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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
for the Quarterly Period Ended:
JUNE 30, 2002
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the Transition Period from ________ to ________.
Commission File Number 0-6983
[GRAPHIC OMITTED - LOGO]
COMCAST CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1709202
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
__________________________
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 twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No
--- ----
__________________________
As of June 30, 2002, there were 915,707,981 shares of Class A Special Common
Stock, 21,591,115 shares of Class A Common Stock and 9,444,375 shares of Class B
Common Stock outstanding.
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet as of June 30, 2002
and December 31, 2001 (Unaudited)......................................................2
Condensed Consolidated Statement of Operations and Retained Earnings for
the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited)......................3
Condensed Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 2002 and 2001 (Unaudited)...............................................4
Notes to Condensed Consolidated Financial Statements (Unaudited)..................5 - 18
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................19 - 27
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.....................................................................28
ITEM 4. Submission of Matters to a Vote of Security Holders...................................29
ITEM 6. Exhibits and Reports on Form 8-K......................................................30
SIGNATURE........................................................................................31
___________________________________
This Quarterly Report on Form 10-Q is for the three months ended June 30,
2002. This Quarterly Report modifies and supersedes documents filed prior to
this Quarterly 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 Quarterly Report. In
addition, information that we file with the SEC in the future will automatically
update and supersede information contained in this Quarterly Report. In this
Quarterly Report, "Comcast," "we," "us" and "our" refer to Comcast Corporation
and its subsidiaries.
You should carefully review the information contained in this Quarterly
Report and in other reports or documents that we file from time to time with the
SEC. In this Quarterly 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"). On July 10, 2002, the shareholders of both Comcast
and AT&T approved the transaction. Upon closing of the transaction, which is
subject to regulatory and other approvals, we will own cable systems in new
communities in which we do not have established relationships with the cable
subscribers, franchising authority and community leaders. Further, a substantial
number of new employees must be integrated into our business practices and
operations. Our results of operations may be significantly affected by our
ability to efficiently and effectively manage these changes.
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.
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
PART I. FINANCIAL INFORMATION
- ------- ---------------------
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in millions, except share data)
June 30, December 31,
2002 2001
---------- -----------
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents.................................................... $557.8 $350.0
Investments.................................................................. 1,057.6 2,623.2
Accounts receivable, less allowance for doubtful accounts of
$166.9 and $153.9.......................................................... 957.0 967.4
Inventories, net............................................................. 414.0 454.5
Deferred income taxes........................................................ 135.9 128.7
Other current assets......................................................... 337.7 153.7
---------- -----------
Total current assets..................................................... 3,460.0 4,677.5
---------- -----------
INVESTMENTS..................................................................... 727.6 1,679.2
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $3,238.2 and $2,725.7 7,023.1 7,011.1
GOODWILL........................................................................ 6,446.3 6,289.4
FRANCHISE RIGHTS................................................................ 16,599.4 16,533.0
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $803.3 and $664.6... 1,471.7 1,686.9
OTHER NONCURRENT ASSETS, net.................................................... 390.7 383.4
---------- -----------
$36,118.8 $38,260.5
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable............................................................. $680.1 $698.2
Accrued expenses and other current liