35.58%
60 41.91%
59 47.5%
58 52.25%
57 56.86%
56 60.78%
55 64.29%
4.2 Waiver of Actuarial Reduction. In the sole discretion of the Board, the
actuarial reduction for early commencement as set forth in Section 4.1 may be
waived in whole or in part.
4.3 Payment of Pension. Payment of the Early Retirement Pension shall be
made in equal, monthly installments. Such payments shall be made through the
first day of the month in which the Senior Executive's death occurs.
4.4 Deferral of Commencement. If the Senior Executive has become entitled
to an Early Retirement Pension, he may, with the approval of the Board, elect to
defer the commencement of his Early Retirement Pension to the first day of any
month during the period between his Termination of Employment and his Normal
Retirement Date. If the deferral of commencement is approved, the amount of the
Senior Executive's Early Retirement Pension shall be determined as of the
deferred commencement date.
ARTICLE V - DISABILITY PENSION
------------------------------
If the Senior Executive incurs a Disability after having attained his Early
Retirement Date, but before having elected an early retirement, the Senior
Executive shall be entitled to a Disability Pension in the same amount as he
would have received as an Early Retirement Pension, but without the percentage
reduction for early commencement. Payment of the Disability Pension shall be
made in equal, monthly installments, commencing on the first day of the month
following the month in which the Senior Executive's Termination of Employment
occurs. Such payments shall be made through the first day of the month in which
the Senior Executive's death occurs.
-3-
ARTICLE VI - NO VESTING
-----------------------
In the event of the Termination of Employment of the Senior Executive for
any reason, other than death or Disability, prior to the later to occur of his
fifty-fifth (55th) birthday or the completion of twenty (20) years of Service,
the Senior Executive shall not be entitled to a pension from the Plan and the
Employer shall have no further obligation hereunder with respect to that Senior
Executive. However, a Senior Executive shall nevertheless have a fully vested
interest in his Normal Retirement Pension upon reaching his Normal Retirement
Date.
ARTICLE VII - DEATH
-------------------
7.1 Death Benefit before Normal Retirement. In the event of a Senior
Executive's death prior to his Normal Retirement Date but after having completed
at least twenty (20) years of Service or in the event of the death of a retired
Senior Executive who pursuant to Section 4.4 had deferred commencement of his
Early Retirement Pension, the Senior Executive's Spouse, except as may otherwise
be provided in accordance with Section 7.3, shall be entitled to receive an
annual death benefit equal to 50% of the annual pension the Senior Executive
would have received had he retired or commenced his Early Retirement Pension, as
the case may be, on the first day of the month immediately preceding or
coincident with his death and elected Option A as an alternative pension under
Article VIII, in lieu of his Normal Retirement Pension. Payment of such death
benefit shall be made in equal, monthly installments, commencing on the first
day of the month immediately following the month in which the death of the
Senior Executive occurs. Such payments shall be made through the first day of
the month in which the death of the Spouse occurs.
7.2 Death after Age 65.
(a) Senior Executives other than Ralph J. Roberts. In the event of the
death of a Senior Executive other than Ralph J. Roberts ("Roberts") while
such Senior Executive is employed after having reached his Normal
Retirement Date and after having completed at least twenty-five (25) years
of Service, such Senior Executive's Spouse shall be entitled to receive an
annual death benefit equal to 100% of the annual pension the Senior
Executive would have received had he retired on the first day of the month
immediately preceding or coincident with his death and elected Option B as
an alternative pension under Article VIII, in lieu of his Normal Retirement
Pension. Payment of such death benefit shall be made in the same manner and
for the same period as provided for the death benefit payable pursuant to
Section 7.1. In the event of such Senior Executive's death while employed
after having reached his Normal Retirement Date, but before he has
completed twenty-five (25) years of Service, such Senior Executive's
surviving Spouse shall be entitled to the death benefit provided under
Section 7.1.
(b) Ralph J. Roberts. In the event of Roberts' death while employed
after having reached his Normal Retirement Date and after having completed
at least twenty-five (25) years of Service, Roberts' "Designated
Beneficiary" (as such term is defined in Section 7.2(c)(1)) shall be
entitled to receive an annual death benefit equal to 100% of the annual
pension Roberts would have received had he retired on the first day of the
month immediately preceding or coincident with his death pursuant to a
"Joint and 100% Survivor Annuity" (as such term is defined in Section
7.2(c)(2)). Payment of such death benefit shall be made to Roberts'
Designated Beneficiary in equal, monthly installments commencing on the
first day of the month immediately following the month in which Roberts'
death occurs. If Roberts' Spouse survives him, such payments shall be made
to Roberts' Designated Beneficiary through the first day of the month in
which occurs the death of Roberts' Spouse or through the first day of the
month in which occurs the fifth anniversary of Roberts' death, if later. If
Roberts' Spouse does not survive him, such payments shall be made to
Roberts' Designated Beneficiary through the first day of the month in which
occurs the fifth anniversary of Roberts' death.
-4-
(c) Definitions.
(1) "Designated Beneficiary" shall mean such one or more
individuals, trusts or other entities (including but not limited to
organizations which are described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended) as Roberts shall designate in a
writing delivered to Employer's chief financial officer prior to his
death for that purpose. If Roberts designates more than one
beneficiary, then the death benefit shall be paid among them in such
manner as Roberts specifies or, in the absence of such specification,
then in equal parts. If no valid beneficiary is designated who
survives Roberts, the Designated Beneficiary shall be Roberts'
personal representatives. Any beneficiary designation may be amended
or revoked at any time prior to Roberts' death by filing a new
beneficiary designation form with the chief financial officer of the
Employer.
(2) "Joint and 100% Survivor Annuity" shall mean a reduced
annuity which is payable monthly for the life of Roberts with a
survivor annuity payable to Roberts' Designated Beneficiary for a
period equal to the greater of (i) the life of Roberts' Spouse or (ii)
five (5) years. Such Joint and 100% Survivor Annuity shall be equal to
100% of the amount of the annuity payable during Roberts' life and
shall be the actuarial equivalent of the benefit payable to Roberts
under Article III.
7.3 Discretionary Death Benefit. The Board, in its sole discretion, may
designate one or more Senior Executives to be entitled to the same form and
amount of death benefit provided under Section 7.2 even though the Senior
Executive has not yet reached his Normal Retirement Date as long as he has
completed at least twenty-five (25) years of Service. Each such designation
shall be made pursuant to a written resolution adopted by the Board.
7.4 Death after Benefit Commencement. Except as otherwise provided in
Section 7.2 with respect to Roberts, if a Senior Executive dies after the
commencement of any pension payments under this Plan, there shall be no death
benefit payable unless one of the alternative pensions under Article VIII is in
effect. If an alternative pension has been elected, the provisions of such
alternative pension shall apply.
7.5 Spouse as Exclusive Beneficiary. Except as otherwise provided in
Section 7.2 with respect to Roberts, a Senior Executive's surviving Spouse shall
be the only person entitled to a death benefit under this Plan as a result of
the Senior Executive's death. Except as otherwise provided in Section 7.2 with
respect to Roberts, a Senior Executive who is not survived by a Spouse shall not
be entitled to the payment of any death benefit.
ARTICLE VIII - ALTERNATIVE PENSION
----------------------------------
8.1 Forms of Alternative Pension.
(a) Senior Executives other than Ralph J. Roberts. At any time prior
to the commencement of pension payments and subject to the provisions of
Section 8.2, a married Senior Executive other than Roberts shall be
entitled to elect to receive, in lieu of the form of pension which he would
otherwise be entitled to receive under this Plan, an actuarially equivalent
alternative pension in one of the following optional forms:
Option A Joint and 50% Survivor Annuity provides a reduced pension
during the Senior Executive's lifetime. Upon his death, if
the Senior Executive's Spouse survives him, 50% of the
Senior Executive's reduced pension will continue to such
Spouse until the Spouse's death.
-5-
Option B Joint and 100% Survivor Annuity provides a reduced pension
during the Senior Executive's lifetime. Upon his death, if
the Senior Executive's Spouse survives him, the same pension
will continue to such Spouse until the Spouse's death.
(b) Ralph J. Roberts. At any time prior to the commencement of pension
payments and subject to the provisions of Section 8.2, Roberts shall be
entitled to elect to receive, in lieu of the form of pension which he would
otherwise be entitled to receive under this Plan, an actuarially equivalent
alternative pension in one of the following optional forms:
Option A Joint and 50% Survivor Annuity provides a reduced pension
during Robert's lifetime with a survivor annuity payable to
Robert's Designated Beneficiary (as such term is defined in
Section 7.2(c)(1)) for a period equal to the greater of (i)
the life of Roberts' Spouse or (ii) five (5) years. Such
Joint and 50% Survivor Annuity shall be equal to 50% of the
amount of the annuity payable during Roberts' life.
Option B Joint and 100% Survivor Annuity provides a reduced pension
during Robert's lifetime with a survivor annuity payable to
Robert's Designated Beneficiary (as such term is defined in
Section 7.2(c)(1)) for a period equal to the greater of (i)
the life of Roberts' Spouse or (ii) five (5) years. Such
Joint and 100% Survivor Annuity shall be equal to 100% of
the amount of the annuity payable during Roberts' life.
8.2 Payment of Alternative Pension. In the event of the election of an
alternative pension, Roberts and each other Senior Executive shall be entitled
to receive, commencing on the date upon which his pension would otherwise
commence under Article III, IV or V, as the case may be, an annual pension equal
to the actuarial equivalent of the pension which Roberts and each other Senior
Executive would otherwise have been entitled to receive had he not made such
election. Payment of the alternative pension shall be made in equal, monthly
installments.
8.3 Election Procedure. Any election to receive an alternative pension
shall be made by written notice of election given by Roberts or other Senior
Executive to the Employer's chief financial officer prior to the commencement of
payments. Any election of an alternative pension may be revoked at any time
prior to the commencement of payments by written notice of revocation similarly
given, provided that Roberts or other Senior Executive may thereafter again make
an election of an alternative pension prior to the commencement of payments by
giving a new written election to such chief financial officer.
8.4 Determination of Actuarial Equivalence. The determination under this
Plan of actuarial equivalence shall be made by the Employer based upon an
interest assumption of seven percent (7%) per annum and the 1971 TPF&C Forecast
Mortality Table.
ARTICLE IX - FORFEITURES
------------------------
9.1 Competitive Activities. If, without the prior written consent of the
Employer, a Senior Executive who has not yet attained age 65 shall at any time
after a Termination of Employment engage in or become associated with, directly
or indirectly, either as a stockholder, director, officer, partner, proprietor,
employee, agent, adviser or consultant, any business which in the opinion of the
Board competes in any way with the business of the Employer (as such business
was conducted at the time the Senior Executive's Termination of Employment
occurred), the Employer shall be relieved of all further obligations hereunder
and all amounts then remaining unpaid under this Plan shall be forfeited. The
Employer shall provide written notice of this determination to the Senior
-6-
Executive. However, nothing herein shall prevent the Senior Executive form
owning up to one percent (1%) of any company which is publicly traded.
9.2 Unclaimed Benefits. If the Employer shall be unable, within one year
after any benefit becomes payable to any person under this Plan, to make
distribution to such person because of the Employer's inability to ascertain his
whereabouts by mailing to the last known address of such person on the records
of the Employer and such person has not made written claim therefor before the
expiration of the one-year period, then the Employer shall declare all rights of
such person under this Plan to be forfeited as of such date as the Employer
shall determine. Notwithstanding the foregoing, if any person whose benefit has
been forfeited under this Section 9.2 subsequently appears and makes a claim for
such benefit, the Employer shall reinstate the benefit on a prospective basis
from the date the claim is received by the Employer.
ARTICLE X - PROHIBITION AGAINST FUNDING
---------------------------------------
Should the Employer elect to acquire any investment in connection with the
liabilities assumed by it under the Plan, it is expressly understood and agreed
that a Senior Executive shall not have any right with respect to, or claim
against, such assets nor shall any such investment be construed to create a
trust of any kind or any fiduciary relationship between the Employer and a
Senior Executive, his beneficiary or any other person. Any such assets shall be
and remain a part of the general, unpledged and unrestricted assets of the
Employer, subject to the claims of its general creditors. Each Senior Executive
and his beneficiary shall be required to look to the provisions of the Plan and
to the Employer itself for enforcement of any and all benefits due under the
Plan and to the extent any person acquires a right to receive any payments under
the Plan, such right shall be no greater than the right of any unsecured,
general creditor of the Employer.
ARTICLE XI - GENERAL PROVISIONS
-------------------------------
11.1 Nonalienation. No benefit or payment under this Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, whether voluntary or involuntary, and no attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the
same shall be valid. Nor shall any such benefit or payment be in any way liable
for or subject to the debts, contracts, liabilities, engagements or torts of any
person entitled to such benefit or payment, except to such extent as may be
required by law. If any person entitled to a benefit or payment under the Plan
becomes bankrupt or attempts to anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge any benefit or payment under the Plan, in whole or in
part, or if any attempt is made to subject any such benefit or payment, in whole
or in part, to the debts, contracts, liabilities, engagements or torts of the
person entitled to any such benefit or payment, then such benefit or payment, in
the discretion of the Employer, shall cease and terminate with respect to such
person, and the Employer in such case shall hold or apply the same or any part
thereof for the benefit of any dependent, relative or beneficiary of such
person, in such manner and proportion as the Employer shall deem proper.
11.2 No Employment Contract. The establishment of the Plan shall not be
construed to confer upon a Senior Executive the legal right to be retained in
the employ of the Employer, or give a Senior Executive or any beneficiary, any
right to any payment whatsoever, except to the extent of the benefits provided
for hereunder. Each Senior Executive shall remain subject to discharge to the
same extent as if the Plan had never been adopted.
11.3 Incompetent Recipient. If the Employer determines that any person to
whom a benefit is payable under the Plan is incompetent by reason of age or
physical or mental disability, the Employer shall have the power to cause the
payments becoming due to such person to be made to another for his benefit
without any responsibility to see to the application of such payments. Any
payment made pursuant to such power shall, as to the amount of such payment,
operate as a complete discharge of the Employer.
11.4 Questions of Identity. If at any time any doubt exists as to the
identity of any person entitled to any payment hereunder or the amount or time
of such payment, the Employer shall be entitled to hold such sum as a
-7-
segregated amount in trust until such identity, amount or time is determined or
until an order of a court of competent jurisdiction is obtained. The Employer
shall also be entitled to pay such sum into court in accordance with the
appropriate rules of law.
11.5 Effect on Other Benefits. The benefits of a Senior Executive or any
other person hereunder shall be in addition to any benefits paid or payable to
or on account of a Senior Executive or such other person under any other
pension, disability, equity, annuity or retirement plan or policy whatsoever.
Nothing herein contained shall in any manner modify, impair or affect any
existing or future rights of a Senior Executive to receive any employee benefits
to which he would otherwise be entitled or to participate in any current or
future pension plan of the Employer or any other supplemental arrangement which
constitutes a part of the Employer's regular compensation structure. However,
any supplemental retirement income credited under this Plan shall not be deemed
part of a Senior Executive's total compensation for the purpose of computing
benefits to which he may be entitled under any pension plan or other
supplemental compensation arrangement, unless such plan or arrangement
specifically provides to the contrary.
11.6 Waiver of Liability. No liability shall attach to or be incurred by
any officer or director of the Employer under or by reason of the terms,
conditions and provisions contained in the Plan, or for the acts or decisions
taken or made thereunder or in connection therewith; and as a condition
precedent to the establishment of the Plan or the receipt of benefits
thereunder, or both, such liability, if any, is expressly waived and released by
each Senior Executive and by any and all person claiming under or through such
Senior Executive or any other person. Such waiver and release shall be
conclusively evidenced by any act of participation in or the acceptance of
benefits under the Plan.
11.7 Amendment and Termination. All questions of interpretation,
construction, or application arising under the Plan shall be decided in good
faith by the Board, whose decisions shall be final and conclusive upon all
persons. The Board shall also have the sole authority to modify, amend or
terminate the Plan, provided that no amendment or termination shall have a
material adverse effect upon rights accrued or amounts being paid as of the date
of such amendment or termination. Should the Plan be terminated, each Senior
Executive shall receive written notice of when such termination shall be
effective.
11.8 Claims Procedure. Benefits payable to a Senior Executive shall be paid
when due without any requirement that a claim for benefits be filed. However,
any Senior Executive who does not receive the benefits to which he believes
himself entitled may file a written claim with the Board's Compensation
Committee which shall act on the claim in the manner prescribed by Section 503
of the Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereunder.
11.9 Notices. Any notices required or permitted to be given under this Plan
shall be sufficient if in writing and if sent by registered or certified mail to
the last known address of a Senior Executive as shown on the Employer's records
or to the principal office of the Employer, as the case may be.
11.10 Governing Law. The Plan shall be governed by and construed and
administered in accordance with the laws of the Commonwealth of Pennsylvania.
11.11 Binding Effect. This Plan shall be binding upon the parties hereto,
their heirs, executors, administrators, successors and assigns. In the event of
a merger, consolidation, or reorganization involving the Employer, this Plan
shall continue in force and become an obligation of the Employer's successor or
successors.
11.12 Severability. If any provision of this Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provisions of the Plan, and the Plan shall be construed and enforced as if such
provision had not been included therein.
-8-
11.13 Headings. The Article and paragraph headings contained herein are
inserted only as a matter of convenience and for reference and in no way define,
limit, enlarge or describe the scope or intent of the Plan nor in any way shall
they affect the Plan or the construction of any provision thereof.
11.14 Counterparts. This Plan may be executed in any number of counterparts
and each counterparts shall be deemed to be in original.
11.15 Special Provision with respect to Ralph J. Roberts. The Employer is a
party to a certain Compensation and Deferred Compensation Agreement with Ralph
J. Roberts which has been amended through the date hereof and which may be
further amended hereafter ("the Roberts Agreement"). The Employer recognizes
that the Roberts Agreement makes (and in the future may make) certain
modifications to this Plan with respect to Ralph J. Roberts which the Employer
recognizes constitute amendments to this Plan adopted pursuant to Section 11.7
hereof.
TO RECORD the adoption of this Plan by the Employer has caused this
instrument to be executed on this 5th day of June 2001.
Attest: COMCAST CORPORATION
/s/ Arthur Block By: /s/ Stanley Wang
- ---------------------- -------------------------
Assistant Secretary Title: Executive Vice President
-9-
EXHIBIT A
---------
INITIAL GROUP OF SENIOR EXECUTIVES
----------------------------------
Ralph J. Roberts
Daniel Aaron
Julian A. Brodsky
-10-
EXHIBIT B
---------
LIST OF PREDECESSOR COMPANIES
-----------------------------
Pursuant to Section 2.14 uninterrupted employment with the following
predecessor companies shall be recognized as "Service" for purposes of the Plan:
1. International Equity Corporation
-11-
364-DAY REVOLVING CREDIT AGREEMENT *
among
COMCAST CABLE COMMUNICATIONS, INC.
and
The Financial Institutions Party Hereto
BANC OF AMERICA SECURITIES LLC
and
J.P. MORGAN SECURITIES INC.,
as
Joint Lead Arrangers and Joint Book Managers
BNY CAPITAL MARKETS, INC.
and
SALOMON SMITH BARNEY INC.,
as Co-Arrangers
BANK OF AMERICA, N.A.,
as Administrative Agent
J.P. MORGAN SECURITIES INC.,
as Syndication Agent
CITIBANK, N.A.
and
THE BANK OF NEW YORK,
as Co-Documentation Agents
Dated as of July 17, 2001
- --------
*Conformed to reflect signatures.
TABLE OF CONTENTS
Section Page
- ------- ----
SECTION 1.
DEFINITIONS AND ACCOUNTING TERMS..........................................1
1.01 Defined Terms...............................................1
1.02 Use of Certain Terms.......................................13
1.03 Accounting Terms...........................................14
1.04 Rounding...................................................14
1.05 Exhibits and Schedules.....................................14
1.06 References to Agreements and Laws..........................14
1.07 Pro Forma Calculations.....................................14
SECTION 2.
THE COMMITMENTS AND EXTENSIONS OF CREDIT.................................15
2.01 Amount and Terms of Commitments............................15
2.02 Borrowings, Conversions and Continuations of Loans.........16
2.03 Prepayments................................................17
2.04 Reduction or Termination of Commitments....................17
2.05 Principal and Interest.....................................18
2.06 Fees.......................................................18
2.07 Computation of Interest and Fees...........................19
2.08 Making Payments............................................19
2.09 Funding Sources............................................20
2.10 Extension of Maturity Date.................................20
SECTION 3.
TAXES, YIELD PROTECTION AND ILLEGALITY...................................22
3.01 Taxes......................................................22
3.02 Illegality.................................................22
3.03 Inability to Determine Eurodollar Rates....................23
3.04 Increased Cost and Reduced Return; Capital Adequacy........23
3.05 Breakfunding Costs.........................................24
3.06 Matters Applicable to all Requests for Compensation........24
3.07 Survival...................................................24
SECTION 4.
CONDITIONS PRECEDENT TO EXTENSIONS OF CREDIT.............................25
4.01 Conditions Precedent to Closing Date.......................25
4.02 Conditions to all Extensions of Credit.....................26
SECTION 5.
REPRESENTATIONS AND WARRANTIES...........................................26
5.01 Existence and Qualification; Power; Compliance with Laws...26
5.02 Power; Authorization; Enforceable Obligations..............27
(i)
5.03 No Legal Bar...............................................27
5.04 Financial Statements; No Material Adverse Effect...........27
5.05 Litigation.................................................27
5.06 No Default.................................................27
5.07 Authorizations.............................................28
5.08 Taxes......................................................28
5.09 Margin Regulations; Investment Company Act; Public Utility
Holding Company Act........................................28
5.10 ERISA Compliance...........................................28
5.11 Assets; Liens..............................................29
5.12 Environmental Compliance...................................29
5.13 Use of Proceeds............................................29
5.14 Disclosure.................................................29
SECTION 6.
AFFIRMATIVE COVENANTS....................................................29
6.01 Financial Statements.......................................29
6.02 Certificates, Notices and Other Information................30
6.03 Payment of Taxes...........................................30
6.04 Preservation of Existence..................................31
6.05 Maintenance of Properties..................................31
6.06 Maintenance of Insurance...................................31
6.07 Compliance With Laws.......................................31
6.08 Inspection Rights..........................................31
6.09 Keeping of Records and Books of Account....................31
6.10 Compliance with ERISA......................................31
6.11 Compliance With Agreements.................................32
6.12 Use of Proceeds............................................32
6.13 Designation of Restricted and Unrestricted Subsidiaries....32
SECTION 7.
NEGATIVE COVENANTS.......................................................32
7.01 Liens......................................................32
7.02 Subsidiary Indebtedness....................................33
7.03 Fundamental Changes........................................33
7.04 ERISA......................................................34
7.05 Limitations on Upstreaming.................................34
7.06 Margin Regulations.........................................34
7.07 Financial Covenants........................................34
SECTION 8.
EVENTS OF DEFAULT AND REMEDIES ..........................................35
8.01 Events of Default..........................................35
8.02 Remedies Upon Event of Default.............................36
(ii)
SECTION 9.
ADMINISTRATIVE AGENT.....................................................37
9.01 Appointment and Authorization of Administrative Agent......37
9.02 Delegation of Duties.......................................37
9.03 Liability of Administrative Agent..........................37
9.04 Reliance by Administrative Agent...........................38
9.05 Notice of Default..........................................38
9.06 Credit Decision; Disclosure of Information by
Administrative Agent.......................................39
9.07 Indemnification of Administrative Agent....................39
9.08 Administrative Agent in Individual Capacity................39
9.09 Resignation by Administrative Agent........................40
9.10 Other Agents...............................................40
SECTION 10.
MISCELLANEOUS............................................................40
10.01 Amendments; Consents.......................................40
10.02 Requisite Notice; Effectiveness of Signatures and
Electronic Mail............................................41
10.03 Attorney Costs, Expenses and Taxes.........................42
10.04 Binding Effect; Assignment.................................43
10.05 Set-off....................................................44
10.06 Sharing of Payments........................................44
10.07 No Waiver; Cumulative Remedies.............................45
10.08 Usury......................................................45
10.09 Counterparts...............................................46
10.10 Integration................................................46
10.11 Nature of Lenders' Obligations.............................46
10.12 Survival of Representations and Warranties.................46
10.13 Indemnity by Borrower......................................46
10.14 Nonliability of Lenders....................................47
10.15 No Third Parties Benefitted................................47
10.16 Severability...............................................47
10.17 Confidentiality............................................48
10.18 Headings...................................................48
10.19 Time of the Essence........................................48
10.20 Foreign Lenders............................................48
10.21 Removal and Replacement of Lenders.........................49
10.22 Governing Law..............................................50
10.23 Waiver of Right to Trial by Jury...........................50
10.24 Waiver of Notice by Requisite Time.........................50
(iii)
EXHIBITS
Form of
A Request for Extension of Credit
B Compliance Certificate
C Note
D Assignment and Acceptance
E Opinion of Counsel
SCHEDULES
2.01 Commitments and Pro Rata Shares
7.01 Existing Liens
7.02 Existing Subsidiary Indebtedness
(iv)
364-DAY REVOLVING CREDIT AGREEMENT
----------------------------------
This 364-DAY REVOLVING CREDIT AGREEMENT is entered into as of July 17,
2001, by and among COMCAST CABLE COMMUNICATIONS, INC., a Delaware corporation
("Borrower"), each lender from time to time party hereto (collectively,
"Lenders" and individually, a "Lender") and BANK OF AMERICA, N.A., as
Administrative Agent.
RECITAL
-------
Borrower has requested that Lenders provide a revolving line of credit, and
Lenders and Administrative Agent are willing to do so on the terms and
conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained,
the parties hereto covenant and agree as follows:
SECTION 1.
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.01 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Acquisition" means (a) any purchase or other acquisition of assets or
series of related purchases or other acquisitions of assets by Borrower or any
Restricted Subsidiary (including by way of asset or stock purchase, swap or
merger) other than from Borrower or any Restricted Subsidiary or (b) the
designation by Borrower of an Unrestricted Subsidiary as a Restricted
Subsidiary.
"Administrative Agent" means Bank of America, N.A., in its capacity as
administrative agent under any of the Loan Documents, or any successor
administrative agent permitted under the Loan Documents.
"Administrative Agent's Office" means Administrative Agent's address and,
as appropriate, account set forth below its signature to this Agreement, or such
other address or account as Administrative Agent hereafter may designate by
written notice to Borrower and Lenders.
"Administrative Agent-Related Persons" means Administrative Agent
(including any successor agent), together with its Affiliates and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Administrative Questionnaire" means, with respect to each Lender, an
administrative questionnaire in the form prepared by Administrative Agent and
submitted to Administrative Agent (with a copy to Borrower) duly completed by
such Lender.
"Affiliate" means any Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with, another Person.
1
"Agreement" means this 364-Day Revolving Credit Agreement, as amended,
restated, extended, supplemented or otherwise modified in writing from time to
time.
"Annualized EBITDA" means, at any date of determination, EBITDA for the two
fiscal quarter periods then most recently ended times two (2).
"Annualized Interest Expense" means, at any date of determination, Interest
Expense for the two fiscal quarter periods then most recently ended times two
(2).
"Applicable Amount" means the following applicable amount per annum, based
upon the applicable Debt Ratings:
Applicable Amount (in basis points per annum)
Pricing Debt Ratings Utilization
Level S&P/Moody's Facility Fee Eurodollar Rate Fee
----- ----------- ------------ --------------- ---
1 [less than or
equal to]A/A2 6.5 21.0 7.5
2 A-/A3 8.0 29.5 7.5
3 BBB+/Baa1 10.0 35.0 10.0
4 BBB/Baa2 12.5 47.5 10.0
5 BBB-/Baa3 15.0 60.0 12.5
6 [less than]BBB-/Baa3 20.0 80.0 12.5
or unrated
As used in this definition, "Debt Rating" means, as of any date of
determination, the rating as determined by either S&P or Moody's (collectively,
the "Debt Ratings") of Borrower's senior unsecured non-credit enhanced long-term
Indebtedness for borrowed money; provided that if a Debt Rating is issued by
each of S&P and Moody's, then the higher of such Debt Ratings shall apply (with
Pricing Level 1 being the highest and Pricing Level 6 being the lowest), unless
there is a split in Debt Ratings of more than one level, in which case the level
that is one level higher than the lower Debt Rating shall apply. Initially, the
Debt Ratings shall be determined from the certificate delivered pursuant to
Section 4.01(a)(v). Thereafter, the Debt Ratings shall be determined from the
most recent public announcement of any changes in the Debt Ratings. Any change
in the Applicable Amount shall become effective on and as of the date of any
public announcement of any Debt Rating that indicates a different Applicable
Amount. If the rating system of S&P or Moody's shall change, Borrower and
Administrative Agent shall negotiate in good faith to amend this definition to
reflect such changed rating system and, pending the effectiveness of such
amendment (which shall require the approval of Required Lenders), the Debt
Rating shall be determined by reference to the rating most recently in effect
prior to such change.
"Applicable Payment Date" means, (a) as to any Eurodollar Rate Loan, the
last day of the relevant Interest Period, any date that such Loan is prepaid or
Converted in whole or in part and the Maturity Date; provided, however, that if
any Interest Period for a Eurodollar Rate Loan exceeds three months, interest
2
shall also be paid on the Business Day which falls every three months after the
beginning of such Interest Period; and (b) as to any other Obligations, the last
Business Day of each calendar quarter and the Maturity Date, as otherwise
provided herein.
"Applicable Time" means New York time.
"Assignment and Acceptance" means an Assignment and Acceptance
substantially in the form of Exhibit D.
"Attorney Costs" means the reasonable fees and disbursements of a law firm
or other external counsel.
"Attributable Indebtedness" means, with respect to any Sale-Leaseback
Transaction, the present value (discounted at the rate set forth or implicit in
the terms of the lease included in such Sale-Leaseback Transaction) of the total
obligations of the lessee for rental payments (other than amounts required to be
paid on account of taxes, maintenance, repairs, insurance, assessments,
utilities, operating and labor costs and other items that do not constitute
payments for property rights) during the remaining term of the lease included in
such Sale-Leaseback Transaction (including any period for which such lease has
been extended). In the case of any lease that is terminable by the lessee upon
payment of a penalty, the Attributable Indebtedness shall be the lesser of the
Attributable Indebtedness determined assuming termination on the first date such
lease may be terminated (in which case the Attributable Indebtedness shall also
include the amount of the penalty, but no rent shall be considered as required
to be paid under such lease subsequent to the first date on which it may be so
terminated) or the Attributable Indebtedness determined assuming no such
termination.
"Audited Financial Statements" means the audited consolidated balance sheet
of Borrower and its Subsidiaries for the fiscal year ended December 31, 2000,
and the related consolidated statements of income and cash flows of Borrower and
its Subsidiaries for such fiscal year.
"Bank of America" means Bank of America, N.A.
"Base Rate" means for any day a fluctuating rate per annum equal to the
higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest
in effect for such day as publicly announced from time to time by Bank of
America as its "prime rate." Such rate is a rate set by Bank of America based
upon various factors including Bank of America's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate. Any change in such rate announced by Bank of America shall take effect at
the opening of business on the day specified in the public announcement of such
change.
"Base Rate Loan" means a Loan made hereunder that bears interest based upon
the Base Rate.
"BLR" means Brian L. Roberts, the estate of Brian L. Roberts, or any trust
of which Brian L. Roberts is the principal beneficiary.
"Borrower" has the meaning set forth in the introductory paragraph hereto.
3
"Borrowing" and "Borrow" each mean a borrowing of Loans hereunder.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York or Dallas, Texas are authorized or
required by law to close, and, if the applicable Business Day relates to a
Eurodollar Rate Loan, any such day on which dealings are carried out in the
applicable offshore Dollar market.
"Change of Control" means an event or series of events as a result of which
neither Comcast Corporation nor BLR, either separately or on a combined basis,
is to be the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under
the Securities Exchange Act of 1934) directly or indirectly of such equity as
entitles the holder thereof, under ordinary circumstances, to elect the majority
of the board of directors of Borrower.
"Closing Date" means the date upon which this Agreement has been executed
by Borrower, Lenders and Administrative Agent and all the conditions precedent
in Section 4.01 have been satisfied or waived.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means, for each Lender, the amount set forth opposite such
Lender's name on Schedule 2.01, as such amount may be reduced or adjusted from
time to time in accordance with the terms of this Agreement (collectively, the
"combined Commitments").
"Compliance Certificate" means a certificate substantially in the form of
Exhibit B, properly completed and signed by a Responsible Officer of Borrower.
"Consolidated Total Indebtedness" means, as of any date of determination,
the total Indebtedness of Borrower and its Restricted Subsidiaries, determined
on a consolidated basis in accordance with GAAP.
"Continuation" and "Continue" mean, with respect to any Eurodollar Rate
Loan, the continuation of such Eurodollar Rate Loan as a Eurodollar Rate Loan on
the last day of the Interest Period for such Loan.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Conversion" and "Convert" mean, with respect to any Loan, the conversion
of such Loan from or into another type of Loan.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of
America, and all other liquidation, conservatorship, bankruptcy, assignment for
the benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization or similar debtor relief Laws of the United States of America or
other applicable jurisdictions from time to time in effect affecting the rights
of creditors generally.
4
"Default" means any event that, with the giving of any notice, the passage
of time, or both, would be an Event of Default.
"Default Rate" means an interest rate equal to the Base Rate plus 2% per
annum; provided, however, that with respect to a Eurodollar Rate Loan (for so
long as it is a Eurodollar Rate Loan), the Default Rate shall be an interest
rate equal to the interest rate (including any Applicable Amount) otherwise
applicable to such Loan plus 2% per annum, in each case to the fullest extent
permitted by applicable Laws.
"Disposition" means (a) any sale, transfer or other disposition of assets
or series of sales, transfers or other disposition of assets by Borrower or any
Restricted Subsidiary (including by way of asset or stock sale, swap or merger)
other than to Borrower or any Restricted Subsidiary or (b) the designation by
Borrower of a Restricted Subsidiary as an Unrestricted Subsidiary.
"Dollar" and "$" means lawful money of the United States of America.
"EBITDA" means, with respect to any Person or any income generating assets,
for any period, an amount equal to (a) the net income of such Person or
generated by such assets adjusted to exclude (i) gains and losses from unusual
or extraordinary items and (ii) interest income, plus (b) income or gross
receipts taxes (whether or not deferred), Interest Expense, depreciation,
amortization and other non-cash charges to income, in each case for such period,
minus (c) any cash payments made during such period in respect of any non-cash
charges to income accrued during a prior period and added back in determining
EBITDA during such prior period pursuant to clause (b) above, plus (d) in
respect of any period ended on or before December 31, 2000, to the extent
deducted in determining net income during such period pursuant to clause (a)
above, management, programming and similar fees paid (whether actually paid in
cash or accrued) by such Person during such period to Comcast Corporation or any
of its wholly-owned Subsidiaries other than Borrower or a Restricted Subsidiary;
provided such management, programming or similar agreement pursuant to which
such fees have been paid or accrued has been assigned to Borrower on or prior to
December 31, 2000.
"Environmental Laws" means all Laws relating to environmental, health,
safety and land use matters applicable to any property.
"ERISA" means the Employee Retirement Income Security Act of 1974 and any
regulations issued pursuant thereto, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with Borrower within the meaning of Section 414(b) or (c)
of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).
"ERISA Event" means (a) any "reportable event," as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by Borrower or any ERISA Affiliates of any
5
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or to
appoint a trustee to administer any Plan; (f) the incurrence by Borrower or any
ERISA Affiliates of any liability with respect to the withdrawal or partial
withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by any
Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from Borrower or any ERISA Affiliate of any notice,
concerning the imposition of withdrawal liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar Base Rate" has the meaning set forth in the definition of
Eurodollar Rate.
"Eurodollar Rate" means for any Interest Period with respect to any
Eurodollar Rate Loan, a rate per annum determined by Administrative Agent
pursuant to the following formula:
Eurodollar Rate = Eurodollar Base Rate
----------------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Base Rate" means, for such Interest Period:
(a) The rate per annum equal to the rate determined by Administrative
Agent to be the offered rate that appears on the page of the Telerate
screen that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day of
such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, or
(b) In the event the rate referenced in the preceding subsection (a)
does not appear on such page or service or such page or service shall cease
to be available, the rate per annum equal to the rate reasonably determined
by Administrative Agent (after consultation with Borrower) to be the
offered rate on such other page or other service that displays an average
British Bankers Association Interest Settlement Rate for deposits in
Dollars (for delivery on the first day of such Interest Period) with a term
equivalent to such Interest Period, determined as of approximately 11:00
a.m. (London time) two Business Days prior to the first day of such
Interest Period, or
(c) In the event the rates referenced in the preceding subsections (a)
and (b) are not available, the rate per annum determined by Administrative
Agent as the average of the rates of interest (rounded upward to the next
1/100th of 1%) at which deposits in Dollars for delivery on the first day
of such Interest Period in same day funds in the approximate amount of the
Eurodollar Rate Loan being made, Continued or Converted by Administrative
Agent in its capacity as a Lender and with a term equivalent to such
Interest Period are offered by Reference Banks to major banks in the London
interbank Dollar market at their request at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest
Period. If any Reference Bank does not quote
6
such a rate at the request of Administrative Agent, such average rate shall
be determined from the rates of the Reference Banks that quote such a rate;
and
"Eurodollar Reserve Percentage" means, for any day during any Interest
Period, the reserve percentage (expressed as a decimal, rounded upward to
the next 1/100th of 1%) in effect on such day, whether or not applicable to
any Lender, under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) for a member bank of the Federal Reserve System in
respect of "Eurocurrency liabilities" (or in respect of any other category
of liabilities, which includes deposits by reference to which the interest
rate on Eurodollar Rate Loans is determined or any category of extensions
of credit or other assets, which includes loans by a non-United States
office of any Lender to United States residents). The Eurodollar Rate for
each outstanding Eurodollar Rate Loan shall be adjusted automatically as of
the effective date of any change in the Eurodollar Reserve Percentage.
The determination of the Eurodollar Reserve Percentage and the
Eurodollar Base Rate by Administrative Agent shall be conclusive in the
absence of manifest error.
"Eurodollar Rate Loan" means a Loan bearing interest based on the
Eurodollar Rate.
"Event of Default" means any of the events specified in Section 8.
"Extension of Credit" means a Borrowing, Conversion or Continuation of
Loans.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such day;
provided that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day, and (b) if no such rate
is so published on such next succeeding Business Day, the Federal Funds Rate for
such day shall be the average rate charged to Bank of America on such day on
such transactions as determined by Administrative Agent (which determination
shall be conclusive in the absence of manifest error).
"Five-Year Agreement" means the Five-Year Revolving Credit Agreement dated
August 24, 2000, among Borrower, Bank of America, N.A., as Administrative Agent,
Swing Line Lender and Issuing Lender and the lenders party thereto.
"GAAP" means generally accepted accounting principles applied on a
consistent basis (but subject to changes approved by Borrower's independent
certified public accountants).
"Governmental Authority" means (a) any international, foreign, federal,
state, county or municipal government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality, central bank or public body, including the Federal
7
Communications Commission, (c) any state public utilities commission or other
authority and any federal, state, county, or municipal licensing or franchising
authority or (d) any court or administrative tribunal.
"Guaranty Obligation" means, as to any Person, any (a) guaranty by such
Person of Indebtedness of any other Person or (b) legally binding obligation of
such Person to purchase or pay (or to advance or supply funds for the purchase
or payment of) Indebtedness of any other Person, or to purchase property,
securities, or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness or to maintain working capital,
equity capital or other financial statement condition of such other Person so as
to enable such other Person to pay such Indebtedness; provided, however, that
the term Guaranty Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guaranty Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof,
covered by such Guaranty Obligation or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by the
Person in good faith.
"Indebtedness" means, as to any Person, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (d) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services, (e) all Indebtedness of others secured by any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (f) all Guaranty Obligations of such Person
with respect to Indebtedness of others, (g) all capital lease obligations of
such Person, (h) all Attributable Indebtedness under Sale-Leaseback Transactions
under which such Person is the lessee and (i) all obligations of such Person as
an account party in respect of outstanding letters of credit (whether or not
drawn) and bankers' acceptances; provided, however, that Indebtedness shall not
include (i) trade accounts payable arising in the ordinary course of business
and (ii) deferred compensation; provided, further that in the case of any
obligation of such Person which is recourse only to certain assets of such
Person, the amount of such Indebtedness shall be deemed to be equal to (but
shall not exceed) the value of the assets to which such obligation is recourse
as reflected on the balance sheet of such Person at the time of the incurrence
of such obligation; and provided, further that the amount of any Indebtedness
described in clause (e) above shall be the lesser of the amount of the
Indebtedness or the fair market value of the property securing such
Indebtedness.
"Indemnified Liabilities" has the meaning set forth in Section 10.13.
"Indemnitees" has the meaning set forth in Section 10.13.
"Interest Coverage Ratio" means, at any date of determination, for Borrower
and its Restricted Subsidiaries, on a consolidated basis, the ratio of (a)
Annualized EBITDA to (b) Annualized Interest Expense.
"Interest Expense" means, with respect to any Person or any income
generating assets, for any period, an amount equal to, without duplication, (a)
all interest on Indebtedness of such Person or properly allocable to such
assets, and commitment and facility fees in respect thereof, accrued (whether or
not actually paid) during such period, plus (b) the net amount accrued (whether
or not actually paid) by such Person or
8
properly allocable to such assets pursuant to any interest rate protection
agreement during such period (or minus the net amount receivable (whether or not
actually received) by such Person or properly allocable to such assets during
such period).
"Interest Period" means, for each Eurodollar Rate Loan, (a) initially, the
period commencing on the date such Eurodollar Rate Loan is disbursed or
Continued as, or Converted into, such Eurodollar Rate Loan and (b) thereafter,
the period commencing on the last day of the preceding Interest Period, and
ending, in each case, on the earlier of (x) the scheduled Maturity Date, or (y)
one, two, three or six months thereafter; provided that:
(i) Any Interest Period that would otherwise end on a day that is not
a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day;
(ii) Any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period; and
(iii) Unless Administrative Agent otherwise consents, there may not be
more than ten (10) Interest Periods for Eurodollar Rate Loans in effect at
any time.
"IRS" means the United States Internal Revenue Service.
"Laws" or "Law" means all international, foreign, federal, state and local
statutes, treaties, rules, regulations, ordinances, codes and administrative or
judicial precedents or authorities, including, if consistent therewith, the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof.
"Lead Arranger" means each of Banc of America Securities LLC and J.P.
Morgan Securities Inc., in its capacity as a joint lead arranger and joint book
manager.
"Lender" means each lender from time to time party hereto and, subject to
the terms and conditions of this Agreement, their respective successors and
assigns (but not any purchaser of a participation hereunder unless otherwise a
party to this Agreement).
"Lending Office" means, as to any Lender, the office or offices of such
Lender described as such on its Administrative Questionnaire, or such other
office or offices as such Lender may from time to time notify Administrative
Agent and Borrower.
"Leverage Ratio" means, at any date of determination, the ratio of (a)
Consolidated Total Indebtedness as of such date to (b) Annualized EBITDA of
Borrower and its Restricted Subsidiaries, on a consolidated basis.
9
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement (in the nature of compensating balances, cash collateral accounts or
security interests), encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest (including any conditional sale
or other title retention agreement, any financing lease or Sale-Leaseback
Transaction having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable Laws of any jurisdiction), including the interest
of a purchaser of accounts receivable; provided that Liens shall not include
ordinary and customary contractual set off rights.
"Loan" means any advance made by any Lender to Borrower as provided in
Section 2 (collectively, the "Loans").
"Loan Documents" means this Agreement, each Note, each Request for
Extension of Credit, each Compliance Certificate, each fee letter and each other
instrument or agreement from time to time delivered by Borrower pursuant to this
Agreement.
"Material Acquisition" means any Acquisition (the "Subject Acquisition")
(i) made at a time when the Leverage Ratio is in excess of 4.5 to 1.0 or (ii)
that has an Annualized Acquisition Cash Flow Value (as defined below) for the
period ended on the last day of the fiscal quarter most recently ended that is
greater than five percent (5%) of the Annualized EBITDA of Borrower and its
Restricted Subsidiaries, on a consolidated basis, for the same period. The
"Annualized Acquisition Cash Flow Value" is an amount equal to (a) the
Annualized EBITDA of the assets comprising the Subject Acquisition less (b) the
Annualized EBITDA of any assets disposed of by Borrower or any Restricted
Subsidiary (other than to Borrower or any Restricted Subsidiary) in connection
with the Subject Acquisition.
"Material Adverse Effect" means any set of circumstances or events (other
than circumstances or events affecting the cable industry in general) which (a)
has or would reasonably be expected to have a material adverse effect upon the
validity or enforceability against Borrower of any Loan Document or (b) is or
would reasonably be expected to be material and adverse to the business, assets,
liabilities, results of operations or financial condition of Borrower and its
Restricted Subsidiaries, taken as a whole.
"Material Disposition" means any Disposition (the "Subject Disposition")
(i) made at a time when the Leverage Ratio is in excess of 4.5 to 1.0 or (ii)
that has an Annualized Disposition Cash Flow Value (as defined below), for the
period ended on the last day of the fiscal quarter most recently ended that is
greater than five percent (5%) of the Annualized EBITDA of Borrower and its
Restricted Subsidiaries, on a consolidated basis, for the same period. The
"Annualized Disposition Cash Flow Value" is an amount equal to (a) the
Annualized EBITDA of the assets comprising the Subject Disposition less (b) the
Annualized EBITDA of any assets acquired by Borrower or any Restricted
Subsidiary (other than from Borrower or any Restricted Subsidiary) in connection
with the Subject Disposition.
"Maturity Date" means (a) July 16, 2002, as such date may be extended
pursuant to and in accordance with Section 2.10 or (b) such earlier date upon
which the combined Commitments may be terminated in accordance with the terms of
this Agreement; provided that, if the Loans are converted to a term loan
pursuant to Section 2.10(d), from and after such conversion, "Maturity Date"
shall mean (i) the fourth anniversary of the date on which such conversion
occurs or (ii) such earlier date upon which the combined Commitments may be
terminated in accordance with the terms of this Agreement.
10
"Minimum Amount" means, with respect to each of the following actions, the
minimum amount and any multiples in excess thereof set forth opposite such
action:
Multiples in excess
Type of Action Minimum Amount thereof
- ------------------------------- ---------------------- ----------------------
Borrowing or prepayment of, or $10,000,000 $1,000,000
Conversion into, Base Rate
Loans
Borrowing, prepayment or $10,000,000 $1,000,000
Continuation of, or Conversion
into, Eurodollar Rate Loans
Reduction in Commitments $25,000,000 $5,000,000
Assignments $10,000,000 None
"Moody's" means Moody's Investors Service, Inc., or its successor, or if it
is dissolved or liquidated or no longer performs the functions of a securities
rating agency, such other nationally recognized securities rating agency agreed
upon by Borrower and Administrative Agent and approved by Required Lenders.
"Multiemployer Plan" means any employee benefit plan of the type described
in Section 4001(a)(3) of ERISA.
"Note" means a promissory note made by Borrower in favor of a Lender
evidencing Loans made by such Lender, substantially in the form of Exhibit C
(collectively, the "Notes").
"Obligations" means all advances to, and debts, liabilities, and
obligations of, Borrower arising under any Loan Document, whether direct or
indirect (including those acquired by assumption), absolute or contingent, due
or to become due, now existing or hereafter arising and including interest that
accrues after the commencement of any proceeding under any Debtor Relief Laws by
or against Borrower.
"Outstanding Obligations" means, as of any date, and giving effect to the
making of any Extension of Credit requested on such date and all payments,
repayments and prepayments made on such date, (a) when reference is made to all
Lenders, the aggregate outstanding principal amount of all Loans, and (b) when
reference is made to one Lender, the aggregate outstanding principal amount of
all Loans made by such Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto established under ERISA.
"Person" means any individual, trustee, corporation, general partnership,
limited partnership, limited liability company, joint stock company, trust,
unincorporated organization, bank, business association, firm, joint venture or
Governmental Authority.
11
"Plan" means any "employee pension benefit plan" (as such term is defined
in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to
Title IV of ERISA and is sponsored or maintained by Borrower or any ERISA
Affiliate or to which Borrower or any ERISA Affiliate contributes or has an
obligation to contribute, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five plan years.
"Prior 364-Day Agreement" means that certain 364-Day Revolving Credit
Agreement dated as of August 24, 2000, among Borrower, the lenders party thereto
and Bank of America, as administrative agent.
"Pro Rata Share" means, with respect to each Lender, the percentage
(rounded, if necessary to the ninth decimal place) of the combined Commitments
set forth opposite the name of such Lender on Schedule 2.01, as such share may
be adjusted as contemplated herein.
"Reference Banks" means Bank of America, The Chase Manhattan Bank,
Citibank, N.A. and The Bank of New York.
"Register" has the meaning set forth in Section 2.01(c).
"Request for Extension of Credit" means, unless otherwise specified herein,
a written request substantially in the form of Exhibit A.
"Required Lenders" means, as of any date of determination, (a) if the
Commitments are then in effect, Lenders (excluding any Lender that has failed to
fund hereunder when the applicable conditions precedent to such funding have
been satisfied or waived in accordance herewith, until such failure has been
cured) having in the aggregate more than 50% of the combined Commitments
(excluding the Commitment of any Lender that has failed to fund hereunder when
the applicable conditions precedent to such funding have been satisfied or
waived in accordance herewith, until such failure has been cured) then in effect
and (b) if the Commitments have then been terminated and there are Outstanding
Obligations, Lenders holding Outstanding Obligations aggregating more than 50%
of such Outstanding Obligations.
"Requisite Notice" means a notice delivered in accordance with Section
10.02.
"Requisite Time" means, with respect to any of the actions listed below,
the time and date set forth below opposite such action:
Applicable
Time
(New York
Type of Action Time) Date of Action
- --------------------------------------------------------------------------------
Delivery of Request for Extension
of Credit for, or notice for:
* Borrowing or prepayment of Base 11:00 a.m. Same Business Day as such
Rate Loans Borrowing or prepayment
12
* Conversion into Base Rate Loans 11:00 a.m. Same Business Day as such
Conversion
* Borrowing, prepayment or 11:00 a.m. 3 Business Days prior to
Continuation of, or Conversion such Borrowing,
into, Eurodollar Rate Loans prepayment,Continuation
or Conversion
* Request to extend Maturity Date 11:00 a.m. Not more than 60 or less
than 30 days prior to
Maturity Date then in
effect
* Election to term out Loans 11:00 a.m. 5 Business Days prior to
Maturity Date then in
effect
Voluntary reduction in or termination 11:00 a.m. 3 Business Days prior to
of Commitments such reduction or
termination
Payments by Lenders or Borrower to 1:00 p.m. On date payment is due
Administrative Agent
"Responsible Officer" means the president, any vice president, the
controller, the chief financial officer, the treasurer or any assistant
treasurer of Borrower. Any document or certificate hereunder that is signed by a
Responsible Officer of Borrower shall be conclusively presumed to have been
authorized by all necessary corporate action on the part of Borrower and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
Borrower.
"Restricted Subsidiary" means each Subsidiary of Borrower that is not an
Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or its successor, or if it is dissolved or
liquidated or no longer performs the functions of a securities rating agency,
such other nationally recognized securities rating agency agreed upon by
Borrower and Administrative Agent and approved by Required Lenders.
"Sale-Leaseback Transaction" means any arrangement whereby Borrower or any
Restricted Subsidiary shall sell or transfer any property, real or personal,
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease property that it intends to use for substantially the
same purpose or purposes as the property sold or transferred.
"Significant Subsidiary" means any Restricted Subsidiary whose Annualized
EBITDA was greater than 5% of the Annualized EBITDA of Borrower and its
Restricted Subsidiaries, on a consolidated basis, for the period ended on the
last day of the fiscal quarter most recently ended, or whose assets comprised
more than 5% of the total assets of Borrower and its Restricted Subsidiaries, on
a consolidated basis, as of the last day of the fiscal quarter most recently
ended.
"Subsidiary" of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting
13
power for the election of directors or other governing body (other than
securities or interests having such power only by reason of the happening of a
contingency) are at the time beneficially owned, directly or indirectly, through
one or more intermediaries, or both, by such Person. Unless otherwise specified,
all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall
refer to a Subsidiary or Subsidiaries of Borrower.
"Threshold Amount" means $200,000,000.
"to the best knowledge of" means, when modifying a representation, warranty
or other statement of any Person, that the fact or situation described therein
is known by such Person (or, in the case of a Person other than a natural
Person, known by any officer of such Person) making the representation, warranty
or other statement, or, if such Person had exercised ordinary care in performing
his or its required duties, would have been known by such Person (or, in the
case of a Person other than a natural Person, would have been known by an
officer of such Person).
"type" of Loan means (a) a Base Rate Loan or (b) a Eurodollar Rate Loan.
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Plan pursuant to Section 412 of the Code for the applicable plan year.
"Unrestricted Subsidiary" means any Subsidiary of Borrower designated as an
"Unrestricted Subsidiary" from time to time in accordance with Section 6.13.
Until so designated, each Subsidiary of Borrower shall be a Restricted
Subsidiary.
1.02 Use of Certain Terms.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
or thereto, unless otherwise defined therein.
(b) As used herein, unless the context requires otherwise, the masculine,
feminine and neuter genders and the singular and plural include one another.
(c) The words "herein" and "hereunder" and words of similar import when
used in any Loan Document shall refer to the applicable Loan Document as a whole
and not to any particular provision thereof. The term "including" is by way of
example and not limitation. References herein to a Section, subsection or clause
shall, unless the context otherwise requires, refer to the appropriate Section,
subsection or clause in this Agreement.
(d) The term "or" is disjunctive; the term "and" is conjunctive. The term
"shall" is mandatory; the term "may" is permissive.
1.03 Accounting Terms. All accounting terms not specifically or completely
defined in this Agreement shall be construed in conformity with, and all
financial data required to be submitted by this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time
14
to time in the United States; provided, however, that for purposes of
determining compliance with the covenants set forth in Section 7.07, if there
are changes in GAAP after December 31, 2000 that materially affect the
calculation of the covenants in Section 7.07 in such a manner as to be
inconsistent with the intent of this Agreement, Administrative Agent and
Borrower shall negotiate in good faith to determine such adjustments to the
method of calculating compliance with Section 7.07 or related definitions as to
make them consistent with the intent hereof. Promptly upon Borrower and
Administrative Agent reaching such agreement, Administrative Agent shall notify
Lenders of such adjustments, which shall be conclusive unless Required Lenders
object to such adjustments within 30 days of receipt of notice. Each Compliance
Certificate shall be prepared in accordance with this Section 1.03, except for
the exclusion of Unrestricted Subsidiaries from the calculations therein.
1.04 Rounding. Any financial ratios required to be maintained by Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio is expressed in this Agreement and rounding
the result up or down to the nearest number (with a round-up if there is no
nearest number) to the number of places by which such ratio is expressed in this
Agreement.
1.05 Exhibits and Schedules. All exhibits and schedules to this Agreement,
either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference. A
matter disclosed on any Schedule shall be deemed disclosed on all Schedules.
1.06 References to Agreements and Laws. Unless otherwise expressly provided
herein, (a) references to agreements (including the Loan Documents) and other
contractual instruments shall include all amendments, restatements, extensions,
supplements and other modifications thereto (unless prohibited by any Loan
Document), and (b) references to any Law shall include all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting such Law.
1.07 Pro Forma Calculations. For the purposes of calculating Annualized
EBITDA of Borrower and its Restricted Subsidiaries, on a consolidated basis, and
Annualized Interest Expense of Borrower and its Restricted Subsidiaries, on a
consolidated basis, for any period (a "Test Period"), (i) if at any time from
the period (a "Pro Forma Period") commencing on the first day of such Test
Period and ending on the date which is ten days prior to the date of delivery of
the Compliance Certificate in respect of such Test Period (or, in the case of
any pro forma calculation required to be made pursuant hereto in respect of the
designation of a Restricted Subsidiary as an Unrestricted Subsidiary that is a
Material Disposition or the designation of an Unrestricted Subsidiary as a
Restricted Subsidiary that is a Material Acquisition, ending on the date such
Material Disposition or Material Acquisition is consummated, after giving effect
thereto), Borrower or any Restricted Subsidiary shall have made any Material
Disposition, the Annualized EBITDA for such Test Period shall be reduced by an
amount equal to the Annualized EBITDA (if positive) for such Test Period
attributable to the assets which are the subject of such Material Disposition or
increased by an amount equal to the Annualized EBITDA (if negative) for such
Test Period attributable to such assets, and Annualized Interest Expense for
such Test Period shall be reduced by an amount equal to the Annualized Interest
Expense for such Test Period attributable to any Indebtedness of Borrower or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged in
connection with such Material Disposition (or, if the capital stock of any
Restricted Subsidiary is sold (pursuant to a merger or otherwise), the
Annualized Interest Expense for such Test Period directly attributable to the
Indebtedness of such Restricted Subsidiary to the
15
extent Borrower and its continuing Restricted Subsidiaries are no longer liable
for such Indebtedness after such Material Disposition); (ii) if during such Pro
Forma Period Borrower or any Restricted Subsidiary shall have made a Material
Acquisition, Annualized EBITDA of Borrower and its Restricted Subsidiaries, on a
consolidated basis, and Annualized Interest Expense of Borrower and its
Restricted Subsidiaries, on a consolidated basis, for such Test Period shall be
calculated after giving pro forma effect thereto (including the incurrence or
assumption of any Indebtedness in connection therewith) as if such Material
Acquisition (and the incurrence or assumption of any such Indebtedness) occurred
on the first day of such Test Period; and (iii) if during such Pro Forma Period
any Person that subsequently became a Restricted Subsidiary or was merged with
or into Borrower or any Restricted Subsidiary since the beginning of such Pro
Forma Period shall have entered into any Material Disposition or Material
Acquisition that would have required an adjustment pursuant to clause (i) or
(ii) above if made by Borrower or a Restricted Subsidiary during such Pro Forma
Period, Annualized EBITDA of Borrower and its Restricted Subsidiaries, on a
consolidated basis, and Annualized Interest Expense of Borrower and its
Restricted Subsidiaries, on a consolidated basis, for such Test Period shall be
calculated after giving pro forma effect thereto as if such Material Disposition
or Material Acquisition occurred on the first day of such Test Period. For the
purposes of this section, whenever pro forma effect is to be given to a Material
Disposition or Material Acquisition, the amount of income or earnings related
thereto and the amount of Annualized Interest Expense associated with any
Indebtedness discharged or incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a Responsible Officer of
Borrower. If any Indebtedness bears a floating rate of interest and the
incurrence or assumption thereof is being given pro forma effect, the Annualized
Interest Expense on such Indebtedness shall be calculated as if the rate in
effect on the last day of the relevant Pro Forma Period had been the applicable
rate for the entire relevant Test Period (taking into account any interest rate
protection agreement applicable to such Indebtedness if such interest rate
protection agreement has a remaining term in excess of 12 months). Comparable
adjustments shall be made in connection with any determination of Annualized
EBITDA.
SECTION 2.
THE COMMITMENTS AND EXTENSIONS OF CREDIT
----------------------------------------
2.01 Amount and Terms of Commitments.
(a) Subject to the terms and conditions set forth in this Agreement, each
Lender severally agrees to make, Convert and Continue Loans in Dollars until,
but not including, the Maturity Date in such amounts as Borrower may from time
to time request; provided, however, that (i) the Outstanding Obligations of each
Lender shall not exceed such Lender's Commitment at any time, and (ii) the
Outstanding Obligations of all Lenders shall not exceed the combined Commitments
at any time. This is a revolving credit and, subject to the foregoing and the
other terms and conditions hereof (including Section 2.10(d)), Borrower may
borrow, Convert, Continue, prepay and reborrow Loans as set forth herein without
premium or penalty.
(b) Upon the request of any Lender made through Administrative Agent, a
Lender's Loans may be evidenced by a Note, instead of or in addition to its loan
accounts or records. Each such Lender may attach schedules to its Note and
endorse thereon the date, amount and maturity of its Loans and payments with
respect thereto. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of Borrower to pay any amount
owing with respect to the Obligations.
16
(c) (i) Administrative Agent shall maintain, at Administrative Agent's
Office, a register for the recordation of the names and addresses of Lenders and
the Commitments and Extensions of Credit of each Lender from time to time (the
"Register"). The Register shall be available for inspection by Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice. Administrative Agent shall maintain the Register, acting, solely for
this administrative purpose only, as agent for Borrower (it being acknowledged
and agreed that Administrative Agent and each Administrative Agent-Related
Person, in such capacity, shall constitute Indemnitees under Section 10.13).
(ii) Administrative Agent shall record in the Register the Commitment
and Extensions of Credit from time to time of each Lender, and each repayment or
prepayment in respect thereof. Any recordation shall be conclusive and binding
on Borrower and each Lender, absent manifest error; provided, however, that the
failure to make any such recordation, or any error in such recordation, shall
not affect any Lender's Commitment or Outstanding Obligations.
(iii) Each Lender shall record on its internal loan accounts or records
(and may record on the Note held by such Lender) the amount of each Extension of
Credit made by it and each payment in respect thereof; provided that the failure
to make any such recordation, or any error in such recordation, shall not affect
any Lender's Commitment or Outstanding Obligations; and provided, further, that
in the event of any inconsistency between the Register and any Lender's records,
the recordations in the Register shall govern, absent manifest error.
(iv) Borrower, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of the
corresponding Commitments and Extensions of Credit listed therein for all
purposes hereof, and no assignment or transfer of any such Commitment or
Extensions of Credit shall be effective, in each case, unless and until an
Assignment and Acceptance effecting the assignment or transfer thereof shall
have been accepted by Administrative Agent and recorded in the Register. Prior
to such recordation, all amounts owed with respect to the applicable Commitment
or Outstanding Obligations shall be owed to the Lender listed in the Register as
the owner thereof, and any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is listed
in the Register as a Lender shall be conclusive and binding on any subsequent
holder, assignee or transferee of the corresponding Commitments or Outstanding
Obligations.
2.02 Borrowings, Conversions and Continuations of Loans.
(a) Borrower may irrevocably request a Borrowing, Conversion or
Continuation of Loans on any Business Day in a Minimum Amount therefor by
delivering a Request for Extension of Credit therefor by Requisite Notice to
Administrative Agent not later than the Requisite Time therefor. All Borrowings,
Conversions and Continuations shall constitute Base Rate Loans unless properly
and timely otherwise designated as set forth in the prior sentence.
(b) Following receipt of a Request for Extension of Credit, Administrative
Agent shall promptly notify each Lender by Requisite Notice of its Pro Rata
Share thereof. In the case of a Borrowing of Loans, each Lender shall make the
funds for its Loan available to Administrative Agent at Administrative Agent's
Office not later than the Requisite Time therefor on the Business Day specified
in such Request for Extension of Credit. Upon satisfaction of the applicable
conditions set forth in Section 4.02 (if applicable to such
17
Extension of Credit) (and, if the initial Extension of Credit hereunder, Section
4.01), all funds so received shall be made available to Borrower in like funds
received. Administrative Agent shall promptly notify Borrower and Lenders of the
interest rate applicable to any Eurodollar Rate Loan upon determination of same.
Administrative Agent shall from time to time notify Borrower and Lenders of any
change in Bank of America's prime rate used in determining the Base Rate
promptly following the public announcement of such change.
(c) Unless Borrower pays all amounts due under Section 3.05, if any, a
Eurodollar Rate Loan may be Continued or Converted only on the last day of the
Interest Period for such Eurodollar Rate Loan. During the existence of an Event
of Default, the Administrative Agent may (and upon the request of the Required
Lenders shall) prohibit Loans from being requested as, Converted into, or
Continued as Eurodollar Rate Loans, and Required Lenders may demand that any or
all of the then outstanding Eurodollar Rate Loans be Converted immediately into
Base Rate Loans.
(d) The failure of any Lender to make any Loan on any date shall not
relieve any other Lender of any obligation to make a Loan on such date, but no
Lender shall be responsible for the failure of any other Lender to so make its
Loan.
2.03 Prepayments.
(a) Upon Requisite Notice to Administrative Agent not later than the
Requisite Time therefor, Borrower may at any time and from time to time
voluntarily prepay Loans in part in the Minimum Amount therefor or in full
without premium or penalty. Administrative Agent will promptly notify each
Lender thereof and of such Lender's Pro Rata Share of such prepayment. Any
prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued
interest thereon, together with the costs set forth in Section 3.05.
(b) If for any reason the amount of the Outstanding Obligations exceeds the
combined Commitments from time to time in effect, Borrower shall immediately
prepay Loans in an aggregate amount equal to such excess.
2.04 Reduction or Termination of Commitments. Upon Requisite Notice to
Administrative Agent not later than the Requisite Time therefor, Borrower may at
any time and from time to time, without premium or penalty, permanently and
irrevocably reduce the Commitments in a Minimum Amount therefor to an amount not
less than the Outstanding Obligations at such time or terminate the Commitments.
Any such reduction or termination shall be accompanied by payment of all accrued
and unpaid facility fees with respect to the portion of the Commitments being
reduced or terminated. Administrative Agent shall promptly notify Lenders of any
such request for reduction or termination of the Commitments. Each Lender's
Commitment shall be reduced by an amount equal to such Lender's Pro Rata Share
times the amount of such reduction.
2.05 Principal and Interest.
(a) Except as otherwise provided hereunder, if not sooner paid, Borrower
hereby promises to pay the outstanding principal amount of each Loan on the
Maturity Date.
18
(b) Subject to subsection (c) below, and unless otherwise specified herein,
Borrower hereby promises to pay interest on the unpaid principal amount of each
Loan (before and after default, before and after maturity, before and after
judgment and before and after the commencement of any proceeding under any
Debtor Relief Laws) from the date borrowed until paid in full (whether by
acceleration or otherwise) on each Applicable Payment Date at a rate per annum
equal to the interest rate determined in accordance with the definition of such
type of Loan, plus, to the extent applicable in each case, the Applicable Amount
for such type of Loan.
(c) Beginning on the date that an Event of Default occurs under Sections
8.01 or 8.02 and continuing until the date such Event of Default no longer
exists, Borrower hereby promises to pay interest on the unpaid principal amount
of each Loan (before or after judgment and before and after the commencement of
any proceeding under any Debtor Relief Laws) at a rate per annum equal to the
Default Rate. In addition, if any amount payable by Borrower under any Loan
Document is not paid when due (without regard to any applicable grace periods),
Borrower hereby promises to pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on such amount at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest
extent permitted by applicable Law. Accrued and unpaid interest on past due
amounts (including interest on past due interest) shall be payable upon demand.
On any Business Day, Borrower may call Administrative Agent and request
information as to the then current Eurodollar Base Rate or Base Rate, and
Administrative Agent shall provide such information.
2.06 Fees.
(a) Facility Fee. Borrower shall pay to Administrative Agent for the
account of each Lender pro rata according to its Pro Rata Share a facility fee
equal to the Applicable Amount times the actual daily amount of its Commitment,
regardless of usage. The facility fee shall accrue at all times from the Closing
Date until the Maturity Date and shall be payable quarterly in arrears on each
Applicable Payment Date. If there is any change in the Applicable Amount during
any quarter, the actual daily amount shall be computed and multiplied by the
Applicable Amount separately for each period during such quarter that such
Applicable Amount was in effect. The facility fee shall accrue at all times,
including at any time during which one or more conditions in Section 4 are not
met.
(b) Utilization Fee. Borrower shall pay to Administrative Agent for the
account of each Lender pro rata according to its Pro Rata Share a utilization
fee equal to the Applicable Amount times the outstanding principal amount of
Loans, for each day that the sum of (i) the Outstanding Obligations on such day
plus (ii) the "Outstanding Obligations," as such term is defined in the
Five-Year Agreement, on such day exceeds 33% of the sum of (x) the combined
Commitments on such day plus (y) the combined "Commitments," as such term is
defined in the Five-Year Agreement, on such day. The utilization fee shall be
payable quarterly in arrears on each Applicable Payment Date. The utilization
fee shall accrue at all applicable times, including at any time during which one
or more conditions in Section 4 are not met.
(c) Agency Fee. Borrower shall pay to Administrative Agent an agency fee in
such amounts and at such times as set forth in a separate letter agreement
between Borrower and Administrative Agent. The agency fee is for the services to
be performed by Administrative Agent in acting as Administrative Agent
19
and is fully earned on the date paid. The agency fee paid to Administrative
Agent is solely for its own account and is nonrefundable.
(d) Structuring Fee. On the Closing Date, Borrower shall pay to each Lead
Arranger a structuring fee in the amount set forth in a separate letter
agreement among Borrower, each Lead Arranger, Bank of America and The Chase
Manhattan Bank. Such structuring fee is for the services of each Lead Arranger
in structuring the credit facilities under this Agreement and is fully earned on
the date paid. The structuring fee paid to each Lead Arranger is solely for its
own account and is nonrefundable.
(e) Lenders' Upfront Fee. On the Closing Date, Borrower shall pay to
Administrative Agent, for the respective accounts of Lenders pro rata according
to their respective Pro Rata Shares, an upfront fee in an amount set forth in a
separate letter agreement among Borrower, each Lead Arranger, Bank of America,
and The Chase Manhattan Bank. Such upfront fees are for the credit facility
committed by Lenders under this Agreement and are fully earned on the date paid.
The upfront fees paid to Lenders are solely for their own account and are
nonrefundable.
2.07 Computation of Interest and Fees. Computation of interest on Base Rate
Loans when the Base Rate is determined by Bank of America's "prime rate" shall
be calculated on the basis of a year of 365 or 366 days, as the case may be, and
the actual number of days elapsed. Computation of all other types of interest
and all fees shall be calculated on the basis of a year of 360 days and the
actual number of days elapsed. Interest shall accrue on each Loan for the day on
which the Loan is made, and shall not accrue on a Loan, or any portion thereof,
for the day on which the Loan or such portion is paid, provided that any Loan
that is repaid on the same day on which it is made shall bear interest for one
day.
2.08 Making Payments.
(a) Except as otherwise provided herein, all payments by Borrower or any
Lender hereunder shall be made to Administrative Agent at Administrative Agent's
Office not later than the Requisite Time for such type of payment. All payments
received after such Requisite Time shall be deemed received on the next
succeeding Business Day for purposes of the calculation of interest and fees,
but not for purposes of determining whether a Default has occurred. All payments
of principal and interest shall be made in immediately available funds in
Dollars. All payments by Borrower shall be made without condition or deduction
for any counterclaim, defense, recoupment or setoff.
(b) Upon satisfaction of any applicable terms and conditions set forth
herein, Administrative Agent shall promptly make any amounts received in
accordance with Section 2.08(a) available in like funds received as follows: (i)
if payable to Borrower, by crediting a deposit account designated from time to
time by Borrower to Administrative Agent by Requisite Notice, and (ii) if
payable to any Lender, by wire transfer to such Lender at its Lending Office. If
such conditions are not so satisfied, Administrative Agent shall return any
funds it is holding to Lenders making such funds available, without interest.
(c) Subject to the definition of "Interest Period," if any payment to be
made by Borrower shall come due on a day other than a Business Day, payment
shall instead be considered due on the next succeeding Business Day, and such
extension of time shall be reflected in computing interest and fees.
20
(d) Unless Borrower or any Lender has notified Administrative Agent, prior
to the Requisite Time any payment to be made by it is due, that it does not
intend to remit such payment, Administrative Agent may, in its sole and absolute
discretion, assume that Borrower or such Lender, as the case may be, has timely
remitted such payment and may, in its sole and absolute discretion and in
reliance thereon, make such payment available to the Person entitled thereto. If
such payment was not in fact remitted to Administrative Agent in immediately
available funds, then:
(i) If Borrower failed to make such payment, each Lender shall
forthwith on demand repay to Administrative Agent the amount of such
assumed payment made available to such Lender, together with interest
thereon in respect of each day from and including the date such amount was
made available by Administrative Agent to such Lender to the date such
amount is repaid to Administrative Agent at the Federal Funds Rate; and
(ii) If any Lender failed to make such payment, Administrative Agent
shall be entitled to recover such corresponding amount on demand from such
Lender. If such Lender does not pay such corresponding amount upon
Administrative Agent's demand therefor, Administrative Agent promptly shall
notify Borrower, and Borrower shall pay such corresponding amount to
Administrative Agent. Administrative Agent also shall be entitled to
recover interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by Administrative
Agent to Borrower to the date such corresponding amount is recovered by
Administrative Agent, (A) from such Lender at a rate per annum equal to the
Federal Funds Rate, and (B) from Borrower, at a rate per annum equal to the
interest rate applicable to such Borrowing. Nothing herein shall be deemed
to relieve any Lender from its obligation to fulfill its Commitment or to
prejudice any rights which Administrative Agent or Borrower may have
against any Lender as a result of any default by such Lender hereunder.
(e) If Administrative Agent or any Lender is required at any time to return
to Borrower, or to a trustee, receiver, liquidator, custodian or any official
under any proceeding under Debtor Relief Laws, any portion of a payment made by
Borrower, each Lender shall, on demand of Administrative Agent, return its share
of the amount to be returned, plus interest thereon from the date of such demand
to the date such payment is made at a rate per annum equal to the Federal Funds
Rate.
2.09 Funding Sources. Nothing in this Agreement shall be deemed to obligate
any Lender to obtain the funds for any Loan in any particular place or manner or
to constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.
2.10 Extension of Maturity Date.
(a) Not earlier or later than the Requisite Time therefor, Borrower may,
upon Requisite Notice to Administrative Agent (who shall promptly notify
Lenders), request an extension of the Maturity Date then in effect (the
"Extension Request"). Within 20 days of delivery of such notice but not earlier
than 30 days prior to the Maturity Date then in effect, each Lender shall notify
Administrative Agent by Requisite Notice whether or not it consents to such
extension. Any Lender not responding within the above time period shall be
deemed to have not consented to such extension. Administrative Agent shall
promptly notify Borrower of Lenders' responses and the aggregate amount of the
Commitments of Rejecting Lenders (the "Rejected
21
Amount"). If the Maturity Date is extended as provided in Section 2.10(b) and if
any Lender (individually, a "Rejecting Lender" and collectively, "Rejecting
Lenders") declines, or is deemed to have declined, to consent to such extension,
Borrower shall cause each Rejecting Lender to be removed and/or replaced as a
Lender no later than the Maturity Date then in effect pursuant to Section 10.21.
(b) The Maturity Date then in effect shall be extended only if Lenders
("Accepting Lenders") holding more than 50% of the combined Commitments (the
amount of which shall be calculated prior to giving effect to any removals or
replacements of Rejecting Lenders) have consented thereto. If so extended, the
Maturity Date then in effect shall be extended to a date 364 days from the
Maturity Date then in effect, effective as of the Maturity Date then in effect
(the "Extension Effective Date"). Administrative Agent shall promptly confirm in
writing to Lenders and Borrower such extension and the Extension Effective Date.
As a condition precedent to such extension, Borrower shall deliver to
Administrative Agent a certificate dated as of the Extension Effective Date (in
sufficient copies for each Accepting Lender) signed by a Responsible Officer of
Borrower (i) certifying and attaching the resolutions adopted by Borrower
approving or consenting to such extension and (ii) certifying that, before and
after giving effect to such extension, no Default or Event of Default exists.
Administrative Agent shall distribute an amended Schedule 2.01 (which shall be
deemed incorporated into this Agreement) to reflect any changes in Lenders and
their Commitments.
(c) If the Maturity Date then in effect is extended pursuant to Section
2.10(b), Borrower shall have the right, in consultation with and through
Administrative Agent, either prior to or within 60 days following the Extension
Effective Date, to request one or more Accepting Lenders to increase their
Commitments by an aggregate amount not to exceed the Rejected Amount. Each
Accepting Lender shall have the right, but not the obligation, to offer to
increase its Commitment by an amount up to the amount requested by Borrower,
which offer shall be made by notice from such Accepting Lender to Administrative
Agent not later than ten days after such Accepting Lender is notified of such
request by Administrative Agent, specifying the amount of the offered increase
in such Accepting Lender's Commitment. If the aggregate amount of the offered
increases in the Commitments of all Accepting Lenders does not equal the
Rejected Amount, then Borrower shall have the right, prior to or within 60 days
following the Extension Effective Date, to add one or more banks or other
financial institutions, each of which must be eligible to be an assignee under
Section 10.04, as Lenders ("Purchasing Lenders") to replace such Rejecting
Lenders, which Purchasing Lenders shall have an aggregate Commitment not greater
than the Rejected Amount less any increases in the Commitments of Accepting
Lenders.
(d) In the event the Maturity Date then in effect is not extended pursuant
to Section 2.10(b), Borrower may, upon Requisite Notice to Administrative Agent
(who shall promptly notify Lenders) not later than the Requisite Time therefor
elect to convert the outstanding principal amount of the Loans on the Maturity
Date then in effect to term loans, which term loans shall be payable on the
fourth anniversary of the date on which such conversion occurs; provided that
such conversion shall not occur if an Event of Default has occurred and is
continuing on the Maturity Date then in effect. From and after such conversion,
(i) such term loans shall continue to be Loans for purposes of this Agreement,
except that such term loans shall not be a revolving credit and, if prepaid, may
not be reborrowed, and (ii) the Commitment of each Lender shall continue to be
outstanding, except that immediately after such conversion, the Commitment of
each Lender shall automatically be reduced to an amount equal to the principal
amount of such term loans owing to such Lender.
22
(e) This Section 2.10 shall supercede any provisions in Section 10.01 to
the contrary.
SECTION 3.
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
3.01 Taxes.
(a) Any and all payments by Borrower to or for the account of
Administrative Agent or any Lender under any Loan Document shall be made free
and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding, in the case of
Administrative Agent and each Lender, taxes imposed on or measured by its net
income, and franchise taxes imposed on it, by the jurisdiction (or any political
subdivision thereof) under the Laws of which Administrative Agent or such
Lender, as the case may be, is organized or maintains a Lending Office (all such
non-excluded taxes, duties, levies, imposts, deductions, assessments, fees,
withholdings or similar charges, and liabilities being hereinafter referred to
as "Taxes"). If Borrower shall be required by any Laws to deduct any Taxes from
or in respect of any sum payable under any Loan Document to Administrative Agent
or any Lender, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 3.01), Administrative Agent and such Lender
receive an amount equal to the sum it would have received had no such deductions
been made, (ii) Borrower shall make such deductions, (iii) Borrower shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable Laws, and (iv) within 30 days after the date of
such payment, Borrower shall furnish to Administrative Agent (who shall forward
the same to such Lender) the original or a certified copy of a receipt
evidencing payment thereof.
(b) In addition, Borrower agrees to pay any and all present or future
stamp, court or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under any Loan
Document or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, any Loan Document (hereinafter
referred to as "Other Taxes").
(c) If Borrower shall be required to deduct or pay any Taxes or Other Taxes
from or in respect of any sum payable under any Loan Document to Administrative
Agent or any Lender, Borrower shall also pay to Administrative Agent or such
Lender such additional amount that Administrative Agent or such Lender specifies
as necessary to preserve the after-tax yield (after factoring in all taxes,
including taxes imposed on or measured by net income) that Administrative Agent
or such Lender would have received if such Taxes or Other Taxes had not been
imposed.
(d) Borrower agrees to indemnify Administrative Agent and each Lender for
the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts payable under this Section)
paid by Administrative Agent and such Lender, amounts payable under Section
3.01(c) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto.
23
(e) Notwithstanding anything to the contrary contained in this Section
3.01, all obligations of Borrower to any Lender under this Section 3.01 shall be
subject to, and conditioned upon such Lender's compliance with its obligations,
if any, under Section 10.20.
3.02 Illegality. If any Lender determines that any Laws have made it
unlawful, or that any Governmental Authority has asserted that it is unlawful,
for such Lender or its applicable Lending Office to make, maintain or fund
Eurodollar Rate Loans, or materially restricts the authority of such Lender to
purchase or sell, or to take deposits of, Dollars in the applicable offshore
interbank market, or to determine or charge interest rates based upon the
Eurodollar Rate, then, on notice thereof by such Lender to Borrower through
Administrative Agent, the obligation of such Lender to make Eurodollar Rate
Loans shall be suspended until such Lender notifies Administrative Agent and
Borrower that the circumstances giving rise to such determination no longer
exist. Upon receipt of such notice, Borrower shall, upon demand from such Lender
(with a copy to Administrative Agent), prepay or Convert all Eurodollar Rate
Loans of such Lender, either on the last day of the Interest Period thereof, if
such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such
day, or immediately, if such Lender may not lawfully continue to maintain such
Eurodollar Rate Loans. Each Lender agrees to designate a different Lending
Office if such designation will avoid the need for such notice and will not, in
the good faith judgment of such Lender, otherwise be materially disadvantageous
to such Lender.
3.03 Inability to Determine Eurodollar Rates. If, in connection with any
Request for Extension of Credit involving any Eurodollar Rate Loan, (a)
Administrative Agent determines that (i) deposits in Dollars are not being
offered to banks in the applicable offshore dollar market for the applicable
amount and Interest Period of the requested Eurodollar Rate Loan or (ii)
adequate and reasonable means do not exist for determining the underlying
interest rate for such Eurodollar Rate Loan, or (b) Required Lenders determine
that such underlying interest rate does not adequately and fairly reflect the
cost to Lenders of funding such Eurodollar Rate Loan, Administrative Agent will
promptly notify Borrower and all Lenders. Thereafter, the obligation of Lenders
to make or maintain such Eurodollar Rate Loan shall be suspended until
Administrative Agent revokes such notice. Upon receipt of such notice, Borrower
may revoke any pending request for a Borrowing of Eurodollar Rate Loans or,
failing that, be deemed to have converted such request into a request for a
Borrowing of Base Rate Loans in the amount specified therein.
3.04 Increased Cost and Reduced Return; Capital Adequacy.
(a) If any Lender determines that any Laws or changes therein effective
after the date hereof:
(i) Subject such Lender to any tax, duty, or other charge with respect
to any Eurodollar Rate Loans or its obligation to make Eurodollar Rate
Loans, or change the basis on which taxes are imposed on any amounts
payable to such Lender under this Agreement in respect of any Eurodollar
Rate Loans;
(ii) Impose or modify any reserve, special deposit, or similar
requirement (other than the reserve requirement utilized in the
determination of the Eurodollar Rate) relating to any extensions of credit
or other assets of, or any deposits with or other liabilities or
commitments of, such Lender (including its Commitment); or
24
(iii) Impose on such Lender or on the offshore interbank market any
other condition affecting this Agreement or any of such extensions of
credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender of
making, Converting into, Continuing, or maintaining any Eurodollar Rate Loans or
to reduce any sum received or receivable by such Lender under this Agreement
with respect to any Eurodollar Rate Loans, then from time to time upon demand of
Lender (with a copy of such demand to Administrative Agent), Borrower shall pay
to such Lender such additional amounts as will compensate such Lender for such
increased cost or reduction.
(b) If any Lender determines that any change in or the interpretation of
any Laws effective after the date hereof have the effect of reducing the rate of
return on the capital of such Lender or compliance by such Lender (or its
Lending Office) or any corporation controlling such Lender as a consequence of
such Lender's obligations hereunder (taking into consideration its policies with
respect to capital adequacy and such Lender's desired return on capital), then
from time to time upon demand of such Lender (with a copy to Administrative
Agent), Borrower shall pay to such Lender such additional amounts as will
compensate such Lender for such reduction.
3.05 Breakfunding Costs. Subject to Section 3.06(a), upon demand of any
Lender (with a copy to Administrative Agent) from time to time, Borrower shall
promptly compensate such Lender for and hold such Lender harmless from any
actual loss, cost or expense incurred by it as a result of:
(a) Any Continuation, Conversion, payment or prepayment of any Eurodollar
Rate Loan on a day other than the last day of the Interest Period for such
Eurodollar Rate Loan (whether voluntary, mandatory, automatic, by reason of
acceleration or otherwise); or
(b) Any failure by Borrower (for a reason other than the failure of such
Lender to make a Eurodollar Rate Loan) to prepay, borrow, Continue or Convert
any Eurodollar Rate Loan on the date or in the amount notified by Borrower;
excluding any loss of anticipated profits but including any loss or expense
arising from the liquidation or reemployment of funds obtained by it to maintain
such Loan or from fees payable to terminate the deposits from which such funds
were obtained.
3.06 Matters Applicable to all Requests for Compensation.
(a) A certificate of Administrative Agent or any Lender claiming
compensation under this Section 3 and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of clearly
demonstrable error; provided that such certificate (i) sets forth with
reasonable specificity the calculation of the amount to be paid, (ii) states
that Administrative Agent or such Lender, as applicable, is treating
substantially all similarly situated borrowers in a manner that is consistent
with the treatment afforded Borrower hereunder, (iii) is delivered within 90
days of the later of the date of the event giving rise to such compensation and
the date Administrative Agent or such Lender knew or, with the exercise of
reasonable care, should have known of the requirements for such compensation,
and (iv) confirms (in the case of a claim for compensation under Section 3.01 or
Section 3.04) that either a change in the Administrative Agent's Office or
Lending Office, as the case may be, of Administrative Agent or such
25
Lender, as the case may be, would not have eliminated the request for
compensation or that such change would have been otherwise disadvantageous to
Administrative Agent or such Lender, as the case may be. In determining the
amount of such compensation, Administrative Agent or any Lender may use any
reasonable averaging and attribution methods.
(b) Upon any Lender becoming prohibited from making, maintaining or funding
Eurodollar Rate Loans pursuant to Section 3.02, or upon any Lender making a
claim for compensation under Section 3.01 or Section 3.04, Borrower may remove
and replace such Lender in accordance with Section 10.21.
3.07 Survival. All of Borrower's obligations under this Section 3 shall
survive termination of the Commitments and payment in full of all Obligations.
SECTION 4.
CONDITIONS PRECEDENT TO EXTENSIONS OF CREDIT
--------------------------------------------
4.01 Conditions Precedent to Closing Date. This Agreement shall become
effective and the Closing Date shall occur when Administrative Agent has
received all of the agreements, documents, instruments and other items described
in this Section 4.01 and the other conditions precedent set forth in this
Section 4.01 have been satisfied (and on the Closing Date, Administrative Agent
shall deliver written notice to Borrower and Lenders that such conditions
precedent have been satisfied and that the Closing Date has occurred, which
written notice shall be conclusive of such occurrence):
(a) Unless waived by all Lenders, each of the following, each of which
shall be originals or facsimiles (followed promptly by originals) unless
otherwise specified, each properly executed by a Responsible Officer of
Borrower, each dated on, or in the case of third-party certificates recently
before, the Closing Date and each in form and substance satisfactory to
Administrative Agent and its legal counsel:
(i) Executed counterparts of this Agreement, sufficient in number for
distribution to Administrative Agent, Lenders and Borrower;
(ii) Notes executed by Borrower in favor of each Lender requesting
same, substantially in the form attached as Exhibit C;
(iii) Such certificates of resolutions or other action, incumbency
certificates and/or other certificates of Responsible Officers of Borrower
as Administrative Agent may request to establish the identities of and
verify the authority and capacity of each Responsible Officer thereof
authorized to act as a Responsible Officer thereof;
(iv) Such evidence as Administrative Agent may request to verify that
Borrower is duly organized or formed, validly existing, in good standing
and qualified to engage in business in each jurisdiction in which it is
required to be qualified to engage in business, including certified copies
of Borrower's certificate of incorporation and bylaws and certificates of
good standing and/or qualification to engage in business;
26
(v) A certificate signed by a Responsible Officer of Borrower
certifying (A) that the conditions specified in Sections 4.01(c) and (d)
have been satisfied, (B) that there has been no event or circumstance since
the date of the Audited Financial Statements which has a Material Adverse
Effect, and (C) the current Debt Ratings, together with a Compliance
Certificate as of March 31, 2001 that gives effect to results of operations
for the period ended on such date;
(vi) Opinions of counsel to Borrower substantially in the form of
Exhibit E; and
(vii) Such other assurances, certificates, documents, consents or
opinions as Administrative Agent or Required Lenders reasonably may
require.
(b) Any fees required to be paid on or before the Closing Date shall have
been paid.
(c) The representations and warranties made by Borrower herein, or which
are contained in any certificate, document or financial or other statement
furnished at any time under or in connection herewith, shall be correct in all
material respects on and as of the Closing Date.
(d) No Default or Event of Default shall have occurred and be continuing.
(e) All consents or approvals of, filings with, and other actions by, any
Governmental Authority that are necessary or appropriate for the execution,
delivery and performance by Borrower of the Loan Documents shall have been
obtained, made or taken.
(f) Unless waived by Administrative Agent, Borrower shall have paid all
Attorney Costs of Administrative Agent to the extent invoiced prior to or on the
Closing Date.
(g) All commitments under the Prior 364-Day Agreement shall have been
terminated and all amounts owing thereunder through the date of termination
shall have been paid in full.
4.02 Conditions to all Extensions of Credit. In addition to any applicable
conditions precedent set forth elsewhere in this Section 4 or in Section 2, the
obligation of each Lender to honor any Request for Extension of Credit (other
than a Conversion or Continuation) is subject to the following conditions
precedent:
(a) The representations and warranties of Borrower contained in Sections
5.01, 5.02 and 5.03 of this Agreement shall be correct in all material respects
on and as of the date of such Extension of Credit.
(b) No Default or Event of Default exists, or would result from such
Extension of Credit or the use thereof.
(c) Administrative Agent shall have timely received a Request for Extension
of Credit by Requisite Notice by the Requisite Time therefor.
(d) Such Extension of Credit shall be permitted by applicable Laws.
27
Each Request for Extension of Credit by Borrower shall be deemed to be a
representation and warranty that the conditions specified in Sections 4.02(a)
and (b) have been satisfied on and as of the date of such Extension of Credit.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to Administrative Agent and Lenders that:
5.01 Existence and Qualification; Power; Compliance with Laws. Each of
Borrower and its Restricted Subsidiaries (a) is a corporation, partnership or
limited liability company duly organized or formed, validly existing and in good
standing under the Laws of the state of its organization, (b) has the power and
authority and the legal right to own, lease and operate its properties and to
conduct its business, (c) is duly qualified and in good standing under the Laws
of each jurisdiction where its ownership, lease or operation of its properties
or the conduct of its business requires such qualification, except to the extent
that the failure to be so qualified and in good standing does not have a
Material Adverse Effect, and (d) is in compliance with all Laws, except to the
extent that noncompliance does not have a Material Adverse Effect.
5.02 Power; Authorization; Enforceable Obligations. Borrower has the power
and authority and the legal right to make, deliver and perform each Loan
Document to which it is a party and to borrow hereunder and has taken all
necessary action to authorize the Extensions of Credit on the terms and
conditions of this Agreement and to authorize the execution, delivery and
performance of this Agreement and the other Loan Documents to which it is a
party. Except for such consents, authorizations, filings or other acts which
have been duly made or obtained and are in full force and effect, no consent or
authorization of, filing with, or other act by or in respect of any Governmental
Authority is required in connection with the Extensions of Credit hereunder or
with the execution, delivery, performance, validity or enforceability of this
Agreement or any of the other Loan Documents. The Loan Documents have been duly
executed and delivered by Borrower, and constitute legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other Laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
5.03 No Legal Bar. The execution, delivery, and performance by Borrower of
the Loan Documents to which it is a party do not and will not (a) violate or
conflict with, or result in a breach of, or require any consent under (i)
Borrower's certificate of incorporation or bylaws, (ii) any applicable Laws
which has a Material Adverse Effect, or (iii) any Contractual Obligation,
license or franchise of Borrower or any of its Restricted Subsidiaries or by
which any of them or any of their property is bound or subject which has a
Material Adverse Effect, (b) constitute a default under any such Contractual
Obligation, license or franchise which has a Material Adverse Effect or (c)
result in, or require, the creation or imposition of any Lien on any of the
properties of Borrower or any of its Restricted Subsidiaries which is not
permitted hereby.
5.04 Financial Statements; No Material Adverse Effect.
(a) The Audited Financial Statements (i) were prepared in accordance with
GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, and (ii) fairly
28
present the financial condition of Borrower and its consolidated Subsidiaries as
of the date thereof and their results of operations for the period covered
thereby in accordance with GAAP consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein.
(b) Since the date of the Audited Financial Statements and to the Closing
Date, there has been no event or circumstance which has a Material Adverse
Effect.
5.05 Litigation. No litigation, investigation or proceeding of or before an
arbitrator or Governmental Authority is pending or, to the best knowledge of
Borrower, threatened by or against Borrower or any of its Restricted
Subsidiaries or against any of their properties or revenues that is reasonably
likely to be determined adversely, and, if so adversely determined, has a
Material Adverse Effect.
5.06 No Default. Neither Borrower nor any of its Restricted Subsidiaries is
in default under or with respect to any Contractual Obligation, license or
franchise which has a Material Adverse Effect, and no Default or Event of
Default has occurred and is continuing or will result from the execution and
delivery of this Agreement or any of the other Loan Documents, or the making of
the Extensions of Credit hereunder.
5.07 Authorizations. Borrower and its Restricted Subsidiaries possess all
licenses, permits, franchises, consents, approvals, and other authorities
required to be issued by Governmental Authorities that are necessary or required
in the conduct of their businesses, all of which are valid, binding,
enforceable, and subsisting without any defaults thereunder, other than any
failures to possess or defaults that do not have a Material Adverse Effect.
5.08 Taxes. Borrower and its Restricted Subsidiaries have filed all tax
returns which are required to be filed, and have paid, or made provision for the
payment of, all taxes with respect to the periods, property or transactions
covered by said returns, or pursuant to any assessment received by Borrower or
its affected Restricted Subsidiaries, except such taxes, if any, as are being
contested in good faith by appropriate proceedings and as to which adequate
reserves have been established and maintained in accordance with GAAP, and
except for the failure to file tax returns and/or to pay taxes which failures do
not, in the aggregate, have a Material Adverse Effect.
5.09 Margin Regulations; Investment Company Act; Public Utility Holding
Company Act.
(a) Borrower is not engaged or will engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" "margin stock" within the respective meanings of each
of the quoted terms under Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. No part of the
proceeds of any Extensions of Credit hereunder will be used for "purchasing" or
"carrying" "margin stock" as so defined in a manner which violates, or which
would be inconsistent with, the provisions of Regulations T, U, or X of such
Board of Governors.
(b) Neither Borrower nor any of its Restricted Subsidiaries (i) is a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding
29
Company Act of 1935, or (ii) is or is required to be registered as an
"investment company" under the Investment Company Act of 1940.
5.10 ERISA Compliance.
(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state Laws. Each Plan that is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS or an application for such a letter is
currently being processed by the IRS (or will be filed before the end of any
applicable remedial amendment period under Section 401(b) of the Code) with
respect thereto and, to the best knowledge of Borrower, nothing has occurred
which would prevent, or cause the loss of, such qualification. Borrower and each
ERISA Affiliate have made all required contributions to each Plan subject to
Section 412 of the Code, and no application for a funding waiver or an extension
of any amortization period pursuant to Section 412 of the Code has been made
with respect to any Plan.
(b) There are no pending or, to the best knowledge of Borrower, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that has a Material Adverse Effect. There has been no
non-exempt prohibited transaction (within the meaning of Section 401 of ERISA)
or violation of the fiduciary responsibility rules of ERISA with respect to any
Plan that has a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur
which has a Material Adverse Effect; (ii) no Plan has any Unfunded Pension
Liability; (iii) neither Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Sections 4069 or 4212(c) of ERISA.
5.11 Assets; Liens. Borrower and its Restricted Subsidiaries own, or
possess the right to use, all properties and assets, including without
limitation, trademarks, trade names, copyrights, patents, patent rights,
franchises, licenses and other intangible assets, that are used in the conduct
of their respective businesses as now operated, and none of such properties and
assets, to the best knowledge of Borrower, conflicts with the valid ownership or
other right of use of any other Person to the extent that such failure to own or
possess or conflict has a Material Adverse Effect. None of such properties or
assets is subject to any Lien, as permitted in Section 7.01.
5.12 Environmental Compliance. Borrower and its Restricted Subsidiaries are
in compliance with Environmental Laws to the extent that noncompliance does not
have a Material Adverse Effect.
5.13 Use of Proceeds. Borrower will use the proceeds of Extensions of
Credit to refinance existing Indebtedness of Borrower and its Restricted
Subsidiaries or Affiliates and for working capital, capital expenditures,
commercial paper backup and other lawful corporate purposes.
30
5.14 Disclosure. No statement, information, report, representation, or
warranty made by Borrower in any Loan Document or furnished to Administrative
Agent or any Lender in connection with any Loan Document contains any untrue
statement of a material fact.
SECTION 6.
AFFIRMATIVE COVENANTS
---------------------
So long as any Obligation remains unpaid or unperformed, or any portion of
the Commitments remains outstanding, Borrower shall, and shall (except in the
case of Borrower's reporting covenants) cause each Restricted Subsidiary to:
6.01 Financial Statements. Deliver to Administrative Agent and Lenders, in
form and detail satisfactory to Administrative Agent:
(a) As soon as available, but in any event within 105 days after the end of
each fiscal year of Borrower, a consolidated balance sheet of Borrower and its
consolidated Subsidiaries as at the end of such fiscal year, and the related
consolidated statements of income and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail, audited and accompanied by a report and opinion of
independent certified public accountants of nationally recognized standing
reasonably acceptable to Administrative Agent, which report and opinion shall
not be subject to any qualifications or exceptions as to the scope of the audit
nor to any qualifications or exceptions not reasonably acceptable to
Administrative Agent; and
(b) As soon as available, but in any event within 60 days after the end of
each of the first three fiscal quarters of each fiscal year of Borrower, a
consolidated balance sheet of Borrower and its consolidated Subsidiaries as at
the end of such fiscal quarter, and the related consolidated statements of
income and cash flows for such fiscal quarter and for the portion of Borrower's
fiscal year then ended, setting forth in each case in comparative form the
figures for the corresponding fiscal quarter of the previous fiscal year and the
corresponding portion of the previous fiscal year, all in reasonable detail and
certified by a Responsible Officer of Borrower as fairly presenting the
financial condition, results of operations and cash flows of Borrower and its
consolidated Subsidiaries in accordance with GAAP, subject only to pro forma
adjustments and normal year-end audit adjustments.
6.02 Certificates, Notices and Other Information. Deliver to Administrative
Agent in form and detail satisfactory to Administrative Agent, with sufficient
copies for each Lender:
(a) No later than the date required for the delivery of the financial
statements referred to in Sections 6.01(a) and (b), a duly completed Compliance
Certificate signed by a Responsible Officer of Borrower, which Compliance
Certificate shall set forth the necessary adjustments to exclude the
Indebtedness and EBITDA attributed to Unrestricted Subsidiaries from the
calculations set forth therein and shall give pro forma effect (in accordance
with Section 1.07) to Material Acquisitions and Material Dispositions in
accordance with Section 1.07;
(b) Promptly after the same are available, copies of all annual, regular,
periodic and special reports and registration statements which Borrower may file
or be required to file with the Securities and
31
Exchange Commission under Sections 13 or 15(d) of the Securities Exchange Act of
1934, and not otherwise required to be delivered to Administrative Agent
pursuant hereto;
(c) Promptly after Borrower obtaining knowledge of the occurrence thereof,
notice of any Default or Event of Default specifying the nature thereof and what
action Borrower has taken, is taking or proposes to take with respect thereto;
(d) Promptly after Borrower obtaining knowledge of the commencement
thereof, notice of any litigation, investigation or proceeding affecting
Borrower or any of its Restricted Subsidiaries where the amount involved exceeds
the Threshold Amount, or in which injunctive relief or similar relief is sought,
which relief, if granted, has a Material Adverse Effect;
(e) Promptly after Borrower obtaining knowledge of the occurrence thereof,
notice of any ERISA Event;
(f) Promptly after Borrower obtaining knowledge of the announcement
thereof, notice of any announcement by Moody's or S&P of any change in a Debt
Rating; and
(g) Promptly after such request, such other data and information as from
time to time may be reasonably requested by Administrative Agent or any Lender
through Administrative Agent.
6.03 Payment of Taxes. Pay and discharge when due all taxes, assessments
and governmental charges or levies imposed on it or on its income or profits or
any of its property, except for any such tax, assessment, charge or levy which
is being contested in good faith and by appropriate proceedings, if adequate
reserves with respect thereto are maintained on its books in accordance with
GAAP, and except for such payments which, if not paid, do not in the aggregate,
have a Material Adverse Effect.
6.04 Preservation of Existence. Preserve and maintain its existence,
licenses, permits, rights, franchises and privileges necessary or desirable in
the normal conduct of its business, except where failure to do so does not have
a Material Adverse Effect, and except that nothing in this Section 6.04 shall
prohibit any transaction permitted by Section 7.03.
6.05 Maintenance of Properties. Maintain, preserve and protect all of its
material properties and equipment necessary in the operation of its business in
good order and condition, subject to wear and tear in the ordinary course of
business, except to the extent that the failure to do so does not have a
Material Adverse Effect.
6.06 Maintenance of Insurance. Maintain liability and casualty insurance
with financially sound and reputable insurance companies not Affiliates of
Borrower in such amounts with such deductibles and against such risks as is
customary for similarly situated businesses, except to the extent Borrower or
such Restricted Subsidiary maintains reasonable self-insurance with respect to
such risks.
32
6.07 Compliance With Laws.
(a) Comply with the requirements of all applicable Laws and orders of any
Governmental Authority, noncompliance with which has a Material Adverse Effect.
(b) Conduct its operations and keep and maintain its property in compliance
with all Environmental Laws, noncompliance with which has a Material Adverse
Effect.
6.08 Inspection Rights. At any time during regular business hours, upon
reasonable notice, and as often as reasonably requested, but subject to Section
10.17, permit Administrative Agent or any Lender, or any employee, agent or
representative thereof, to examine (and during the existence of an Event of
Default, make copies and abstracts from) the records and books of account of
Borrower and its Restricted Subsidiaries and to visit and inspect their
properties and to discuss their affairs, finances and accounts with any of their
officers and key employees.
6.09 Keeping of Records and Books of Account. Keep adequate records and
books of account reflecting all material financial transactions in conformity
with GAAP, consistently applied, and in material conformity with all applicable
requirements of any Governmental Authority having regulatory jurisdiction over
Borrower or the applicable Restricted Subsidiary.
6.10 Compliance with ERISA. Cause, and cause each of its ERISA Affiliates
to (a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law; (b)
cause each Plan which is qualified under Section 401(a) of the Code to maintain
such qualification; and (c) make all required contributions to any Plan subject
to Section 412 of the Code; provided that this Section 6.10 shall not prohibit
Borrower and its ERISA Affiliates from terminating any Plan to the extent
permitted by ERISA, the Code, and other applicable law or if such termination
does not have a Material Adverse Effect.
6.11 Compliance With Agreements. Promptly and fully comply with all
Contractual Obligations to which any one or more of them is a party, except for
any such Contractual Obligations (a) then being contested or intended to be
timely contested by any of them in good faith by appropriate proceedings, or (b)
the failure to comply with which does not have a Material Adverse Effect.
6.12 Use of Proceeds. Use the proceeds of Extensions of Credit as
represented herein.
6.13 Designation of Restricted and Unrestricted Subsidiaries. So long as no
Default or Event of Default exists or arises as a result thereof, Borrower may
from time to time designate a Restricted Subsidiary as an Unrestricted
Subsidiary or designate an Unrestricted Subsidiary as a Restricted Subsidiary;
provided that Borrower shall (a) provide Administrative Agent written
notification of such designation prior to or concurrently therewith, and (b) if
such designation is a Material Acquisition (in the case of the designation of an
Unrestricted Subsidiary as a Restricted Subsidiary) or a Material Disposition
(in the case of the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary), within 10 Business Days after such notification, deliver to
Administrative Agent a certificate, in form reasonably acceptable to
Administrative Agent, demonstrating pro-forma compliance (in accordance with
Section 1.07) with Section 7.07 immediately prior to and after giving effect to
such designation.
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SECTION 7.
NEGATIVE COVENANTS
------------------
So long as any Obligations remain unpaid or unperformed, or any portion of
the Commitments remains outstanding:
7.01 Liens. Borrower shall not, nor shall it permit any Restricted
Subsidiary to, directly or indirectly, incur, assume or suffer to exist, any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except:
(a) Liens pursuant to any Loan Document;
(b) Liens existing on the date hereof securing Indebtedness which does not
exceed $50,000,000 in the aggregate (which, in the case of any such Lien
securing Indebtedness in the amount of $100,000 or more, is listed on Schedule
7.01), and any renewals or extensions thereof, provided that such Liens are not
extended to cover any other property, assets or revenues;
(c) Liens for taxes not yet due or which are being contested in good faith
and by appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the applicable Person or such Liens are otherwise
permitted under Section 6.03;
(d) Carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business which are not
overdue for a period of more than 30 days or which are being contested or
intended to be timely contested in good faith and by appropriate proceedings;
(e) Pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation;
(f) Deposits to secure the performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(g) Easements, rights-of-way, restrictions and other similar encumbrances
affecting real property which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the applicable Person;
(h) Attachment, judgment or other similar Liens arising in connection with
litigation or other legal proceedings (and not otherwise a Default hereunder)
that are currently being contested in good faith by appropriate proceedings or
are intended to be timely contested in good faith by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of the
applicable Person;
(i) Liens in favor of Borrower or any Restricted Subsidiary;
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(j) Liens on "margin stock" (as defined in Regulation U of the Board of
Governors of the Federal Reserve System);
(k) Liens on property acquired (by purchase, merger or otherwise) after the
date hereof, existing at the time of acquisition thereof (but not created in
anticipation thereof), or placed thereon (at the time of such acquisition or
within 180 days of such acquisition to secure a portion of the purchase price
thereof), and any renewals or extensions thereof, so long as the Indebtedness
secured thereby is permitted hereby; provided that such Liens do not and are not
extended to cover any other property;
(l) Liens under Sale-Leaseback Transactions and other Liens, and any
renewals or extensions thereof, so long as the Indebtedness secured thereby does
not exceed $500,000,000 in the aggregate; and
(m) Liens not otherwise permitted hereby which do not secure any
Indebtedness.
7.02 Subsidiary Indebtedness. Borrower shall not permit any of its
Restricted Subsidiaries to create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness existing on the date hereof, which, for all such
Indebtedness other than any Indebtedness which is less than $1,000,000 on an
individual basis, is set forth on Schedule 7.02, and extensions, renewals and
replacements of such Indebtedness that do not increase the outstanding principal
amount thereof;
(b) Indebtedness of any Restricted Subsidiary to Borrower or any other
Restricted Subsidiary; and
(c) Other Indebtedness in an aggregate principal amount not exceeding
$750,000,000 at any time.
7.03 Fundamental Changes. (a) Borrower shall not (A) merge or consolidate
with or into any Person or (B) liquidate, wind-up or dissolve itself or (C)
sell, transfer or dispose of all or substantially all of its assets, provided,
nothing in this Section 7.03 shall be construed to prohibit Borrower from
reincorporating in another jurisdiction, changing its form of organization or
merging into, or transferring all or substantially all of its assets to, another
Person so long as
(i) either (x) Borrower shall be the surviving entity with
substantially the same assets immediately following the
reincorporation or reorganization or (y) the surviving entity or
transferee (the "Successor Corporation") shall, immediately following
the merger or transfer, as the case may be, (A) have substantially all
of the assets of Borrower immediately preceding the merger or
transfer, as the case may be, (B) have duly assumed all of Borrower's
obligations hereunder and under the other Loan Documents in form and
substance satisfactory to Administrative Agent (and, if requested by
Administrative Agent, the Successor Corporation shall have delivered
an opinion of counsel as to the assumption of such obligations) and
(C) either (I) have then-effective ratings (or implied ratings)
published by Moody's or S&P applicable to such Successor Corporation's
senior, unsecured, non-credit-enhanced, long term indebtedness for
borrowed money, which ratings shall be
35
either Baa3 or higher (if assigned by Moody's) or BBB- or higher (if
assigned by S&P) or (II) be acceptable to Required Lenders; and
(ii) immediately after giving effect to such transaction no
Default or Event of Default shall have occurred and be continuing.
(b) Borrower and its Restricted Subsidiaries, taken as a whole, shall
continue to maintain cable and other communications businesses as their
primary lines of business.
7.04 ERISA. Borrower shall not, nor shall it permit any Restricted
Subsidiary to, directly or indirectly, at any time engage in a transaction which
could be subject to Sections 4069 or 4212(c) of ERISA, or permit any Plan to (a)
engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of
the Code); (b) fail to comply with ERISA or any other applicable Laws; or (c)
incur any material "accumulated funding deficiency" (as defined in Section 302
of ERISA); which, with respect to each event described in clauses (a), (b) or
(c) above, has a Material Adverse Effect.
7.05 Limitations on Upstreaming. Borrower shall not, nor shall it permit
any Restricted Subsidiary to, directly or indirectly agree to any restriction or
limitation on the making of dividends or distributions, the repaying of loans or
advances or the transferring of assets from any Restricted Subsidiary to
Borrower or any other Restricted Subsidiary, except (a) restrictions and
limitations imposed by Law or by the Loan Documents, (b) customary restrictions
and limitations contained in agreements relating to the sale of a Subsidiary or
its assets that is permitted hereunder and (c) any other restrictions that could
not reasonably be expected to impair Borrower's ability to repay the Obligations
as and when due.
7.06 Margin Regulations. Borrower shall not, nor shall it permit any
Restricted Subsidiary to, directly or indirectly, use the proceeds of any
Extensions of Credit hereunder for "purchasing" or "carrying" "margin stock" (as
such terms are defined in Regulation U of the Board of Governors of the Federal
Reserve System), if such use would violate, or would be inconsistent with, the
provisions of Regulations T, U, or X of such Board of Governors.
7.07 Financial Covenants.
(a) Interest Coverage Ratio. Borrower shall not permit the Interest
Coverage Ratio as of the end of any fiscal quarter of Borrower to be less than
2.5 to 1.0; and
(b) Leverage Ratio. Borrower shall not permit the Leverage Ratio of
Borrower to be greater than 5.50 to 1.0 at any time.
SECTION 8.
EVENTS OF DEFAULT AND REMEDIES
------------------------------
8.01 Events of Default. Any one or more of the following events shall
constitute an Event of Default:
36
(a) Borrower fails to pay any principal on any Outstanding Obligation
(other than fees) on the date when due; or
(b) Borrower fails to pay any interest on any Outstanding Obligation, or
any facility or utilization fees, within three days after the date when due; or
fails to pay any other fees or amount payable to Administrative Agent or any
Lender under any Loan Document within five days after the date when due or, if
applicable, after demand is made for the payment thereof; or
(c) Any default occurs in the observance or performance of any agreement
contained in Section 6.02(c), 6.12, 7.03 or 7.07; or
(d) Borrower fails to perform or observe any other covenant or agreement
(not specified in subsections (a), (b) or (c) above) contained in any Loan
Document on its part to be performed or observed and such failure continues for
30 days after notice thereof to Borrower from Administrative Agent or any
Lender; or
(e) Any representation or warranty by Borrower in this Agreement or any
Compliance Certificate proves to have been incorrect in any material respect
when made or deemed made; or
(f) (i) Borrower (x) defaults in any payment when due (including any stated
grace periods) of principal of or interest on any Indebtedness (other than the
Obligations) having an aggregate principal amount in excess of the Threshold
Amount or (y) defaults in the observance or performance of any other agreement
or condition relating to any Indebtedness (other than the Obligations) or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur, the effect of which default or other
event (after giving effect to any applicable stated grace periods) is to cause,
or to permit the holder or holders of such Indebtedness (or a trustee or agent
on behalf of such holder or holders or beneficiary or beneficiaries) to cause,
with the giving of notice if required, Indebtedness having an aggregate
principal amount in excess of the Threshold Amount to be demanded or become due
(automatically or otherwise) or to become subject to mandatory redemption prior
to its stated maturity, or any Guaranty Obligation in such amount to become
payable or cash collateral in respect thereof to be demanded (provided that to
the extent that any default referred to in the preceding provisions of this
Section 8.01(f) is cured or duly waived by the required holders of the
applicable Indebtedness, such default shall cease to be an Event of Default
hereunder, unless and except to the extent that Administrative Agent has
theretofore exercised remedies hereunder pursuant to Section 8.02), or Borrower
is unable or admits in writing its inability to pay its debts as they mature; or
(g) Any Loan Document, at any time after its execution and delivery and for
any reason other than the agreement of Required Lenders or all Lenders, as may
be required hereunder, or satisfaction in full of all the Obligations, ceases to
be in full force and effect or is declared by a court of competent jurisdiction
to be null and void, invalid or unenforceable in any material respect; or
Borrower denies that it has any or further liability or obligation under any
Loan Document, or purports to revoke, terminate or rescind any Loan Document; or
(h) (i) A final non-appealable judgment against Borrower or any of its
Significant Subsidiaries is entered for the payment of money (which is not
covered by insurance) in excess of the Threshold Amount,
37
or any non-monetary final judgment is entered against Borrower or any of its
Significant Subsidiaries which has a Material Adverse Effect if, in each case,
such judgment remains unsatisfied without procurement of a stay of execution for
(A) 30 calendar days after the date of entry of such judgment or (B) if earlier,
five days prior to the date of any possible execution sale, or (ii) any writ or
warrant of attachment or execution or similar process is issued or levied
against all or any material part of the property of any such Person and is not
released, vacated, stayed or fully bonded within 30 calendar days after its
issue or levy; or
(i) Borrower or any of its Significant Subsidiaries institutes or consents
to the institution of any proceeding under Debtor Relief Laws, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any material part of its
property; or any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed without the application or consent
of that Person and the appointment continues undischarged or unstayed for 60
calendar days; or any proceeding under Debtor Relief Laws relating to any such
Person or to all or any part of its property is instituted without the consent
of that Person and continues undismissed or unstayed for 60 calendar days, or an
order for relief is entered in any such proceeding; or
(j) There occurs any Change of Control.
8.02 Remedies Upon Event of Default. Without limiting any other rights or
remedies of Administrative Agent or Lenders provided for elsewhere in this
Agreement, or the other Loan Documents, or by applicable Law, or in equity, or
otherwise:
(a) Upon the occurrence, and during the continuance, of any Event of
Default other than an Event of Default described in Section 8.01(i),
Administrative Agent may (and, subject to the terms of Section 9, shall upon the
request of Required Lenders) terminate the Commitments and/or declare all or any
part of the unpaid principal of all Loans, all interest accrued and unpaid
thereon and all other amounts payable under the Loan Documents to be immediately
due and payable, whereupon the same shall become and be immediately due and
payable, without protest, presentment, notice of dishonor, demand or further
notice of any kind, all of which are expressly waived by Borrower.
(b) Upon the occurrence of any Event of Default described in Section
8.01(i):
(i) The Commitments and all other obligations of Administrative Agent
or Lenders shall automatically terminate without notice to or demand upon
Borrower, which are expressly waived by Borrower; and
(ii) The unpaid principal of all Loans, all interest accrued and
unpaid thereon and all other amounts payable under the Loan Documents shall
be immediately due and payable, without protest, presentment, notice of
dishonor, demand or further notice of any kind, all of which are expressly
waived by Borrower.
(c) Upon the occurrence of any Event of Default, Administrative Agent may
proceed to protect, exercise and enforce against Borrower the rights and
remedies of Administrative Agent and Lenders under the Loan Documents and such
other rights and remedies as are provided by Law or equity.
38
(d) The order and manner in which Administrative Agent's and Lenders'
rights and remedies are to be exercised shall be determined by Administrative
Agent or Required Lenders in their sole and absolute discretion. Regardless of
how a Lender may treat payments for the purpose of its own accounting, for the
purpose of computing the Obligations hereunder, payments received during the
existence of an Event of Default shall be applied first, to costs and expenses
(including Attorney Costs) incurred by Administrative Agent and each Lender (to
the extent that each Lender has a right to reimbursement thereof pursuant to the
Loan Documents), second, to the payment of accrued and unpaid interest on the
Obligations to and including the date of such application, third, to the payment
of the unpaid principal of the Obligations, and fourth, to the payment of all
other amounts (including fees) then owing to Administrative Agent and Lenders
under the Loan Documents, in each case paid pro rata to each Lender in the same
proportions that the aggregate Obligations owed to each Lender under the Loan
Documents bear to the aggregate Obligations owed under the Loan Documents to all
Lenders, without priority or preference among Lenders. No application of
payments will cure any Event of Default, or prevent acceleration, or continued
acceleration, of amounts payable under the Loan Documents, or prevent the
exercise, or continued exercise, of rights or remedies of Administrative Agent
and Lenders hereunder or thereunder, at Law or in equity.
SECTION 9.
ADMINISTRATIVE AGENT
--------------------
9.01 Appointment and Authorization of Administrative Agent. Each Lender
hereby irrevocably (subject to Section 9.09) appoints, designates and authorizes
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document,
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall Administrative Agent have or be deemed to
have any fiduciary relationship with any Lender or participant, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against Administrative Agent. Without limiting the generality of the foregoing
sentence, the use of the term "agent" in this Agreement with reference to
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
9.02 Delegation of Duties. Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Administrative Agent shall not
be responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects in the absence of gross negligence or willful misconduct.
9.03 Liability of Administrative Agent. No Administrative Agent-Related
Person shall (i) be liable for any action taken or omitted to be taken by any of
them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence
39
or willful misconduct in connection with its duties expressly set forth herein),
or (ii) be responsible in any manner to any Lender or participant for any
recital, statement, representation or warranty made by Borrower or any officer
thereof contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Administrative Agent under or in connection with, this Agreement
or any other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of Borrower or any other party to any Loan Document to perform
its obligations hereunder or thereunder. No Administrative Agent-Related Person
shall be under any obligation to any Lender or participant to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of Borrower or any Subsidiary or Affiliate
thereof.
9.04 Reliance by Administrative Agent.
(a) Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, communication, signature, resolution,
representation, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to Borrower), independent accountants and other
experts selected by Administrative Agent. Administrative Agent shall be fully
justified in failing or refusing to take any action under any Loan Document
unless it shall first receive such advice or concurrence of Required Lenders or
all Lenders as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of Required Lenders or all
Lenders, if required hereunder, and such request and any action taken or failure
to act pursuant thereto shall be binding upon all Lenders and participants.
Where this Agreement expressly permits or prohibits an action unless Required
Lenders or all Lenders otherwise determine, and in all other instances,
Administrative Agent may, but shall not be required to, initiate any
solicitation for the consent or a vote of Lenders.
(b) For purposes of determining compliance with the conditions specified in
Section 4.01, absent Requisite Notice by such Lender to Administrative Agent to
the contrary, each Lender shall be deemed to have consented to, approved or
accepted or to be satisfied with, each document or other matter either sent by
Administrative Agent to each Lender for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approved by or
acceptable or satisfactory to a Lender.
9.05 Notice of Default. Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to Administrative Agent for the account of Lenders, unless
Administrative Agent shall have received written notice from a Lender or
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." Administrative
Agent will notify Lenders of its receipt of any such notice. Administrative
Agent shall take such action with respect to such Default or Event of Default as
may be directed by Required Lenders in accordance with Section 8; provided,
however, that unless and until Administrative Agent has received any
40
such direction, Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable or in the best interest of Lenders.
9.06 Credit Decision; Disclosure of Information by Administrative Agent.
Each Lender and participant acknowledges that no Administrative Agent-Related
Person has made any representation or warranty to it, and that no act by
Administrative Agent hereinafter taken, including any consent to and acceptance
of any assignment or review of the affairs of Borrower or any of its
Subsidiaries or Affiliates, shall be deemed to constitute any representation or
warranty by any Administrative Agent-Related Person to any Lender or participant
as to any matter, including whether Administrative Agent-Related Persons have
disclosed material information in their possession. Each Lender, including any
Lender by assignment, and each participant represents to Administrative Agent
that it has, independently and without reliance upon any Administrative
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and its Subsidiaries and Affiliates, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrower hereunder. Each Lender and participant also represents that
it will, independently and without reliance upon any Administrative
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of Borrower and its Subsidiaries and
Affiliates. Except for notices, reports and other documents expressly required
to be furnished to Lenders by Administrative Agent herein (which shall include
the notices, reports and other documents described in Section 6.02),
Administrative Agent shall not have any duty or responsibility to provide any
Lender or participant with any credit or other information concerning the
business, prospects, operations, property, financial and other condition or
creditworthiness of Borrower or any of its Subsidiaries or Affiliates which may
come into the possession of any Administrative Agent-Related Person.
9.07 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, Lenders shall indemnify upon
demand each Administrative Agent-Related Person (to the extent not reimbursed by
or on behalf of Borrower and without limiting the obligation of Borrower to do
so), pro rata, and hold harmless each Administrative Agent-Related Person from
and against any and all Indemnified Liabilities incurred by it; provided,
however, that no Lender shall be liable for the payment to any Administrative
Agent-Related Person of any portion of such Indemnified Liabilities resulting
from such Person's gross negligence or willful misconduct; provided, however,
that no action taken in accordance with the directions of Required Lenders shall
be deemed to constitute gross negligence or willful misconduct for purposes of
this Section. Without limitation of the foregoing, each Lender shall reimburse
Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that Administrative Agent
is not reimbursed for such expenses by or on behalf of Borrower. The undertaking
in this Section shall survive the payment of all Obligations hereunder and the
resignation of Administrative Agent.
41
9.08 Administrative Agent in Individual Capacity. Bank of America and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with Borrower
and its Subsidiaries and Affiliates as though Bank of America were not
Administrative Agent hereunder and without notice to or consent of Lenders.
Lenders and participants acknowledge that, pursuant to such activities, Bank of
America or its Affiliates may receive information regarding Borrower or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of Borrower or such Affiliate) and acknowledge that
Administrative Agent shall be under no obligation to provide such information to
them. With respect to its Loans, Bank of America shall have the same rights and
powers under this Agreement as any other Lender and may exercise the same as
though it were not Administrative Agent.
9.09 Resignation by Administrative Agent. Administrative Agent may resign
as Administrative Agent upon 30 days' notice to Lenders. If Administrative Agent
resigns under this Agreement, Required Lenders shall appoint from among Lenders
a successor administrative agent for Lenders which successor administrative
agent shall be consented to by Borrower at all times other than during the
existence of an Event of Default (which approval of Borrower shall not be
unreasonably withheld or delayed). If no successor administrative agent is
appointed prior to the effective date of the resignation of Administrative
Agent, Administrative Agent may appoint, after consulting with Lenders and
Borrower, a successor administrative agent from among Lenders (or, if no Lender
is willing to act as successor administrative agent, among other commercial
banks each having a combined capital and surplus of at least $1,000,000,000),
which successor administrative agent shall be consented to by Borrower at all
times other than during the existence of an Event of Default (which approval of
Borrower shall not be unreasonably withheld or delayed). Upon the acceptance of
its appointment as successor administrative agent hereunder, such successor
administrative agent shall succeed to all the rights, powers and duties of the
retiring Administrative Agent and the term "Administrative Agent" shall mean
such successor administrative agent and the retiring Administrative Agent's
appointment, powers and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Section 9 and Sections 10.03 and
10.13 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If no successor
administrative agent has accepted appointment as Administrative Agent by the
date which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and Lenders shall perform all of the duties of
Administrative Agent hereunder until such time, if any, as Required Lenders
appoint a successor agent as provided for above.
9.10 Other Agents. None of Lenders (other than Bank of America) identified
on the facing page or signature pages of this Agreement as having a title or
role other than as a Lender shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Lenders as such. Without limiting the foregoing, none of Lenders so identified
shall have or be deemed to have any fiduciary relationship with any Lender. Each
Lender acknowledges that it has not relied, and will not rely, on any of Lenders
so identified in deciding to enter into this Agreement or in taking or not
taking action hereunder.
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SECTION 10.
MISCELLANEOUS
-------------
10.01 Amendments; Consents. No amendment, modification, supplement,
extension, termination or waiver of any provision of this Agreement or any other
Loan Document, no approval or consent thereunder, and no consent to any
departure by Borrower therefrom shall be effective unless in writing signed by
Borrower and Required Lenders and acknowledged by Administrative Agent, and each
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. Notwithstanding the foregoing sentence,
without the approval in writing of Borrower, Administrative Agent and each
Lender affected thereby, no amendment, modification, supplement, termination,
waiver, approval, or consent may be effective to:
(a) Reduce the amount of principal of any Outstanding Obligations owed to
such Lender;
(b) Reduce the rate of interest payable on any Outstanding Obligations owed
to such Lender or the amount or rate of any fee or other amount payable to such
Lender under the Loan Documents, except that Required Lenders may waive or defer
the imposition of the Default Rate;
(c) Waive an Event of Default consisting of the failure of Borrower to pay
when due principal, interest, any facility or utilization fee, or any other
amount payable to such Lender under the Loan Documents;
(d) Postpone any date scheduled for the payment of principal of, or
interest on, any Loan or for the payment of any facility or utilization fee or
for the payment of any other amount, in each case payable to such Lender under
the Loan Documents, or extend the term of, or increase the amount of, such
Lender's Commitment (it being understood that a waiver of any Event of Default
not referred to in subsection (c) above shall require only the consent of
Required Lenders) or modify the Pro Rata Share of such Lender (except as
contemplated hereby);
(e) Amend or waive the definition of "Required Lenders" or the provisions
of this Section 10.01 or 10.06; or
(f) Amend or waive any provision of this Agreement that expressly requires
the consent or approval of such Lender;
provided, however, that (i) no amendment, waiver or consent shall, unless in
writing and signed by Administrative Agent in addition to Required Lenders or
each affected Lender, as the case may be, affect the rights or duties of
Administrative Agent, and (ii) any fee letters may be amended, or rights or
privileges thereunder waived, in a writing executed by the parties thereto. Any
amendment, modification, supplement, termination, waiver or consent pursuant to
this Section shall apply equally to, and shall be binding upon, all Lenders and
Administrative Agent.
10.02 Requisite Notice; Effectiveness of Signatures and Electronic Mail.
(a) Requisite Notice. Notices given in connection with any Loan Document
shall be delivered to the intended recipient at the number and/or address set
forth on the Administrative Questionnaire (or as
43
otherwise specified from time to time by such recipient in writing to
Administrative Agent) and shall be given by (i) irrevocable written notice or
(ii) except as otherwise provided, irrevocable telephonic (not voicemail)
notice. Such notices may be delivered, must be confirmed and shall be effective
as follows:
Mode of Delivery Effective on earlier of actual receipt, and:
- --------------------------------------------------------------------------------
Mail Fourth Business Day after deposit in U.S. Mail,
first class postage pre-paid
Courier or hand delivery When signed for by recipient
Telephone (not voicemail) When conversation completed (must be confirmed in
writing)
Facsimile When confirmed by telephone (not voicemail)
Electronic Mail When delivered (usage subject to subsection (c)
below)
provided, however, that notices delivered to Administrative Agent pursuant to
Section 2 shall not be effective until actually received by Administrative
Agent; provided, further, that Administrative Agent may require that any notice
be confirmed or followed by a manually-signed hard copy thereof. Notices shall
be in any form prescribed herein and, if sent by Borrower, shall be made by a
Responsible Officer of Borrower. Notices delivered and, if required, confirmed
in accordance with this subsection shall be deemed to have been delivered by
Requisite Notice.
(b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may
be transmitted and/or signed by facsimile. The effectiveness of any such
documents and signatures shall, subject to applicable Law, have the same force
and effect as manually-signed hard copies and shall be binding on Borrower,
Administrative Agent and Lenders. Administrative Agent may also require that any
such documents and signatures be confirmed by a manually-signed hard copy
thereof; provided, however, that the failure to request or deliver the same
shall not limit the effectiveness of any facsimile document or signature.
(c) Limited Usage of Electronic Mail. Electronic mail and internet and
intranet websites may be used to distribute routine communications, such as
financial statements and other information, and to distribute agreements and
other documents to be signed by Administrative Agent, Lenders and Borrower. No
other legally-binding and/or time-sensitive communication or Request for
Extension of Credit may be sent by electronic mail without the consent of, or
confirmation to, the intended recipient in each instance.
(d) Reliance by Administrative Agent and Lenders. Administrative Agent and
Lenders shall be entitled to rely and act upon any notices purportedly given by
or on behalf of Borrower even if (i) such notices were not made in a manner
specified herein, were incomplete or were not preceded or followed by any other
notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof. Borrower shall indemnify
Administrative Agent-Related Persons and Lenders from
44
any loss, cost, expense or liability as a result of relying on any notices
purportedly given by or on behalf of Borrower absent the gross negligence or
willful misconduct of the Person seeking indemnification.
10.03 Attorney Costs, Expenses and Taxes. Borrower agrees (a) to pay or
reimburse Administrative Agent and Lead Arrangers for all reasonable costs and
expenses incurred in connection with the development, preparation, negotiation
and execution of the Loan Documents, and to pay or reimburse Administrative
Agent for all reasonable costs and expenses incurred in connection with the
development, preparation, negotiation and execution of any amendment, waiver,
consent, supplement or modification to, any Loan Documents, and any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, including
all Attorney Costs of Administrative Agent, and (b) to pay or reimburse
Administrative Agent and each Lender for all costs and expenses incurred in
connection with any restructuring, reorganization (including a bankruptcy
reorganization) or enforcement or attempted enforcement of, or preservation of
any rights under, any Loan Documents, and any other documents prepared in
connection herewith or therewith, or in connection with any refinancing or
restructuring of any such documents in the nature of a "workout" or of any
insolvency or bankruptcy proceeding, including Attorney Costs. The agreements in
this Section shall survive repayment of all Obligations.
10.04 Binding Effect; Assignment.
(a) This Agreement and the other Loan Documents to which Borrower is a
party will be binding upon and inure to the benefit of Borrower, Administrative
Agent, Lenders and their respective successors and assigns, except that Borrower
may not, except as permitted by Section 7.03, assign its rights hereunder or
thereunder or any interest herein or therein without the prior written consent
of all Lenders and any such attempted assignment shall be void. Any Lender may
at any time pledge its Note or any other instrument evidencing its rights as a
Lender under this Agreement to a Federal Reserve Bank or, if such Lender is a
fund, to any trustee or to any other representative of holders of obligations
owed or securities issued by such fund as security for such obligations or
securities, but no such pledge shall release such Lender from its obligations
hereunder or grant to such Federal Reserve Bank or trust or other representative
the rights of a Lender hereunder absent foreclosure of such pledge, and any
transfer to any Person upon the enforcement of such pledge shall be subject to
this Section 10.04.
(b) From time to time following the Closing Date, each Lender may assign to
one or more banks or other financial institutions, each having a combined
capital and surplus of at least $250,000,000 (such qualifications being subject
to waiver by Borrower and Administrative Agent), all or any portion of its
Commitment and/or Extensions of Credit; provided that (i) such assignment, if
not to a Lender or an Affiliate of the assigning Lender, shall be consented to
(which consents shall not be unreasonably withheld) by Borrower at all times
other than during the existence of an Event of Default and by Administrative
Agent, (ii) a copy of a duly signed and completed Assignment and Acceptance
shall be delivered to Administrative Agent, (iii) except in the case of an
assignment (A) to an Affiliate of the assigning Lender or to another Lender or
(B) of the entire remaining Commitment of the assigning Lender, the portion of
the Commitment assigned shall not be less than the Minimum Amount therefor, and
(iv) the effective date of any such assignment shall be as specified in the
Assignment and Acceptance, but not earlier than the date which is five Business
Days after the date Administrative Agent has received the Assignment and
Acceptance. Upon obtaining any consent required as set forth in the prior
sentence, any forms required by Section 10.20 and
45
payment of the requisite fee described below, the assignee named therein shall
be a Lender for all purposes of this Agreement to the extent of the Assigned
Interest (as defined in such Assignment and Acceptance), and, except for rights
and obligations which by their terms survive termination of any Commitments, the
assigning Lender shall be released from any further obligations under this
Agreement to the extent of such Assigned Interest. Upon request, Borrower shall
execute and deliver new or replacement Notes to the assigning Lender and the
assignee Lender to evidence Loans made by them. Administrative Agent's consent
to any assignment shall not be deemed to constitute any representation or
warranty by any Administrative Agent-Related Person as to any matter.
Administrative Agent shall record the information contained in the Assignment
and Acceptance in the Register.
(c) After receipt of a completed Assignment and Acceptance, and receipt of
an assignment fee of $3,500 from such assignee and/or such assigning Lender
(including in the case of assignments to Affiliates of assigning Lenders),
Administrative Agent shall, promptly following the effective date thereof,
provide to Borrower and Lenders a revised Schedule 2.01 giving effect thereto.
(d) Each Lender may from time to time, without the consent of any other
Person, grant participations to one or more other Persons (including another
Lender) in all or any portion of its Commitment and/or Extensions of Credit;
provided, however, that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participating
bank or other financial institution shall not be a Lender hereunder for any
purpose except, if the participation agreement so provides, for the purposes of
the increased cost provisions of Section 3 (but only to the extent that the cost
of such benefits to Borrower does not exceed the cost which Borrower would have
incurred in respect of such Lender absent the participation) and for purposes of
Section 10.06, (iv) Borrower, Administrative Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and (v) the consent of the
holder of such participation interest shall not be required for amendments or
waivers of provisions of the Loan Documents; provided however, that the
assigning Lender may, in any agreement with a participant, give such participant
the right to consent (as between the assigning Lender and such participant) to
any matter which (A) extends the Maturity Date as to such participant or any
other date upon which any payment of money is due to such participant, (B)
reduces the rate of interest owing to such participant or any fee or any other
monetary amount owing to such participant, or (C) reduces the amount of any
scheduled payment of principal owing to such participant. Any Lender that sells
a participation to any Person that is a "foreign corporation, partnership or
trust" within the meaning of the Code shall include in its participation
agreement with such Person a covenant by such Person that such Person will
comply with the provisions of Section 10.20 as if such Person were a Lender and
provide that Administrative Agent and Borrower shall be third party
beneficiaries of such covenant. Each Lender that sells or grants a participation
shall (a) withhold or deduct from each payment to the holder of such
participation the amount of any tax required under applicable law to be withheld
or deducted from such payment and not withheld or deducted therefrom by Borrower
or Administrative Agent, (b) pay the tax so withheld or deducted by it to the
appropriate taxing authority in accordance with applicable law and (c) indemnify
Borrower and Administrative Agent for any losses, cost and expenses that they
may incur as a result of any failure to so withhold or deduct and pay such tax.
10.05 Set-off. In addition to any rights and remedies of Administrative
Agent and Lenders or any assignee of any Lender or any Affiliate thereof (each,
a "Proceeding Party") provided by law, upon the
46
occurrence and during the continuance of any Event of Default, each Proceeding
Party is authorized at any time and from time to time, without prior notice to
Borrower, any such notice being waived by Borrower to the fullest extent
permitted by law, to proceed directly, by right of set-off, banker's lien or
otherwise, against any assets of Borrower which may be in the hands of such
Proceeding Party (including all general or special, time or demand, provisional
or other deposits and other indebtedness owing by such Proceeding Party to or
for the credit or the account of Borrower) and apply such assets against the
Obligations then due and payable, irrespective of whether such Proceeding Party
shall have made any demand therefor. Each Lender agrees promptly to notify
Borrower and Administrative Agent after any such set-off and application made by
such Lender; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application.
10.06 Sharing of Payments. Each Lender severally agrees that if it, through
the exercise of any right of setoff, banker's lien or counterclaim against
Borrower or otherwise, receives payment of the Obligations held by it of a type
owed ratably to the various Lenders that is ratably more than any other Lender
receives in payment of those Obligations held by such other Lender, then,
subject to applicable Laws, (a) such Lender exercising the right of setoff,
banker's lien or counterclaim or otherwise receiving such payment shall
purchase, and shall be deemed to have simultaneously purchased, from the other
Lender a participation in the Obligations held by the other Lender and shall pay
to the other Lender a purchase price in an amount so that the share of the
Obligations held by each Lender after the exercise of the right of setoff,
banker's lien or counterclaim or receipt of payment shall be in the same
proportion that existed prior to the exercise of the right of setoff, banker's
lien or counterclaim or receipt of payment; and (b) such other adjustments and
purchases of participations shall be made from time to time as shall be
equitable to ensure that all Lenders share any payment obtained in respect of
the Obligations ratably in accordance with each Lender's share of the
Obligations immediately prior to, and without taking into account, the payment;
provided that, if all or any portion of a disproportionate payment obtained as a
result of the exercise of the right of setoff, banker's lien, counterclaim or
otherwise is thereafter recovered from the purchasing Lender by Borrower or any
Person claiming through or succeeding to the rights of Borrower, the purchase of
a participation shall be rescinded and the purchase price thereof shall be
restored to the extent of the recovery, but without interest. Each Lender that
purchases a participation in the Obligations pursuant to this Section shall from
and after the purchase have the right to give all notices, requests, demands,
directions and other communications under this Agreement with respect to the
portion of the Obligations purchased to the same extent as though the purchasing
Lender were the original owner of the Obligations purchased. Borrower expressly
consents to the foregoing arrangements and agrees that any Lender holding a
participation in an Obligation so purchased may exercise any and all rights of
setoff, banker's lien or counterclaim with respect to the participation as fully
as if Lender were the original owner of the Obligation purchased.
10.07 No Waiver; Cumulative Remedies.
(a) No failure by any Lender or Administrative Agent to exercise, and no
delay by any Lender or Administrative Agent in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege under any
Loan Document preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege.
(b) The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by Law. Any decision by Administrative Agent or
47
any Lender not to require payment of any interest (including interest at the
Default Rate), fee, cost or other amount payable under any Loan Document or to
calculate any amount payable by a particular method on any occasion shall in no
way limit or be deemed a waiver of Administrative Agent's or such Lender's right
to require full payment thereof, or to calculate an amount payable by another
method that is not inconsistent with this Agreement, on any other or subsequent
occasion.
(c) Except with respect to Section 9.09, the terms and conditions of
Section 9 are for the sole benefit of Administrative Agent and Lenders.
10.08 Usury. Notwithstanding anything to the contrary contained in any Loan
Document, the interest paid or agreed to be paid under the Loan Documents shall
not exceed the maximum rate of non-usurious interest permitted by applicable Law
(the "Maximum Rate"). If Administrative Agent or any Lender shall receive
interest in an amount that exceeds the Maximum Rate, the excessive interest
shall be applied to the principal of the Outstanding Obligations or, if it
exceeds the unpaid principal, refunded to Borrower. In determining whether the
interest contracted for, charged or received by Administrative Agent or any
Lender exceeds the Maximum Rate, such Person may, to the extent permitted by
applicable Law, (a) characterize any payment that is not principal as an
expense, fee or premium rather than interest, (b) exclude voluntary prepayments
and the effects thereof, and (c) amortize, prorate, allocate and spread, in
equal or unequal parts, the total amount of interest throughout the contemplated
term of the Obligations.
10.09 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 Integration. This Agreement, together with the other Loan Documents
and any letter agreements referred to herein, comprises the complete and
integrated agreement of the parties regarding the subject matter hereof and
supersedes all prior agreements, written or oral, on the subject matter hereof.
In the event of any conflict between the provisions of this Agreement and those
of any other Loan Document, the provisions of this Agreement shall control and
govern; provided that the inclusion of supplemental rights or remedies in favor
of Administrative Agent or Lenders in any other Loan Document shall not be
deemed a conflict with this Agreement. Each Loan Document was drafted with the
joint participation of the respective parties thereto and shall be construed
neither against nor in favor of any party, but rather in accordance with the
fair meaning thereof. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN SUCH PARTIES.
10.11 Nature of Lenders' Obligations. Nothing contained in this Agreement
or any other Loan Document and no action taken by Administrative Agent or
Lenders or any of them pursuant hereto or thereto may, or may be deemed to, make
Lenders a partnership, an association, a joint venture or other entity, either
among themselves or with Borrower or any Subsidiary or Affiliate of Borrower.
Each Lender's obligation to make any Extension of Credit pursuant hereto is
several and not joint or joint and several. A default by any Lender will not
increase the Pro Rata Share attributable to any other Lender.
48
10.12 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any other Loan Document shall survive the
execution and delivery thereof. Such representations and warranties have been or
will be relied upon by Administrative Agent and each Lender, notwithstanding any
investigation made by Administrative Agent or any Lender or on their behalf.
10.13 Indemnity by Borrower.
(a) Whether or not the transactions contemplated hereby are consummated,
Borrower agrees to indemnify, save and hold harmless each Administrative
Agent-Related Person and each Lender and their respective Affiliates, directors,
officers, agents, attorneys and employees (collectively the "Indemnitees") from
and against: (i) any and all claims, demands, actions or causes of action that
are asserted against any Indemnitee by any Person (other than Administrative
Agent or any Lender) relating directly or indirectly to a claim, demand, action
or cause of action that such Person asserts or may assert against Borrower, any
of its Affiliates or any of its officers or directors; (ii) any and all claims,
demands, actions or causes of action arising out of or relating to the Loan
Documents, the Commitments, the use or contemplated use of the proceeds of any
Extension of Credit, or the relationship of Borrower, Administrative Agent and
Lenders under this Agreement; (iii) any administrative or investigative
proceeding by any Governmental Authority arising out of or related to a claim,
demand, action or cause of action described in subsection (i) or (ii) above; and
(iv) any and all liabilities (including liabilities under indemnities), losses,
costs or expenses (including Attorney Costs (limited to one law firm for Lenders
unless Lenders have differing interests or defenses that preclude the engagement
of one law firm to represent Lenders)) that any Indemnitee suffers or incurs as
a result of the assertion of any foregoing claim, demand, action, cause of
action or proceeding, or as a result of the preparation of any defense in
connection with any foregoing claim, demand, action, cause of action or
proceeding, in all cases, including settlement costs incurred with the prior
written consent of Borrower (which consent shall not be unreasonably withheld),
whether or not arising out of the negligence of an Indemnitee, and whether or
not an Indemnitee is a party to such claim, demand, action, cause of action or
proceeding (all the foregoing, collectively, the "Indemnified Liabilities");
provided that no Indemnitee shall be entitled to indemnification for any loss
caused by its own gross negligence or willful misconduct. The agreements in this
Section shall survive repayment of all Obligations.
10.14 Nonliability of Lenders. Borrower acknowledges and agrees that:
(a) Any inspections of any property of Borrower made by or through
Administrative Agent or Lenders are for purposes of administration of the Loan
Documents only, and Borrower is not entitled to rely upon the same (whether or
not such inspections are at the expense of Borrower);
(b) By accepting or approving anything required to be observed, performed,
fulfilled or given to Administrative Agent or Lenders pursuant to the Loan
Documents, neither Administrative Agent nor Lenders shall be deemed to have
warranted or represented the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision or condition thereof, and such
acceptance or approval thereof shall not constitute a warranty or representation
to anyone with respect thereto by Administrative Agent or Lenders;
(c) The relationship between Borrower and Administrative Agent and Lenders
is, and shall at all times remain, solely that of borrower and lenders; neither
Administrative Agent nor any Lender shall under any circumstance be deemed to be
in a relationship of confidence or trust or a fiduciary relationship with
49
Borrower or its Affiliates, or to owe any fiduciary duty to Borrower or its
Affiliates; neither Administrative Agent nor any Lender undertakes or assumes
any responsibility or duty to Borrower or its Affiliates to select, review,
inspect, supervise, pass judgment upon or inform Borrower or its Affiliates of
any matter in connection with their property or the operations of Borrower or
its Affiliates; Borrower and its Affiliates shall rely entirely upon their own
judgment with respect to such matters; and any review, inspection, supervision,
exercise of judgment or supply of information undertaken or assumed by
Administrative Agent or any Lender in connection with such matters is solely for
the protection of Administrative Agent and Lenders and neither Borrower nor any
other Person is entitled to rely thereon; and
(d) Neither Administrative Agent nor any Lender shall be responsible or
liable to any Person for any loss, damage, liability or claim of any kind
relating to injury or death to Persons or damage to property caused by the
actions, inaction or negligence of Borrower and/or its Affiliates and Borrower
hereby indemnifies and holds Administrative Agent and Lenders harmless from any
such loss, damage, liability or claim.
10.15 No Third Parties Benefitted. This Agreement is made for the purpose
of defining and setting forth certain obligations, rights and duties of
Borrower, Administrative Agent and Lenders in connection with the Extensions of
Credit, and is made for the sole benefit of Borrower, Administrative Agent and
Lenders, and Administrative Agent's and Lenders' successors and permitted
assigns. Except as provided in Sections 10.04 and 10.13, no other Person shall
have any rights of any nature hereunder or by reason hereof.
10.16 Severability. Any provision of the Loan Documents that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective and severable to the extent of such prohibition or unenforceability
without invalidating the remaining provisions thereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Administrative Agent,
Lenders and Borrower agree to negotiate, in good faith, the terms of a
replacement provision as similar to the severed provision as may be possible and
be legal, valid, and enforceable.
10.17 Confidentiality. Administrative Agent and each Lender shall use any
confidential non-public information concerning Borrower and its Subsidiaries and
Affiliates that is furnished to Administrative Agent or such Lender by or on
behalf of Borrower and its Subsidiaries in connection with the Loan Documents
(collectively, "Confidential Information") solely for the purpose of
administering and enforcing the Loan Documents, and it will hold the
Confidential Information in confidence. Notwithstanding the foregoing,
Administrative Agent and each Lender may disclose Confidential Information (a)
to their affiliates or any of their or their affiliates' directors, officers,
employees, auditors, counsel, advisors, or representatives (collectively, the
"Representatives") who need to know such information for the purposes set forth
in this Section 10.17 and who have been advised of and acknowledge their
obligation to keep such information confidential in accordance with this Section
10.17, (b) to any bank or financial institution or other entity to which such
Lender has assigned or desires to assign an interest or participation in the
Loan Documents or the Obligations, provided that any such foregoing recipient of
such Confidential Information agrees to keep such Confidential Information
confidential as specified herein, (c) to any governmental agency or regulatory
body having or claiming to have authority to regulate or oversee any aspect of
Administrative Agent's or such Lender's business or that of their
Representatives in connection with the exercise of such authority or claimed
50
authority, (d) to the extent necessary or appropriate to enforce any right or
remedy or in connection with any claims asserted by or against Administrative
Agent or such Lender or any of their Representatives, and (e) pursuant to any
subpoena or any similar legal process. For purposes hereof, the term
"Confidential Information" shall not include information that (x) is in
Administrative Agent's or a Lender's possession prior to its being provided by
or on behalf of Borrower or any of its Subsidiaries or Affiliates, provided that
such information is not known by Administrative Agent or such Lender to be
subject to another confidentiality agreement with, or other legal or contractual
obligation of confidentiality to, Borrower or any of its Subsidiaries or
Affiliates, (y) is or becomes publicly available (other than through a breach
hereof by Administrative Agent or such Lender), or (z) becomes available to
Administrative Agent or such Lender on a nonconfidential basis, provided that
the source of such information was not known by Administrative Agent or such
Lender to be bound by a confidentiality agreement or other legal or contractual
obligation of confidentiality with respect to such information.
10.18 Headings. Section headings in this Agreement and the other Loan
Documents are included for convenience of reference only and are not part of
this Agreement or the other Loan Documents for any other purpose.
10.19 Time of the Essence. Time is of the essence of the Loan Documents.
10.20 Foreign Lenders. Each Lender organized under the Laws of a
jurisdiction outside the United States, on or prior to the Closing Date in the
case of each Lender listed on the signature pages hereof and on or prior to the
date on which it becomes a Lender in the case of each other Lender, and from
time to time thereafter if requested in writing by Borrower or Administrative
Agent (but only so long as such Lender remains lawfully able to do so), shall
provide Borrower and Administrative Agent with (i) if such Lender is a "bank"
within the meaning of Section 881(c)(3)(A) of the Code, IRS Form 1001 or 4224,
as appropriate, or any successor form prescribed by the IRS, certifying that
such Lender is entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to the Loan
Documents is effectively connected with the conduct of a trade or business in
the United States, or (ii) if such Lender is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and intends to claim an exemption from United
States withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest," IRS Form W-8, or any successor form
prescribed by the IRS, and a certificate representing that such Lender is not a
bank for purposes of Section 881(c) of the Code, is not a ten-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of
Borrower, and is not a controlled foreign corporation related to Borrower
(within the meaning of Section 864(d)(4) of the Code). Thereafter and from time
to time, each such Person shall (a) promptly submit to Administrative Agent such
additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to
Borrower and Administrative Agent of any available exemption from or reduction
of, United States withholding taxes in respect of all payments to be made to
such Person by Borrower pursuant to this Agreement, (b) promptly notify
Administrative Agent of any change in circumstances which would modify or render
invalid any claimed exemption or reduction, and (c) take such steps as shall not
be materially disadvantageous to it, in the reasonable judgment of such Lender,
and as may be reasonably necessary (including the re-designation of its Lending
Office) to avoid any requirement of applicable Laws that Borrower make any
deduction or
51
withholding for taxes from amounts payable to such Person. If such Person fails
to deliver the above forms or other documentation, then Administrative Agent may
withhold from any interest payment to such Person an amount equivalent to the
applicable withholding tax imposed by Sections 1441 and 1442 of the Code,
without reduction. If any Governmental Authority asserts that Administrative
Agent did not properly withhold any tax or other amount from payments made in
respect of such Person, such Person shall indemnify Administrative Agent
therefor, including all penalties and interest, any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this Section, and costs
and expenses (including Attorney Costs) of Administrative Agent. The obligation
of Lenders under this Section shall survive the payment of all Obligations and
the resignation of Administrative Agent.
10.21 Removal and Replacement of Lenders.
(a) Under any circumstances set forth in this Agreement providing that
Borrower shall have the right (or, in the case of Section 2.10(a), obligation)
to remove or replace a Lender as a party to this Agreement, Borrower may (or, in
the case of Section 2.10(a), shall), upon notice to such Lender and
Administrative Agent, remove such Lender by (i) non ratably terminating such
Lender's Commitment and/or (ii) causing such Lender to assign its Commitment
pursuant to Section 10.04(b) to one or more other Lenders or permitted assignees
procured by Borrower. Borrower shall, in the case of a termination of such
Lender's Commitment pursuant to clause (i) preceding, (y) pay in full all
principal, interest, fees and other amounts owing to such Lender through the
date of termination (including any amounts payable pursuant to Section 3), and
(z) release such Lender from its obligations under the Loan Documents from and
after the date of termination. Any such Lender whose Commitment is being
assigned shall execute and deliver an Assignment and Acceptance covering such
Lender's Commitment. Borrower shall, in the case of an assignment pursuant to
clause (ii) preceding, cause to be paid the assignment fee payable to
Administrative Agent pursuant to Section 10.04(c). Administrative Agent shall
distribute an amended Schedule 2.01, which shall be deemed incorporated into
this Agreement, to reflect adjustments to Lenders and their Commitments.
(b) This section shall supercede any provisions in Section 10.01 to the
contrary.
10.22 Governing Law.
(a) THE LOAN DOCUMENTS HAVE BEEN ENTERED INTO PURSUANT TO SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW AND THE LOAN DOCUMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT
ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
SITTING IN THE BOROUGH OF MANHATTAN OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS
PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL
52
OBLIGATIONS LAW. BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN
DOCUMENT OR OTHER DOCUMENT RELATED THERETO. BORROWER, ADMINISTRATIVE AGENT AND
EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, POSTAGE PREPAID, TO ITS ADDRESS SPECIFIED HEREIN, OR BY ANY
OTHER MEANS PERMITTED BY THE LAWS OF THE STATE OF NEW YORK.
10.23 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
10.24 Waiver of Notice by Requisite Time. By its execution hereof, each
Lender that is also a "Lender," under and as defined in the Prior 364-Day
Agreement, hereby waives three Business Days' prior notice of the termination of
the "combined Commitments," as defined in the Prior 364-Day Agreement, and
agrees that such notice shall be effective on as and of the date it is given.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE FOLLOWS.]
53
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
COMCAST CABLE COMMUNICATIONS, INC.,
as Borrower
By /s/ Kenneth Mikalauskas
-------------------------------
Kenneth Mikalauskas,
Vice President/Assistant Treasurer
54
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
BANK OF AMERICA, N.A., as Administrative
Agent and as a Lender
By /s/ Todd Shipley
-------------------------------
Todd Shipley, Managing Director
55
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
THE CHASE MANHATTAN BANK, as a Lender
By /s/ Tracey Navin Ewing
-------------------------------
Tracey Navin Ewing, Vice President
56
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
THE BANK OF NEW YORK, as a Lender
By /s/ James W. Whitaker
-------------------------------
James W. Whitaker,
Senior Vice President
57
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
CITIBANK, N.A., as a Lender
By /s/ Julio Ojea Quintana
-------------------------------
Julio Ojea Quintana, Vice President
58
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
BARCLAYS BANK PLC, as a Lender
By /s/ Daniele Iacovone
-------------------------------
Daniele Iacovone, Director
59
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH, as a
Lender
By /s/ William W. McGinty
-------------------------------
William W. McGinty, Director
By /s/ Joel Makowsky
-------------------------------
Joel Makowsky, Vice President
60
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
TORONTO DOMINION (TEXAS), INC., as a
Lender
By /s/ Carol Brandt
-------------------------------
Carol Brandt, Vice President
61
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
FIRST UNION NATIONAL BANK, as a Lender
By /s/ C. Brand Hosford
-------------------------------
C. Brand Hosford, Vice President
62
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
CREDIT SUISSE FIRST BOSTON, as a Lender
By /s/ David L. Sawyer
-------------------------------
David L. Sawyer, Vice President
By /s/ David M. Koczan
-------------------------------
David M. Koczan, Assistant Vice
President
63
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
FLEET NATIONAL BANK, as a Lender
By /s/ Michael D. Elwell
-------------------------------
Michael D. Elwell, Vice President
64
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
ABN AMRO BANK, N.V., as a Lender
By /s/ Thomas Rogers
-------------------------------
Thomas Rogers, Group Vice President
By /s/ Thomas Cha
-------------------------------
Thomas Cha, Assistant Vice President
65
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
THE BANK OF NOVA SCOTIA, as a Lender
By /s/ Brenda S. Insull
-------------------------------
Brenda S. Insull, Authorized
Signatory
66
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
LEHMAN COMMERCIAL PAPER INC., as a
Lender
By /s/ G. Andrew Keith
-------------------------------
G. Andrew Keith, Authorized
Signatory
67
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
LLOYDS TSB BANK PLC, as a Lender
By /s/ Windsor R. Davies
-------------------------------
Director, Corporate Banking, USA
By /s/ Paul D. Briamonte
-------------------------------
Director-Project Finance (USA)
68
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
SUMITOMO MITSUI BANKING
CORPORATION, as a Lender
By /s/ Leo E. Pagarigan
-------------------------------
Leo E. Pagarigan, Vice President
69
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
SUNTRUST BANK, as a Lender
By /s/ J. Eric Millham
-------------------------------
J. Eric Millham, Director
70
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH, as a
Lender
By /s/ Lucie L. Guernsey
-------------------------------
Lucie L. Guernsey, Director
By /s/ Pascal Kabemba
-------------------------------
Pascal Kabemba, Associate Director
71
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
THE DAI-ICHI KANGYO BANK, LTD., as a
Lender
By /s/ Daniel Guevara
-------------------------------
Daniel Guevara, Vice President
72
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, as a Lender
By /s/ Takuya Honjo
-------------------------------
Takuya Honjo, Deputy General Manager
73
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as a Lender
By /s/ Michael J. Wiskind
-------------------------------
Michael J. Wiskind, Vice President
74
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
MELLON BANK, N.A., as a Lender
By /s/ Nancy E. Gale
-------------------------------
Nancy E. Gale, Vice President
75
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
PNC BANK, NATIONAL ASSOCIATION, as a
Lender
By /s/ Steven J. McGehrin
-------------------------------
Steven J. McGehrin, Vice President
76
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
BAYERISCHE LANDESBANK
GIROZENTRALE, CAYMAN ISLANDS
BRANCH, as a Lender
By /s/ Peter Obermann
-------------------------------
Peter Obermann, Senior Vice
President
By /s/ James H. Boyle
-------------------------------
James H. Boyle, Vice President
77
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
MERRILL LYNCH BANK USA, as a Lender
By /s/ D. Kevin Imlay
-------------------------------
D. Kevin Imlay, Senior Credit
Officer
78
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
U.S. BANK NATIONAL ASSOCIATION, as a
Lender
By /s/ Jaycee Earll
-------------------------------
Jaycee Earll, Assistant Vice
President
79
Signature Page to that certain 364-Day Revolving Credit Agreement dated as
of the date first set forth above, among Comcast Cable Communications, Inc., as
Borrower, each Lender, and Bank of America, N.A., as Administrative Agent.
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, as a Lender
By /s/ James H. Atchley
-------------------------------
James H. Atchley, Senior Vice
President
80
SCHEDULE 2.01
COMMITMENTS
AND PRO RATA SHARES
Lender Commitment Pro Rata Share
------ ---------- --------------
Bank of America, N.A. $180,000,000.00 8.000000000%
The Chase Manhattan Bank 180,000,000.00 8.000000000%
The Bank of New York 180,000,000.00 8.000000000%
Citibank, N.A. 155,000,000.00 6.888888889%
Barclays Bank Plc 120,000,000.00 5.333333334%
Deutsche Bank AG New York Branch 120,000,000.00 5.333333334%
Toronto Dominion (Texas), Inc. 120,000,000.00 5.333333334%
First Union National Bank 115,000,000.00 5.111111111%
Credit Suisse First Boston 100,000,000.00 4.444444444%
Fleet National Bank 90,000,000.00 4.000000000%
ABN Amro Bank, N.V. 75,000,000.00 3.333333333%
Lehman Commercial Paper Inc. 75,000,000.00 3.333333333%
Lloyds TSB Bank plc 75,000,000.00 3.333333333%
Sumitomo Mitsui Banking Corporation 75,000,000.00 3.333333333%
SunTrust Bank 75,000,000.00 3.333333333%
The Bank of Nova Scotia 75,000,000.00 3.333333333%
Westdeutsche Landesbank Girozentrale, New York 75,000,000.00 3.333333333%
Branch
The Dai-ichi Kangyo Bank, Ltd. 60,000,000.00 2.666666667%
The Industrial Bank of Japan, Limited 60,000,000.00 2.666666667%
Bank of Tokyo-Mitsubishi Trust Company 50,000,000.00 2.222222222%
Mellon Bank, N.A. 50,000,000.00 2.222222222%
PNC Bank, National Association 50,000,000.00 2.222222222%
1
Lender Commitment Pro Rata Share
------ ---------- --------------
Bayerische Landesbank Girozentrale, Cayman Islands 37,500,000.00 1.666666667%
Branch
Merrill Lynch Bank USA 37,500,000.00 1.666666667%
U.S. Bank National Association 12,500,000.00 0.555555556%
First Tennessee Bank National Association 7,500,000.00 0.333333333%
- ---------------------------------------------------------------------------------------------------
Total $2,250,000,000.00 100.000000000%
2
SCHEDULE 7.01
EXISTING LIENS
--------------
Outstanding Amount
Secured
at July 17, 2001
------------------
Jones Car Leases (Various Subs) $ 3,312,586.02
Lenfest AUL Loan 2,550,830.19
Jones West Chester Data Center Mortgage 2,178,778.82
Lenfest PIDA Loan 839,367.62
Prime Cable Automobile Leases 501,235.72
Holdings - P.C. Building Leases 566,759.13
Lenfest Capital Leases (Various Subs) 326,692.21
CN8 Capital Leases 166,375.71
- -----------------------------------------------------------------------
TOTAL OUTSTANDING LIENS $ 10,442,625.42
1
SCHEDULE 7.02
EXISTING SUBSIDIARY INDEBTEDNESS
--------------------------------
Outstanding Amount
at July 17, 2001
------------------
Jones Car Leases (Various Subs) $ 3,312,586.02
Lenfest AUL Loan 2,550,830.19
Jones West Chester Data Center Mortgage 2,178,778.82
- -----------------------------------------------------------------------
TOTAL SUBSIDIARY INDEBTEDNESS $ 8,042,195.03
1
EXHIBIT A
FORM OF REQUEST FOR EXTENSION OF CREDIT
---------------------------------------
Date: , 200__
------------
To: Bank of America, N.A., as Administrative Agent
Ladies and Gentlemen:
Reference is made to that certain 364-Day Revolving Credit Agreement dated
as of July 17, 2001, among Comcast Cable Communications, Inc., a Delaware
corporation ("Borrower"), Lenders from time to time party thereto, and Bank of
America, N.A., as Administrative Agent (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the
"Agreement;" the terms defined therein being used herein as therein defined).
The undersigned Responsible Officer hereby requests (select one):
[__] A Borrowing of Loans [__] A Conversion or Continuation of Loans
1. On (a Business Day).
-------------------------------------------
2. In the amount of $_______________________.
3. Comprised of .
----------------------------------------
[type of Loan requested]
4. For Eurodollar Rate Loans: with an Interest Period of months.
-----
The foregoing request complies with the requirements of Sections 2.01 and
2.02 of the Agreement. If the requested Extension of Credit is a Borrowing of
Loans, the undersigned hereby certifies that the following statements will be
true on the date of the requested Extension of Credit:
(a) The representations and warranties of Borrower contained in
Sections 5.01, 5.02 and 5.03 of the Agreement are correct in all material
respects; and
(b) no Default or Event of Default exists or will result from the
requested Extension of Credit.
COMCAST CABLE COMMUNICATIONS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
1
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
------------------------------
Financial Statement Date: , 200_
-------
To: Bank of America, N.A., as Administrative Agent
Ladies and Gentlemen:
Reference is made to that certain 364-Day Revolving Credit Agreement dated as of
July 17, 2001, among Comcast Cable Communications, Inc., a Delaware corporation
("Borrower"), Lenders from time to time party thereto, and Bank of America,
N.A., as Administrative Agent (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, the "Agreement;" the terms
defined therein being used herein as therein defined).
The undersigned Responsible Officer hereby certifies as of the date hereof
that he is the_________of Borrower, and that, as such, he is authorized to
execute and deliver this Certificate to Administrative Agent on the behalf of
Borrower, and that:
[Use following for fiscal year-end financial statements]
1. Attached hereto as Annex 1 are the year-end audited financial statements
required by Section 6.01(a) of the Agreement for the fiscal year of Borrower
ended as of the above date, together with the report and opinion of independent
certified public accountants required by such section.
[Use following for fiscal quarter-end financial statements]
1. Attached hereto as Annex 1 are the unaudited financial statements
required by Section 6.01(b) of the Agreement for the fiscal quarter of Borrower
ended as of the above date. Such financial statements fairly present the
financial condition, results of operations and changes in financial position of
Borrower and its Subsidiaries in accordance with GAAP as at such date and for
such periods, subject only to pro forma adjustments and normal year-end audit
adjustments and the absence of footnotes.
2. The undersigned has reviewed and is familiar with the terms of the
Agreement and has made, or has caused to be made under his supervision, a
detailed review of the transactions and conditions (financial or otherwise) of
Borrower during the accounting period covered by the attached financial
statements.
3. A review of the activities of Borrower during such fiscal period has
been made under my supervision with a view to determining whether during such
fiscal period Borrower performed and observed its Obligations under the Loan
Documents, and
[select one:]
1
[to the best knowledge of the undersigned during such fiscal period,
Borrower performed and observed each covenant and condition of the Loan
Documents applicable to it.]
--or--
[the following covenants or conditions have not been performed or observed
and the following is a list of each such Default or Event of Default and its
nature and status:]
4. The financial covenant analyses and information set forth on Annex 2
attached hereto are true and accurate. Such analyses and information set forth
the necessary adjustments to exclude the Indebtedness, EBITDA and Interest
Expense attributed to Unrestricted Subsidiaries and give pro forma effect (in
accordance with Section 1.07 of the Agreement) to Material Acquisitions and
Material Dispositions made during the period covered thereby.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
of__________ , 200_.
COMCAST CABLE COMMUNICATIONS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
2
ANNEX 1
FINANCIAL STATEMENTS
--------------------
1
For the Quarter/Year ended ___________________, 200_ ("Statement
Date")
ANNEX 2
to the Compliance Certificate
($ in 000's)
I. Section 7.07(a) - Interest Coverage Ratio.
A. Consolidated EBITDA for two consecutive fiscal quarters ending on
Statement Date ("Subject Two Quarters"):
1. Consolidated net income for Subject Two Quarters (excluding gains
and losses from unusual or extraordinary items and interest
income): $____________
2. Consolidated Interest Expense for Subject Two Quarters:
$____________
3. Provision for income or gross receipts taxes for Subject Two
Quarters: $____________
4. Depreciation expense for Subject Two Quarters: $____________
5. Amortization expense for Subject Two Quarters: $____________
6. Other non-cash charges to income for Subject Two Quarters:
$____________
7. Management and programming fees paid to Comcast Corporation or
any of its wholly-owned Subsidiaries other than Borrower or any
Restricted Subsidiary during Subject Two Quarters: $____________
8. Cash payments made in Subject Two Quarters in respect of non-cash
charges accrued during a prior period: $____________
9. Consolidated EBITDA for Subject Two Quarters (Lines I.A.1 + 2 + 3
+ 4 + 5 + 6 + 7 - 8): $____________
B. EBITDA of Unrestricted Subsidiaries for Subject Two Quarters:
1. Net income of Unrestricted Subsidiaries for Subject Two Quarters
(excluding gains and losses from unusual or extraordinary items
and interest income): $____________
2. Interest Expense of Unrestricted Subsidiaries for Subject Two
Quarters: $____________
3. Provision for income or gross receipts taxes of Unrestricted
1
Subsidiaries for Subject Two Quarters: $____________
4. Depreciation expense of Unrestricted Subsidiaries for Subject Two
Quarters: $____________
5. Amortization expense of Unrestricted Subsidiaries for Subject Two
Quarters: $____________
6. Other non-cash charges to income of Unrestricted Subsidiaries for
Subject Two Quarters: $____________
7. Management and programming fees paid by Unrestricted Subsidiaries
to Comcast Corporation or any of its wholly- owned Subsidiaries
other than Borrower or a Restricted Subsidiary during Subject Two
Quarters: $____________
8. Cash payments made by Unrestricted Subsidiaries in Subject Two
Quarters in respect of non-cash charges accrued during a prior
period: $____________
9. EBITDA of Unrestricted Subsidiaries for Subject Two Quarters
(Lines I.B.1 + 2 + 3 + 4 + 5 + 6 + 7 - 8): $____________
C. EBITDA of Borrower and Restricted Subsidiaries for Subject Two
Quarters ((Line I.A.9) - (Line I.B.9)): $____________
D. Annualized EBITDA of Borrower and Restricted Subsidiaries (Line I.C
times two (2)): $____________
E. Consolidated Interest Expense for Subject Two Quarters: $____________
F. Interest Expense of Unrestricted Subsidiaries for Subject Two
Quarters: $____________
G. Interest Expense of Borrower and Restricted Subsidiaries for Subject
Two Quarters ((Line I.E) - (Line I.F)): $____________
H. Annualized Interest Expense of Borrower and Restricted Subsidiaries
(Line I.G times two (2)): $____________
I. Interest Coverage Ratio ((Line I.D) / (Line I.H)): ________to 1
Minimum required: 2.50 to 1
II. Section 7.07(b) - Leverage Ratio.
A. Consolidated Indebtedness at Statement Date: $____________
2
B. Indebtedness of Unrestricted Subsidiaries at Statement Date: $____________
C. Consolidated Total Indebtedness at Statement Date: (Line II.A) - (Line
II.B) $____________
D. Annualized EBITDA of Borrower and Restricted Subsidiaries (Line I.D): $____________
E. Leverage Ratio ((Line II.C) / (Line II.D)): ________to 1
Maximum permitted: 5.50 to 1
3
EXHIBIT C
FORM OF NOTE
------------
, 200_
------------------
FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay to
the order of ("Lender"), on the date specified in the Agreement referred to
below, the unpaid principal amount of Loans (as defined in the Agreement
referred to below) made by Lender to Borrower under that certain 364-Day
Revolving Credit Agreement dated as of July 17, 2001, among Borrower, Lenders
from time to time party thereto, and Bank of America, N.A., as Administrative
Agent (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the "Agreement;" the terms defined therein being used
herein as therein defined).
Borrower promises to pay interest on the unpaid principal amount of each
Loan from the date of such Loan until such principal amount is paid in full, at
such interest rates and at such times as are specified in the Agreement. All
payments of principal and interest shall be made to Administrative Agent at
Administrative Agent's Office for the account of Lender in immediately available
funds. If any amount is not paid in full when due hereunder, such unpaid amount
shall bear interest, to be paid upon demand, from the due date thereof until the
date of actual payment (and before as well as after judgment) at the per annum
rate set forth in the Agreement.
This Note is one of the "Notes" referred to in the Agreement. Reference is
hereby made to the Agreement for rights and obligations of payment and
prepayment, events of default and the right of Administrative Agent, on behalf
of Lender, to accelerate the maturity hereof upon the occurrence of such events.
Loans made by Lender shall be evidenced by one or more loan accounts or records
maintained by Lender in the ordinary course of business. Lender may also attach
schedules to this Note and endorse thereon the date, amount and maturity of its
Loans and payments with respect thereto.
Borrower, for itself, its successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
non-payment of this Note.
Borrower agrees to pay all collection expenses, court costs and Attorney
Costs (whether or not litigation is commenced) which may be incurred by
Administrative Agent or Lender in connection with the collection or enforcement
of this Note.
1
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
COMCAST CABLE COMMUNICATIONS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
2
LOANS AND PAYMENTS WITH RESPECT THERETO
---------------------------------------
Amount of
Principal Outstanding
Type of Amount of End of or Interest Principal
Loan Loan Interest Paid This Balance Notation
Date Made Made Period Date This Date Made By
- ------ --------- ----------- ---------- ------------- -------------- -----------
3
EXHIBIT D
FORM OF ASSIGNMENT AND ACCEPTANCE
---------------------------------
, 200_
----------------
Reference is made to that certain 364-Day Revolving Credit Agreement dated
as of July 17, 2001, among Comcast Cable Communications, Inc., a Delaware
corporation ("Borrower"), Lenders from time to time party thereto, and Bank of
America, N.A., as Administrative Agent (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the
"Agreement;" the terms defined therein being used herein as therein defined).
The assignor identified on the signature page hereto ("Assignor") and the
assignee identified on the signature page hereto ("Assignee") agree as follows:
1. (a) Subject to Paragraph 11, effective as of the date written on Annex 1
hereto (the "Effective Date"), Assignor irrevocably sells and assigns to
Assignee without recourse to Assignor, and Assignee hereby irrevocably purchases
and assumes from Assignor without recourse to Assignor, the interest described
on Annex 1 hereto (the "Assigned Interest") in and to Assignor's rights and
obligations under the Agreement.
(b) From and after the Effective Date, (i) Assignee shall be a party under
the Agreement and will have all the rights and obligations of a Lender for all
purposes under the Loan Documents to the extent of the Assigned Interest and be
bound by the provisions thereof, and (ii) Assignor shall relinquish its rights
and be released from its obligations under the Agreement to the extent of the
Assigned Interest. Assignor and/or Assignee, as agreed by Assignor and Assignee,
shall deliver to Administrative Agent any applicable assignment fee required
under Section 10.04(c) of the Agreement.
2. On the Effective Date, Assignee shall pay to Assignor, in immediately
available funds, an amount equal to the purchase price of the Assigned Interest
as agreed upon by Assignor and Assignee.
3. Assignor and Assignee agree that all payments of principal, interest,
fees and other amounts in respect of the Assigned Interest accruing from and
after the Effective Date shall be for the account of Assignee, and all payments
of such amounts in respect of the Assigned Interest accruing prior to the
Effective Date shall remain for the account of Assignor. Assignor and Assignee
hereby agree that if either receives any payment of such amounts which is for
the account of the other, it shall hold the same in trust for such party and
shall promptly pay the same to such party.
4. Assignor represents and warrants to Assignee that:
(a) Assignor is the legal and beneficial owner of the Assigned
Interest, and the Assigned Interest is free and clear of any adverse claim;
(b) The Assigned Interest listed on Annex 1 accurately and completely
sets forth the amount of all Outstanding Obligations relating to the
Assigned Interest as of the Effective Date;
1
(c) It has the power and authority and the legal right to make,
deliver and perform, and has taken all necessary action, to authorize the
execution, delivery and performance of this Assignment and Acceptance, and
any and all other documents delivered by it in connection herewith and to
fulfill its obligations under, and to consummate the transactions
contemplated by, this Assignment and Acceptance and the Loan Documents, and
no consent or authorization of, filing with, or other act by or in respect
of any Governmental Authority, is required in connection in connection
herewith or therewith; and
(d) This Assignment and Acceptance constitutes the legal, valid and
binding obligation of Assignor.
Assignor makes no representation or warranty and assumes no responsibility
with respect to the financial condition of Borrower or the performance by
Borrower of its obligations under the Loan Documents, and assumes no
responsibility with respect to any statements, warranties or representations
made under or in connection with any Loan Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of any Loan Document
other than as expressly set forth above.
5. Assignee represents and warrants to Assignor and Administrative Agent
that:
(a) It is eligible to purchase the Assigned Interest pursuant to
Section 10.04 of the Agreement;
(b) It has the power and authority and the legal right to make,
deliver and perform, and has taken all necessary action, to authorize the
execution, delivery and performance of this Assignment and Acceptance, and
any and all other documents delivered by it in connection herewith and to
fulfill its obligations under, and to consummate the transactions
contemplated by, this Assignment and Acceptance and the Loan Documents, and
no consent or authorization of, filing with, or other act by or in respect
of any Governmental Authority, is required in connection in connection
herewith or therewith;
(c) This Assignment and Acceptance constitutes the legal, valid and
binding obligation of Assignee;
(d) Under applicable Laws no tax will be required to be withheld by
Administrative Agent or Borrower with respect to any payments to be made to
Assignee hereunder or under any Loan Document, and prior to or concurrently
with Administrative Agent's receipt of this Assignment and Acceptance,
Assignee has delivered to Administrative Agent any tax forms required by
Section 10.20 of the Agreement; and
(e) Assignee has received a copy of the Agreement, together with
copies of the most recent financial statements delivered pursuant thereto,
and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Assignment and
Acceptance. Assignee has independently and without reliance upon Assignor
or Administrative Agent and based on such information as Assignee has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Assignee
2
will, independently and without reliance upon Administrative Agent or any
Lender, and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Agreement.
6. Assignee appoints and authorizes Administrative Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
the Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto as are delegated to Administrative Agent by
the terms thereof, together with such powers as are incidental thereto.
7. If either Assignee or Assignor desires a Note to evidence its Loans, it
shall request Administrative Agent to procure a Note from Borrower.
8. Assignor and Assignee agree to execute and deliver such other
instruments, and take such other action, as either party may reasonably request
in connection with the transactions contemplated by this Assignment and
Acceptance.
9. This Assignment and Acceptance shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns; provided
however, that Assignee shall not assign its rights or obligations hereunder
without the prior written consent of Assignor and any purported assignment,
absent such consent, shall be void.
10. This Assignment and Acceptance may be executed by facsimile signatures
with the same force and effect as if manually signed and may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Assignment and
Acceptance shall be governed by and construed in accordance with the laws of the
state specified in the Agreement.
11. The effectiveness of the assignment described herein is subject to:
(a) If such consent is required by the Agreement, Assignor and
Assignee obtaining the consent of Administrative Agent and Borrower to the
assignment described herein. By delivering a copy of this Assignment and
Acceptance to Administrative Agent, Assignor and Assignee hereby request
any such required consent and request that Administrative Agent register
Assignee as a Lender under the Agreement effective as of the Effective
Date.
(b) Receipt by Administrative Agent of (or other arrangements
acceptable to Administrative Agent with respect to) any applicable
assignment fee referred to in Section 10.04(c) of the Agreement and any tax
forms required by Section 10.20 of the Agreement.
By signing below, Administrative Agent agrees to register Assignee as a
Lender under the Agreement, effective as of the Effective Date with respect to
the Assigned Interest and will adjust the registered Pro Rata Share of Assignor
under the Agreement to reflect the assignment of the Assigned Interest.
3
12. Attached hereto as Annex 2 is all contact, address, account and other
administrative information relating to Assignee.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers.
Assignor:
----------------------------------------
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
Assignee:
[__] Tax forms required by ----------------------------------------
Section 10.20 of the Agreement
included
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
(Signatures continue)
4
In accordance with and subject to
Section 10.04 of the Credit Agreement,
the undersigned consent to the foregoing
assignment as of the Effective Date:
COMCAST CABLE COMMUNICATIONS, INC.
By:
-----------------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
BANK OF AMERICA, N.A.,
as Administrative Agent
By:
-----------------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
5
ANNEX 1 TO ASSIGNMENT AND ACCEPTANCE
THE ASSIGNED INTEREST
---------------------
Effective Date: ______________________
Amount of Outstanding Obligations Assigned Pro Rata
Assigned Commitment assigned Share
- -----------------------------------------------------------------------------
$____________________ $__________________________________ __________________%
6
ANNEX 2 TO ASSIGNMENT AND ACCEPTANCE
ADMINISTRATIVE DETAILS
----------------------
(Assignee to list names of credit contacts, addresses, phone and facsimile
numbers, electronic mail addresses and account and payment information)
7
EXHIBIT E
FORM OF OPINION OF COUNSEL TO BORROWER
July 17, 2001
To the Lenders party to the 364-Day Revolving Credit Agreement referred to
below, and to Bank of America, N.A., as Administrative Agent thereunder
We have acted as counsel to Comcast Cable Communications, Inc., a Delaware
corporation ("Borrower") in connection with the 364-Day Revolving Credit
Agreement (the "Credit Agreement") dated as of July 17_, 2001, among Borrower,
the Lenders party thereto, and Bank of America, N.A., as Administrative Agent.
Except as otherwise provided herein, terms defined in the Credit Agreement are
used herein as defined therein. This opinion letter is being delivered pursuant
to Section 4.01(a)(vi) of the Credit Agreement.
In rendering the opinions expressed below, we have examined the following
agreements, instruments and other documents:
(a) the Credit Agreement;
(b) the Notes payable to Lenders requesting them; and
(c) a good standing certificate issued by the Secretary of State of
the State of Delaware on July 17_, 2001 (the "Good Standing
Certificate"), a certified copy of resolutions of the Board of
Directors of the Borrower, dated July 17_, 2001 (the
"Resolutions"), a certified copy of the by-laws of the Borrower
(the "Bylaws"), a certified copy of the Certificate of
Incorporation of the Borrower issued by the Secretary of State of
the State of Delaware on July 17_, 2001 (the "Charter"), a
Certificate of the Assistant Secretary of the Borrower, dated as
of the date hereof, with the signatures of the authorized
officers of the Borrower (the "Incumbency Certificate") and such
records of the Borrower and such other documents as we have
deemed necessary as a basis for the opinions expressed below.
The agreements and instruments referred to in the foregoing lettered clauses (a)
and (b) are collectively referred to as the "Loan Documents."
In our examination, we have assumed the genuineness of all signatures (other
than those of Borrower), the authenticity of all documents submitted to us as
originals and the conformity with authentic original documents of all documents
submitted to us as copies. When relevant facts were not independently
established, we have relied upon certificates of governmental officials and upon
representations made in or pursuant to the Loan Documents and certificates of
appropriate representatives of Borrower.
1
Based upon and subject to the foregoing and subject to the comments and
qualifications hereto, and having considered such questions of law as we have
deemed necessary as a basis for the opinions expressed below, we are of the
opinion that:
1. Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Borrower has all
requisite corporate power and authority to carry on its business as now
conducted as described in its most recent Annual Report on Form 10-K filed
with the Securities and Exchange Commission (the "10-K").
2. Borrower has all requisite corporate power to execute, deliver, and
perform its obligations under the Loan Documents.
3. The execution, delivery, and performance by Borrower of the Loan
Documents have been duly authorized by all necessary corporate action on
the part of Borrower.
4. Each Loan Document has been duly executed and delivered by
Borrower.
5. The Loan Documents constitute the legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or other
similar laws relating to or affecting the rights of creditors generally and
except as the enforceability of the Loan Documents is subject to the
application of general principles of equity (regardless of whether
considered in a proceeding in equity or at law), including, without
limitation, (a) the possible unavailability of specific performance,
injunctive relief or any other equitable remedy and (b) concepts of
materiality, reasonableness, good faith and fair dealing.
6. The execution, delivery and performance by Borrower of the Loan
Documents (a) will not violate any applicable Law or the Charter or Bylaws
of Borrower or, to our knowledge, any order of any Governmental Authority,
(b) to our knowledge, will not result in a default under any material
indenture, agreement or other instrument binding upon Borrower or its
assets, and (c) to our knowledge, will not result in the creation or
imposition of any Lien on any asset of Borrower.
7. We have no knowledge of any litigation, investigation, or
proceeding of or before an arbitrator or Governmental Authority now pending
against or threatened against Borrower that, if determined adversely, has a
Material Adverse Effect.
8. Borrower is not an "investment company" as defined in, or subject
to registration under, the Investment Company Act of 1940.
9. Borrower is not a "holding company," or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the
Public Utility Act of 1935.
2
Our opinions expressed above are limited to matters involving the Federal Laws
of the United States of America, the laws of the Commonwealth of Pennsylvania,
the laws of the State of New York and the General Corporation Law of the State
of Delaware. To the extent that this opinion is based on the laws of the State
of New York, we have, with your permission, relied exclusively on the opinion of
Howe & Addington LLP, a copy of which is attached hereto, and any opinion herein
based on New York law is subject to the qualifications and limitations set forth
in such opinion. Further, we express no opinion concerning (1) the effects of
any local law and regulation, or (2) federal or state laws, rules or regulations
governing securities or "blue sky", antitrust or unfair competition, compliance
with fiduciary duty, taxation, environmental liability, or any regulated aspect
of the communications business, including without limitation, the Federal
Communications Act.
When any opinion is subject to the qualification "to our knowledge" or words of
similar import, it means that no one in the Primary Lawyer Group (as defined
below) has actual knowledge of facts which are contrary to the opinion rendered,
without having undertaken independent investigation or verification of any such
facts. The words "actual knowledge" mean the conscious attention to such
information by the Primary Lawyer Group. The phrase "Primary Lawyer Group"
includes only lawyers who are currently members of or employed by this firm who
have been involved in the preparation of this letter or involved in the
representation of the Borrower in connection with the transaction that is the
subject of this letter.
The opinions set forth above are subject to the following qualifications and
limitations:
(A) We have assumed the legal capacity of all individuals executing any of
the Loan Documents.
(B) We express no opinion as to the enforceability of any provisions in any
Loan Document imposing penalties, forfeitures, late payment charges, prepayment
premiums, or an increase in interest rate upon the occurrence of a default or an
event of default to the extent the same are deemed to be unenforceable
penalties.
(C) We express no opinion as to the enforceability of any provision of any
Loan Document which is intended to permit modification thereof only by means of
any agreement in writing by the parties thereto;
(D) We express no opinion as to the enforceability of provisions contained
in any Loan Document which purport to constitute or provide for the waiver and
release of any rights, claims, defenses, counterclaims or remedies of the
Borrower (including, without limitation, waiver of the applicable statute of
limitations in advance of the accrual of a cause of action) to the extent such
waiver or release may not be given under applicable law.
(E) We express no opinion concerning the financial condition or solvency of
the Borrower, nor do we express any opinion concerning the effect of any action,
suit, proceeding, litigation or transaction (including, without limitation, the
transactions contemplated in the Credit Agreement) upon either (1) the financial
condition of the Borrower or (2) any financial covenants which the Borrower may
have agreed to in the Loan Documents.
3
(F) We express no opinion as to the enforceability of any provision of any
Loan Document to the extent that such provision constitutes a waiver of
illegality as a defense to performance of contract obligations.
(G) The opinion set forth in the first sentence of paragraph 1 above is
based on our review of the Good Standing Certificate and the 10-K. The opinions
set forth in paragraphs 2 and 3 above are based on our review of the Charter,
Bylaws, Resolutions and applicable law. The opinion set forth in paragraph 4 is
based on our review of the Charter, Bylaws, Resolutions, Incumbency Certificate
and applicable law. The opinions set forth in paragraphs 7 and 9 are based on
our review of the 10-K and applicable law. The opinion set forth in paragraph 8
is based on our review of the 10-K, Comcast Corporation's most recent Annual
Report on Form 10-K filed with the Securities and Exchange Commission and
applicable law.
(H) No opinion is expressed as to the enforceability of any of the
following kinds of provisions in the Loan Documents: (1) provisions for
self-help except as permitted by applicable law; (2) provisions which purport to
establish evidentiary standards; (3) provisions relating to the non-waiver of
your rights; (4) provisions containing powers of attorney; (5) provisions which
would provide for interest in excess of the "legal rate" permitted under
applicable law; and (6) provisions which purport to create obligations to
indemnify you, except as permitted by applicable law.
The foregoing opinions are being furnished solely for the benefit of
Administrative Agent, Lenders and any participants or assignees as specified in
Section 10.04 of the Credit Agreement, and may not be relied upon by any other
Person or for any other purpose without our written consent.
Very truly yours,
DRINKER BIDDLE & REATH LLP
4
STEVEN B. CALLAHAN EDWIN A. HOWE, JR.
BRUCE E. HOOD SENIOR COUNSEL
ANNE L. STRASSNER TELEPHONE: (212) 490-1700
ROBERT W. BENJAMIN FAX: (212) 490-0536
ANDREW J. PAL (212) 490-2574
R. SCOTT GREATHEAD E-MAIL: LAW@HOWEADD.COM
- ------------------ WEB SITE: WWW.HOWEADD.COM
CINDY G. FINE
R. ANDREW SHORE
STEPHANIE E. BUSLOFF
July 17, 2001
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103
Re: 364-Day Revolving Credit Agreement, dated as of July 17, 2001 (the "Credit
Agreement"), among Comcast Cable Communications, Inc., a Delaware
corporation (the "Borrower"), the Lenders party thereto and Bank of
America, N. A., as Administrative Agent
Dear Ladies and Gentlemen:
We have acted as special New York counsel to you in support of your role as
special counsel to the Borrower in connection with the execution and delivery of
the Credit Agreement. Unless otherwise indicated, capitalized terms used but not
defined herein shall have the respective meanings set forth in the Credit
Agreement.
In connection with this opinion, we have examined the Credit Agreement and the
Notes (collectively, the "Loan Documents") in a form that you have confirmed to
us has been signed by all parties thereto. We also have made such other
investigations as we have deemed relevant and necessary in connection with the
opinions expressed herein. In addition, we have examined, and have relied as to
matters of fact upon, the representations made in the Loan Documents. We have
not undertaken any independent investigation of factual matters.
In rendering the opinion set forth below, we have assumed the genuineness of all
signatures, the legal capacity of natural persons executing the Loan Documents,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic, original documents of all documents submitted to us as
copies.
In rendering the opinion set forth below, we have assumed that (1) each of the
Loan Documents has been duly authorized by, and is a valid and legally binding
obligation of, each of the Lenders party thereto and Bank of America, N.A., as
Administrative Agent (collectively, "Addressees") and (2)(a) the Borrower is
5
duly organized, validly existing and in good standing under the laws of Delaware
and has duly authorized, executed and delivered the Loan Documents in accordance
with its Certificate of Incorporation, By-Laws and applicable resolutions of its
stockholders and board of directors, (b) execution, delivery and performance by
the Borrower of the Loan Documents does not violate the laws of Delaware or any
other applicable laws (excepting the laws of the State of New York) and (c)
execution, delivery and performance by the Borrower of the Loan Documents does
not constitute a breach or violation of, or result in, or require, the creation
or imposition of, any Lien under, any contract, agreement or instrument which is
binding upon the Borrower. As used herein, the term "Requirement of Law" shall
mean, and shall be limited to, the laws of the State of New York (other than the
categories excluded from this opinion and other than any judicial,
administrative or other governmental order, decree, ruling or proceeding that
may be applicable to the Borrower) that in our experience are normally
applicable to general business corporations and to transactions of the type
contemplated by the Loan Documents.
Based upon and subject to the foregoing, and subject to the qualifications and
limitations set forth herein, we are of the opinion that:
1. The Loan Documents constitute the legal, valid and binding obligations
of the Borrower, enforceable against the Borrower in accordance with their
respective terms.
2. The execution and delivery by the Borrower of, and the performance by
the Borrower of its obligations under, the Loan Documents (a) does not violate
any Requirement of Law or, to our knowledge, any order of any Governmental
Authority of the State of New York and (b) to our knowledge, will not result in,
or require, the creation or imposition of any Lien on any of the Borrower's
properties or revenues pursuant to any such Requirement of Law, except to the
extent that all such violations and creation or imposition of Liens could not,
in the aggregate, have a Material Adverse Effect.
3. We have no knowledge of any litigation, investigation or proceeding of
or before an arbitrator or Governmental Authority of or in the State of New York
now pending or threatened against Borrower that, if determined adversely, would
have a Material Adverse Effect.
Our opinion set forth above is subject to (i) the effects of bankruptcy,
insolvency, fraudulent conveyance or transfer, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, (ii)
general principles of equity (whether considered in a proceeding in equity or at
law), including, without limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and (b) concepts of
materiality, reasonableness, good faith and fair dealing, and (iii) an implied
covenant of good faith and fair dealing.
We express no opinion with respect to:
(1) The enforceability of any provisions in any Loan Document imposing
penalties, forfeitures, late payment charges, prepayment premiums, or an
increase in the interest rate upon the occurrence of a default or an event of
default to the extent the same are deemed to be unenforceable penalties;
(2) The enforceability of any provision of any Loan Document which is
intended to permit modification thereof only by means of any agreement in
writing by the parties thereto;
6
(3) The enforceability of provisions contained in any Loan Document which
purport to constitute or provide for the waiver and release of any rights,
claims, defenses, counterclaims or remedies of the Borrower (including, without
limitation, waiver of the applicable statute of limitations in advance of the
accrual of a cause of action) to the extent such waiver or release may not be
given under applicable law;
(4) The financial condition or solvency of the Borrower, nor do we express
any opinion concerning the effect of any action, suit, proceeding, litigation or
transaction (including, without limitation, the transactions contemplated in the
Credit Agreement) upon either (a) the financial condition of the Borrower or (b)
any financial covenants which the Borrower may have agreed to in the Loan
Documents;
(5) The enforceability of any provision of any Loan Document to the extent
that such provision constitutes a waiver of illegality as a defense to
performance of contract obligations;
(6) The enforceability of any of the following kinds of provisions in the
Loan Documents: (a) provisions for self-help except as permitted by applicable
law; (b) provisions which purport to establish evidentiary standards; (c)
provisions relating to the non-waiver of any of Addressees' rights; (d)
provisions containing powers of attorney; (e) provisions which would provide for
interest in excess of the "legal rate" permitted under applicable law; and (f)
provisions which purport to create obligations to indemnify the Addressees,
except as permitted by applicable law;
(7) Federal or state laws, rules or regulations governing securities or
"blue sky," antitrust or unfair competition, compliance with fiduciary duty,
taxation environmental liability or any regulated aspect of the communications
business, including, without limitation, the Federal Communications Act.
Our opinions expressed herein are limited to the Requirements of Law (without
our having made any investigation as to any other laws), and we do not express
any opinion herein concerning any other laws.
When any opinion is subject to the qualification "to our knowledge" or words of
similar import, it means that, without having undertaken independent
investigation or verification, no one in the Primary Lawyer Group, as defined
below, has actual knowledge of facts contrary to the opinion rendered. The words
"actual acknowledge" mean the conscious attention to such information by the
Primary Lawyer Group. The phrase "Primary Lawyer Group" includes only attorneys
who are currently members or employed by this firm who have been involved in the
review of the Loan Documents and/or the preparation of this letter.
This opinion letter is rendered to you in connection with the above-described
transaction. This opinion letter may not be relied upon by you for any purpose
other than to the extent necessary for purposes of rendering your opinion of
even date herewith to the Addressees in connection with the Loan Documents, nor
may this opinion letter be relied upon by any other person, firm or corporation
without our prior written consent.
The opinions set forth herein are as of the date hereof, and we hereby disclaim
any obligation to advise you of any change in any matter set forth herein which
may hereafter arise.
7
Very truly yours,
Howe & Addington LLP
8
Entity Name Entity Status
----------- -------------
1227844 Ontario Ltd. Existing - Active
21st Century Communications Partners Existing - Active
Accucom Wireless Services, Inc. Existing - Inactive
Across Media Networks, L.L.C. Existing - Active
Adlink Cable Advertising, LLC Existing - Active
Affiliate Investment, Inc. Existing - Active
Affiliate Marks Investment, Inc. Existing - Active
Affiliate Relations Holdings, Inc. Existing - Active
Affiliate Sales & Marketing, Inc. Existing - Active
ARP Partnership Existing - Inactive
At Home Corporation Existing - Active
AT&T Comcast Corporation Existing - Active
AT&T Corp. Existing - Active
Australis Media, Ltd. Existing - Active
Bell Canada International (Brazil Canbras) Limited Existing - Active
Box Office Enterprises, Inc. Existing - Inactive
BroadNet Austria GmbH Existing - Active
BroadNet Belgium S.A. Existing - Inactive
BroadNet Consorcio, S.A. Existing - Active
BroadNet Czech s.r.o. Existing - Active
BroadNet Deutschland GmbH Existing - Active
BroadNet Europe SPRL Existing - Active
BroadNet France S.A.S. Existing - Active
BroadNet Hellas S.A. Existing - Active
BroadNet Holdings, B.V. Existing - Active
BroadNet Hungary Holdings Ltd Existing - Active
BroadNet Ireland Ltd Existing - Inactive
BroadNet Italy Holdings Ltd Existing - Active
BroadNet Italy SPA Existing - Active
BroadNet Magyarorszag Kft Existing - Active
BroadNet Norge AS Existing - Active
BroadNet Poland Holdings Ltd Existing - Active
BroadNet Polska s.p.z.o.o. Existing - Active
BroadNet Slovakia s.r.o. Existing - Active
BroadNet Suisse A.S. Existing - Active
BroadNet UK Ltd. Existing - Active
Bulldog Acquisition Company, L.L.C. Existing - Inactive
Cable Enterprises, Inc. Existing - Inactive
Cable Programming Ventures, LLC Existing - Active
Cable Sports Southeast, LLC Existing - Active
Cable TV Fund 12-B, Ltd. Existing - Active
Cable TV Fund 12-B/C/D Venture Existing - Active
Cable TV Fund 12-C, Ltd. Existing - Active
Cable TV Fund 12-D, Ltd. Existing - Active
Cable TV Fund 14-A, Ltd. Existing - Active
Cable TV Fund 14-B, Ltd. Existing - Active
Cablevision Investment of Detroit, Inc. Existing - Active
Casco Cable Television, Inc. Existing - Active
CDirect Mexico I, Inc. Existing - Active
CDirect Mexico II, Inc. Existing - Active
Classic Services, Inc. Existing - Active
Entity Name Entity Status
----------- -------------
Clearview Partners Existing - Active
Clinton Cable TV Investors, Inc. Existing - Active
Coastal Cable TV, Inc. Existing - Active
COM Indiana, LLC Existing - Active
COM Indianapolis, LLC Existing - Active
COM Inkster, Inc. Existing - Active
COM MH, Inc. Existing - Active
COM South Limited Partnership Existing - Active
COM South, LLC Existing - Active
COM Sports Holding Company, Inc. Existing - Active
COM Sports Ventures, Inc. Existing - Active
Comcast 38GHZ, Inc. Existing - Active
Comcast Argentina, Inc. Existing - Inactive
Comcast Asbc, Inc. Existing - Active
Comcast Brazil, Inc. Existing - Active
Comcast BroadNet Payroll Services, Inc. Existing - Active
Comcast Business Communications Financing, Inc. Existing - Active
Comcast Business Communications Holdings, Inc. Existing - Active
Comcast Business Communications of Virginia, LLC Existing - Active
Comcast Business Communications Online, Inc. Existing - Active
Comcast Business Communications Purchasing, LLC Existing - Active
Comcast Business Communications Systems, Inc. Existing - Active
Comcast Business Communications, Inc. Existing - Active
Comcast Cable Communications of Pennsylvania, Inc. Existing - Active
Comcast Cable Communications, Inc. Existing - Active
Comcast Cable Communications, LLC Existing - Merger
in Process
Comcast Cable Funding Existing - Active
Comcast Cable Funding GP, Inc. Existing - Active
Comcast Cable Funding I, Inc. Existing - Active
Comcast Cable Guide, Inc. Existing - Inactive
Comcast Cable Investors, Inc. Existing - Active
Comcast Cable of Indiana, Inc. Existing - Active
Comcast Cable of Maryland, Inc. Existing - Active
Comcast Cable SC Investment, Inc. Existing - Active
Comcast Cable Tri-Holdings, Inc. Existing - Active
Comcast Cable Trust I Existing - Active
Comcast Cable Trust II Existing - Active
Comcast Cable Trust III Existing - Active
Comcast Cablevision Communications, Inc. Existing - Inactive
Comcast Cablevision Corporation of California, LLC Existing - Active
Comcast Cablevision Corporation of Connecticut Existing - Active
Comcast Cablevision Investment Corporation Existing - Merger
in Process
Comcast Cablevision of Alabama, Inc. Existing - Active
Comcast Cablevision of Arizona, Inc. Existing - Active
Comcast Cablevision of Arkansas, Inc. Existing - Active
Comcast Cablevision of Avalon, LLC Existing - Active
Comcast Cablevision of Birmingham, Inc. Existing - Inactive
Comcast Cablevision of Bryant, Inc. Existing - Active
Comcast Cablevision of Burlington County, Inc. Existing - Active
Comcast Cablevision of Cambridge, Inc. Existing - Inactive
Comcast Cablevision of Carolina, Inc. Existing - Active
Entity Name Entity Status
----------- -------------
Comcast Cablevision of Celebration, LLC Existing - Active
Comcast Cablevision of Central New Jersey, Inc. Existing - Active
Comcast Cablevision of Chesterfield County, Inc. Existing - Active
Comcast Cablevision of Clinton Existing - Active
Comcast Cablevision of Clinton, Inc. Existing - Active
Comcast Cablevision of Clinton, Inc. Existing - Active
Comcast Cablevision of Danbury, Inc. Existing - Active
Comcast Cablevision of Delaware County, Inc. Existing - Merger
in Process
Comcast Cablevision of Delmarva, Inc. Existing - Active
Comcast Cablevision of Detroit Existing - Active
Comcast Cablevision of Detroit, Inc. Existing - Active
Comcast Cablevision of Eastern Shore, Inc. Existing - Active
Comcast Cablevision of Elkton, Inc. Existing - Active
Comcast Cablevision of Flint, Inc. Existing - Active
Comcast Cablevision of Fort Wayne Limited Partnership Existing - Active
Comcast Cablevision of Garden State, Inc. Existing - Inactive
Comcast Cablevision of Garden State, L.P. Existing - Active
Comcast Cablevision of Georgia/South Carolina, Inc. Existing - Active
Comcast Cablevision of Gloucester County, Inc. Existing - Active
Comcast Cablevision of Grosse Pointe, Inc. Existing - Active
Comcast Cablevision of Groton, Inc. Existing - Active
Comcast Cablevision of Harford County, LLC Existing - Active
Comcast Cablevision of Hopewell Valley, Inc. Existing - Active
Comcast Cablevision of Howard County, Inc. Existing - Active
Comcast Cablevision of Indianapolis, Inc. Existing - Active
Comcast Cablevision of Indianapolis, L.P. Existing - Active
Comcast Cablevision of Inkster Limited Partnership Existing - Active
Comcast Cablevision of Jersey City, Inc. Existing - Active
Comcast Cablevision of Lake County, LLC Existing - Active
Comcast Cablevision of Laurel, Inc. Existing - Active
Comcast Cablevision of Lawrence, Inc. Existing - Active
Comcast Cablevision of Levittown, Inc. Existing - Active
Comcast Cablevision of Little Rock, Inc. Existing - Active
Comcast Cablevision of Lompoc, LLC Existing - Active
Comcast Cablevision of London, Inc. Existing - Inactive
Comcast Cablevision of Long Beach Island, LLC Existing - Active
Comcast Cablevision of Lower Merion, Inc. Existing - Active
Comcast Cablevision of Macomb County, Inc. Existing - Active
Comcast Cablevision of Macomb, Inc. Existing - Active
Comcast Cablevision of Marianna, Inc. Existing - Active
Comcast Cablevision of Maryland Limited Partnership Existing - Active
Comcast Cablevision of Maryland, Inc. Existing - Active
Comcast Cablevision of Maryland, LLC Existing - Active
Comcast Cablevision of Mercer County, Inc. Existing - Active
Comcast Cablevision of Meridian, Inc. Existing - Active
Comcast Cablevision of Michigan, LLC Existing - Active
Comcast Cablevision of Middletown, Inc. Existing - Active
Comcast Cablevision of Missouri, Inc. Existing - Active
Comcast Cablevision of Monmouth County, Inc. Existing - Active
Comcast Cablevision of Mt. Clemens Existing - Active
Comcast Cablevision of Mt. Clemens, Inc. Existing - Active
Entity Name Entity Status
----------- -------------
Comcast Cablevision of Muncie, LLC Existing - Active
Comcast Cablevision of Muncie, LP Existing - Active
Comcast Cablevision of Nashville I, LLC Existing - Active
Comcast Cablevision of Nashville II, LLC Existing - Active
Comcast Cablevision of New Castle County Existing - Active
Comcast Cablevision of New Castle County, LLC Existing - Active
Comcast Cablevision of New Haven, Inc. Existing - Active
Comcast Cablevision of New Jersey, Inc. Existing - Active
Comcast Cablevision of New Jersey, LLC Existing - Active
Comcast Cablevision of New Mexico, Inc. Existing - Active
Comcast Cablevision of New Mexico/Pennsylvania, Inc. Existing - Active
Comcast Cablevision of Northwest New Jersey, Inc. Existing - Active
Comcast Cablevision of Oakland County, Inc. Existing - Inactive
Comcast Cablevision of Ocean County, Inc. Existing - Active
Comcast Cablevision of Paducah, Inc. Existing - Active
Comcast Cablevision of Panama City, Inc. Existing - Active
Comcast Cablevision of Pennsylvania, LLC Existing - Active
Comcast Cablevision of Perry, Inc. Existing - Active
Comcast Cablevision of Philadelphia Area I, Inc. Existing - Active
Comcast Cablevision of Philadelphia Area I, LLC Existing - Inactive
Comcast Cablevision of Philadelphia, Inc. Existing - Active
Comcast Cablevision of Plainfield, Inc. Existing - Active
Comcast Cablevision of Potomac, LLC Existing - Active
Comcast Cablevision of Quincy, Inc. Existing - Active
Comcast Cablevision of Santa Maria, LLC Existing - Active
Comcast Cablevision of Shelby, Inc. Existing - Active
Comcast Cablevision of South Jersey, Inc. Existing - Active
Comcast Cablevision of Southeast Michigan, Inc. Existing - Active
Comcast Cablevision of Southeast Pennsylvania, Inc. Existing - Active
Comcast Cablevision of Sterling Heights, Inc. Existing - Active
Comcast Cablevision of Tallahassee, Inc. Existing - Active
Comcast Cablevision of Taylor, Inc. Existing - Active
Comcast Cablevision of the District, LLC Existing - Active
Comcast Cablevision of the Meadowlands, Inc. Existing - Active
Comcast Cablevision of the South Existing - Active
Comcast Cablevision of the South, Inc. Existing - Active
Comcast Cablevision of the South, L.P. Existing - Active
Comcast Cablevision of the South, LLC Existing - Active
Comcast Cablevision of Tupelo, Inc. Existing - Active
Comcast Cablevision of Utica, Inc. Existing - Active
Comcast Cablevision of Virginia, Inc. Existing - Active
Comcast Cablevision of Warren Existing - Active
Comcast Cablevision of Warren, Inc. Existing - Active
Comcast Cablevision of West Florida, Inc. Existing - Active
Comcast Cablevision of Wildwood, Inc. Existing - Active
Comcast Cablevision of Willow Grove, Inc. Existing - Active
Comcast Cablevision of Wisconsin, Inc. Existing - Active
Comcast Capital Corporation Existing - Active
Comcast Cellular Holding Company, Inc. Existing - Inactive
Comcast Cellular Holdings Corporation Existing - Inactive
Comcast Central Europe, Inc. Existing - Merger
in Process
Entity Name Entity Status
----------- -------------
Comcast CICG GP, Inc. Existing - Active
Comcast CICG LP, Inc. Existing - Active
Comcast CICG, L.P. Existing - Active
Comcast Concurrent Holdings, Inc. Existing - Active
Comcast Corporate Investments II, Inc. Existing - Active
Comcast Corporate Investments, Inc. Existing - Active
Comcast Corporation Existing - Active
Comcast Corporation Political Action Committee
of Maryland Existing - Active
Comcast Corporation Trust I Existing - Active
Comcast Corporation Trust II Existing - Active
Comcast Corporation Trust III Existing - Active
Comcast Crystalvision, Inc. Existing - Active
Comcast Data Services, Inc. Existing - Inactive
Comcast DC Radio, Inc. Existing - Active
Comcast Directory Services, Inc. Existing - Inactive
Comcast do Brasil Ltda. Existing - Active
Comcast Entertainment Holdings LLC Existing - Active
Comcast Europe Holdings, Inc. Existing - Merger
in Process
Comcast Financial Agency Corporation Existing - Active
Comcast Florida Programming Investments, Inc. Existing - Active
Comcast France Holdings, Inc. Existing - Inactive
Comcast Funding I, Inc. Existing - Active
Comcast Garden State LP, Inc. Existing - Active
Comcast Garden State, Inc. Existing - Active
Comcast Gateway Holdings, LLC Existing - Active
Comcast Hattiesburg Holding Company, Inc. Existing - Active
Comcast HTS Holdings, Inc. Existing - Active
Comcast HTS, LLC Existing - Active
Comcast IAP, Inc. Existing - Inactive
Comcast ICG Holdings 1, Inc. Existing - Inactive
Comcast ICG Holdings 10, Inc. Existing - Inactive
Comcast ICG Holdings 2, Inc. Existing - Active
Comcast ICG Holdings 3, Inc. Existing - Active
Comcast ICG Holdings 4, Inc. Existing - Active
Comcast ICG Holdings 5, Inc. Existing - Inactive
Comcast ICG Holdings 6, Inc. Existing - Inactive
Comcast ICG Holdings 7, Inc. Existing - Inactive
Comcast ICG Holdings 8, Inc. Existing - Inactive
Comcast ICG Holdings 9, Inc. Existing - Inactive
Comcast ICG, Inc. Existing - Active
Comcast In Demand Holdings, Inc. Existing - Active
Comcast Interactive Capital, L.P. Existing - Active
Comcast International Holdings, Inc. Existing - Active
Comcast International Programming, Inc. Existing - Inactive
Comcast Investment Holdings, Inc. Existing - Active
Comcast ISD, Inc. Existing - Inactive
Comcast LCP, Inc. Existing - Active
Comcast Life Insurance Holding Company Existing - Active
Comcast LM Investment, Inc. Existing - Active
Comcast LMDS Communications, Inc. Existing - Inactive
Comcast Merger, Inc. Existing - Merger
in Process
Entity Name Entity Status
----------- -------------
Comcast Mexico, Inc. Existing - Merger
in Process
Comcast MH Holdings, Inc. Existing - Active
Comcast MH Online Communications, Inc. Existing - Dissolution
in Process
Comcast MH Telephony Communications of
New Jersey, Inc. Existing - Active
Comcast Michigan Holdings, Inc. Existing - Active
Comcast Midwest Management, Inc. Existing - Active
Comcast MLP Partner, Inc. Existing - Dissolution
in Process
Comcast Multicable Media, Inc. Existing - Inactive
Comcast Nashville I, L.P. Existing - Active
Comcast Nashville II, L.P. Existing - Active
Comcast Netherlands, Inc Existing - Active
Comcast Network Communications, Inc. Existing - Inactive
Comcast New Media Development, Inc. Existing - Active
Comcast Online Communications Investment
Holdings, Inc. Existing - Active
Comcast PC Communications, Inc. Existing - Inactive
Comcast PC Investments Holdings 4, Inc. Existing - Inactive
Comcast PC Investments Holdings 5, Inc. Existing - Inactive
Comcast PC Investments Holdings 6, Inc. Existing - Inactive
Comcast PC Investments Holdings 7, Inc. Existing - Inactive
Comcast PC Investments Holdings 8, Inc. Existing - Inactive
Comcast PC Investments Holdings 9, Inc. Existing - Inactive
Comcast PC Investments, Inc. Existing - Active
Comcast Prime, LLC Existing - Active
Comcast Primestar Holdings, Inc. Existing - Active
Comcast Programming Holdings, Inc. Existing - Active
Comcast Programming Ventures II, Inc. Existing - Active
Comcast Programming Ventures III, Inc. Existing - Active
Comcast Programming Ventures IV, Inc. Existing - Active
Comcast Programming Ventures, Inc. Existing - Active
Comcast PSM Holdings, Inc. Existing - Active
Comcast Publishing Holdings Corporation Existing - Inactive
Comcast Publishing Holdings Financial Corporation Existing - Merger
in Process
Comcast QIH, Inc. Existing - Active
Comcast QVC, Inc. Existing - Active
Comcast Rapid, LLC Existing - Active
Comcast Real Estate Holdings of Alabama, Inc. Existing - Active
Comcast Satellite Communications, Inc. Existing - Inactive
Comcast SC Investment, Inc. Existing - Active
Comcast SCH Delaware Holdings, Inc. Existing - Inactive
Comcast SCH Holdings, LLC Existing - Active
Comcast Shared Services Corporation Existing - Active
Comcast Soccer, LLC Existing - Active
Comcast Sound Corporation Existing - Inactive
Comcast Spectacor Foundation Existing - Active
Comcast Spectacor, L.P. Existing - Active
Comcast Sports Holding Company, Inc. Existing - Active
Comcast Technology, Inc. Existing - Active
Comcast Telecommunications of Michigan, LLC Existing - Active
Comcast Telephony Communications of California, Inc. Existing - Active
Comcast Telephony Communications of Connecticut, Inc. Existing - Active
Comcast Telephony Communications of Delaware, Inc. Existing - Active
Entity Name Entity Status
----------- -------------
Comcast Telephony Communications of Georgia, Inc. Existing - Active
Comcast Telephony Communications of Indiana, Inc. Existing - Active
Comcast Telephony Communications of Maryland, Inc. Existing - Active
Comcast Telephony Communications of
Pennsylvania, Inc. Existing - Active
Comcast Telephony Communications of South
Carolina, Inc. Existing - Active
Comcast Telephony Communications, Inc. Existing - Active
Comcast Telephony Services Holdings, Inc. Existing - Active
Comcast Telephony Services II, Inc. Existing - Inactive
Comcast TM, Inc. Existing - Merger
in Process
Comcast TSIX Holdings, Inc. Existing - Merger
in Process
Comcast U.K. Holdings, Inc. Existing - Inactive
Comcast UK Cable Partners Consulting, Inc. Existing - Inactive
Comcast Venezuela PCS, Inc. Existing - Inactive
Comcast WCS Holdings, Inc. Existing - Inactive
Comcast WCS ME02, Inc. Existing - Active
Comcast WCS ME04, Inc. Existing - Active
Comcast WCS ME05, Inc. Existing - Active
Comcast WCS ME12, Inc. Existing - Inactive
Comcast WCS ME16, Inc. Existing - Active
Comcast WCS ME18, Inc. Existing - Inactive
Comcast WCS ME19, Inc. Existing - Active
Comcast WCS ME19B, Inc. Existing - Inactive
Comcast WCS ME22, Inc. Existing - Active
Comcast WCS ME26, Inc. Existing - Active
Comcast WCS ME28, Inc. Existing - Active
Comcast WCS ME33, Inc. Existing - Inactive
Comcast WCS ME43, Inc. Existing - Inactive
Comcast WCS ME44, Inc. Existing - Inactive
Comcast WCS ME46, Inc. Existing - Inactive
Comcast WCS Merger Holdings, LLC Existing - Active
Comcast WCS MergerCo, Inc. Existing - Active
Comcast WCS RE03, Inc. Existing - Inactive
Comcast Wink, Inc. Existing - Active
Comcast/Time Warner Charleston Cable Advertising, LLC Existing - Active
Comcast/Time Warner Detroit Cable Advertising, LLC Existing - Active
ComCon Entertainment Holdings, Inc. Existing - Active
ComCon Production Services I, Inc. Existing - Inactive
Commerce Technologies, Inc. Existing - Active
Connecticut Cable Advertising L.P. Existing - Dissolution
in Process
CP MI, LLC Existing - Dissolution
in Process
CV Directo de Mexico S. de R.L. de C.V. Existing - Active
CVN Companies, Inc. Existing - Active
CVN Direct Marketing Corp. Existing - Inactive
CVN Distribution Co., Inc. Existing - Active
CVN Management, Inc. Existing - Inactive
CVN Michigan, Inc. Existing - Inactive
Diamonique Corporation Existing - Active
Diamonique Corporation Existing - Active
Digital Cable Radio Associates Existing - Active
Digital Cable Radio Associates, L.P. Existing - Active
DiscoverMusic.com Existing - Active
Entity Name Entity Status
----------- -------------
E! Entertainment Television International
Holdings, Inc. Existing - Active
E! Entertainment Television Latin America Existing - Active
E! Entertainment Television, Inc. Existing - Active
E! Online, Inc. Existing - Active
East Rutherford Realty, Inc. Existing - Inactive
Eastecnica IV S.G.P.S. Existing - Active
ER Marks, Inc. Existing - Active
Exclamation Music, Inc. Existing - Active
Exclamation Productions, Inc. Existing - Active
EZShop International, Inc. Existing - Active
First Television Corporation Existing - Active
Florida Telecommunications Services, Inc. Existing - Active
Flyers Skate Zone, Inc. Existing - Active
Flyers Skate Zone, L.P. Existing - Active
FPS Rink, Inc. Existing - Active
FPS Rink, L.P. Existing - Active
G4 Media, LLC Existing - Active
Garden State Telecommunications LLC Existing - Active
Global Spectrum, Inc. Existing - Active
Global Spectrum, L.P. Existing - Active
Global Sport, Inc. Existing - Active
GlobalCom Holding Company, Inc. Existing - Inactive
Globe Facilities Limited Partnership Existing - Active
Greater Birmingham Interconnect Existing - Active
Health Ventures Partners G.P. Existing - Active
I.C.E. Limited Existing - Active
IC Marks, Inc. Existing - Active
IM Experience, Inc. Existing - Active
Influence Marketing Corporation Existing - Active
Influence Marketing Services, Inc. Existing - Active
Innovative Retailing, Inc. Existing - Active
Interactive Technology Acquisitions, Inc. Existing - Active
Interactive Technology Holdings, LLC Existing - Active
Interactive Technology Services, Inc. Existing - Active
Internet Capital Group, Inc. Existing - Active
Intertainer, Inc. Existing - Active
Janco Capital, LP Existing - Active
Jones Cable Corporation Existing - Active
Jones Cable Holdings, Inc. Existing - Active
Jones Communications, Inc. Existing - Inactive
Jones Entertainment Group, Ltd. Existing - Active
Jones Intercable Funds, Inc. Existing - Inactive
Jones International Networks, Ltd. Existing - Active
Jones Panarama Properties, LLC Existing - Active
Jones Programming Services, Inc. Existing - Active
Jones Spacelink Cable Corporation Existing - Active
Jones Telecommunications of California, LLC Existing - Active
Jones Telecommunications of Maryland, Inc. Existing - Active
Jones Telecommunications of Virginia, Inc. Existing - Active
L-TCI Associates Existing - Inactive
Lenfest Atlantic Communications, Inc. Existing - Active
Entity Name Entity Status
----------- -------------
Lenfest Australia Group Pty Ltd. Existing - Active
Lenfest Australia Investment Pty Ltd. Existing - Active
Lenfest Australia, Inc. Existing - Active
Lenfest Clearview, Inc. Existing - Active
Lenfest Delaware Properties, Inc. Existing - Active
Lenfest International Holdings, Inc. Existing - Inactive
Lenfest International, Inc. Existing - Active
Lenfest Investments, Inc. Existing - Active
Lenfest Jersey, Inc. Existing - Active
Lenfest MCN, Inc. Existing - Active
Lenfest Oaks, Inc. Existing - Active
Lenfest Programming Services, Inc. Existing - Active
Lenfest Raystay Holdings, Inc. Existing - Active
Lenfest Telephony, Inc. Existing - Inactive
Lenfest Videopole Holdings, Inc. Existing - Inactive
Lenfest West, LLC Existing - Active
Lenfest York, Inc. Existing - Active
Liberate Technologies Existing - Active
Liberty City Funding Corporation Existing - Inactive
Liberty Digital, Inc. Existing - Active
M H Lightnet Inc. Existing - Active
MCNS Holdings, L.P. Existing - Active
MCOM Wireless S.A. Existing - Active
MComcast S.A. Existing - Active
MicroUnity Systems Engineering, Inc. Existing - Active
Mobile Enterprises, Inc. Existing - Active
Movie Magazine LLC Existing - Active
Mt. Clemens Cable TV Investors, Inc. Existing - Active
MTCB S.A. Existing - Active
Muzak, LLC Existing - Active
National Cable Communications LLC Existing - Active
Net Value Holdings Existing - Active
New England Microwave, Inc. Existing - Active
New Hope Cable TV, Inc. Existing - Inactive
New Hydromercial Partners Existing - Active
NHL Enterprises Canada, L.P. Existing - Active
NHL Enterprises, Inc. Existing - Active
NHL Enterprises, L.P. Existing - Active
Nroca Holdings, Inc. Existing - Inactive
Nucable Resources Corporation Existing - Inactive
Outdoor Life Network, L.L.C. Existing - Active
Ovations Food Services, Inc. Existing - Active
Ovations Food Services, L.P. Existing - Active
Pa-Thai Corporation Existing - Inactive
Pattison Development, Inc. Existing - Active
Pattison Realty, Inc. Existing - Active
Philadelphia 76ers, Inc. Existing - Active
Philadelphia 76ers, L.P. Existing - Active
Philadelphia Cable Investment Corporation Existing - Inactive
Philadelphia Flyers Enterprises Co. Existing - Active
Philadelphia Phantoms, Inc. Existing - Active
Entity Name Entity Status
----------- -------------
Philadelphia Phantoms, L.P. Existing - Active
Philadelphia Sports Media, Inc. Existing - Active
Philadelphia Sports Media, L.P. Existing - Active
Phoenixstar, Inc. Existing - Active
Pioneer Studios, Inc. Existing - Active
Prime Communications Holdings, LLC Existing - Active
Prime Communications, LLC Existing - Active
Prime Potomac Performance, LLC Existing - Active
Prime Potomac Purchasing, LLC Existing - Active
Prime Telecom Potomac, LLC Existing - Inactive
Q & M Enterprises Existing - Active
Q The Music, Inc. Existing - Active
Q2, Inc. Existing - Active
QC Marks, Inc. Existing - Active
QDirect Ventures, Inc. Existing - Active
QExhibits, Inc. Existing - Active
QFit, Inc. Existing - Active
QFlight, Inc. Existing - Inactive
QHealth, Inc. Existing - Active
QK Holdings, Inc. Existing - Active
QVC Existing - Active
QVC - QRT, Inc. Existing - Inactive
QVC Britain Existing - Active
QVC Britain I, Inc. Existing - Active
QVC Britain II, Inc. Existing - Active
QVC Britain III, Inc. Existing - Active
QVC Call Center GmbH & Co. KG Existing - Active
QVC Call Center Verwaltungs GmbH Existing - Active
QVC Chesapeake, Inc. Existing - Active
QVC China Domain Limited Existing - Active
QVC China, Inc. Existing - Active
QVC de Mexico de C.V. Existing - Active
QVC Delaware, Inc. Existing - Active
QVC Deutschland GmbH Existing - Active
QVC Edv-Service GmbH Existing - Inactive
QVC Germany I, Inc. Existing - Active
QVC Germany II, Inc. Existing - Active
QVC Handel GmbH Existing - Active
QVC Holdings, Inc. Existing - Active
QVC International, Inc. Existing - Active
QVC Japan Holdings, Inc. Existing - Active
QVC Japan Services, Inc. Existing - Active
QVC Japan, Inc. Existing - Active
QVC Local, Inc. Existing - Active
QVC Logistik GmbH Existing - Active
QVC Mexico II, Inc. Existing - Active
QVC Mexico III, Inc. Existing - Active
QVC Mexico, Inc. Existing - Active
QVC Middle East, Inc. Existing - Active
QVC of Thailand, Inc. Existing - Inactive
QVC ProductWorks, Inc. Existing - Active
Entity Name Entity Status
----------- -------------
QVC Properties, Ltd. Existing - Active
QVC Publishing, Inc. Existing - Active
QVC Realty, Inc. Existing - Active
QVC Rocky Mount, Inc. Existing - Active
QVC San Antonio, Inc. Existing - Active
QVC Satellite, Ltd. Existing - Active
QVC St. Lucie, Inc. Existing - Active
QVC Studio GmbH Existing - Active
QVC Virginia, Inc. Existing - Active
QVC, Inc. Existing - Active
Raystay Co. Existing - Active
RS Marks, Inc. Existing - Active
RS Myrtle Beach, Inc. Existing - Active
Sandler Capital Partners IV Existing - Active
Sandler Mezzanine Partners, L.P. Existing - Active
Saturn Cable TV, Inc. Existing - Active
SBC Cable Co. Existing - Active
SCI 11, Inc. Existing - Active
SCI 34, Inc. Existing - Active
SCI 36, Inc. Existing - Active
SCI 37, Inc. Existing - Active
SCI 38, Inc. Existing - Active
SCI 39, Inc. Existing - Inactive
SCI 48, Inc. Existing - Active
SCI 55, Inc. Existing - Active
Selkirk Communications (Delaware) Corporation Existing - Active
Selkirk Systems, Inc. Existing - Inactive
SKC Hangar Partners Existing - Active
Spectacor Adjoining Real Estate New Arena, L.P. Existing - Active
Spectrum Arena Limited Partnership Existing - Active
Speedvision Network, L.L.C. Existing - Active
StarNet Development, Inc. Existing - Inactive
StarNet Interactive Entertainment, Inc. Existing - Inactive
StarNet, Inc. Existing - Inactive
Storer Administration, Inc. Existing - Inactive
Storer Cable TV of Radnor, Inc. Existing - Inactive
Storer Disbursments, Inc. Existing - Inactive
Suburban Digital Services, Inc. Existing - Merger
in Process
Sunshine Network of Florida, Ltd. Existing - Active
Sunshine Network, Inc. Existing - Active
Sural, LLC Existing - Active
Susquehanna Cable Co. Existing - Active
TATV, Inc. Existing - Active
Tele-Link Telecomunicacoes S.A. Existing - Active
Telemercado Alameda S. de R.L. de C.V. Existing - Active
TGC, Inc. Existing - Active
TGW Telecomunicacoes S.A. Existing - Active
The Cable Television Network of New Jersey, Inc. Existing - Dissolution
in Process
The Comcast Foundation Existing - Active
The Detroit Cable Interconnect L.P. Existing - Dissolution
in Process
The Greater Washington Interconnect, LLC Existing - Dissolution
in Process
Entity Name Entity Status
----------- -------------
The Intercable Group, Ltd. Existing - Active
The Knot, Inc. Existing - Active
The Lightspan Partnership, Inc. Existing - Active
The New York Interconnect L.L.C. Existing - Active
The Philadelphia Interconnect Existing - Active
Tri-State Media, Inc. Existing - Merger
in Process
UCTC of Baltimore, Inc. Existing - Active
United Cable Television of Baltimore Limited
Partnership Existing - Active
Viewer's Choice, L.L.C. Existing - Active
Westmoreland Financial Corporation Existing - Inactive
Wilmington Cellular Telephone Company LLC Existing - Inactive
York Cable Television, Inc. Existing - Active
INDEPENDENT AUDITORS' CONSENT Board of Directors and Stockholders Comcast Corporation Philadelphia, Pennsylvania We consent to the incorporation by reference in Registration Statement Numbers 333-81391 and 333-54032 on Forms S-3 and Registration Statement Numbers 33-63223, 33-56903, 333-08577, 333-18715, 333-69709, 333-62482, 333-69146 and 333-81182 on Forms S-8 of Comcast Corporation of our report dated February 5, 2002 (which report expresses an unqualified opinion and includes an explanatory paragraph related to the adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, effective January 1, 2001) appearing in this Annual Report on Form 10-K of Comcast Corporation for the year ended December 31, 2001. Philadelphia, Pennsylvania March 26, 2002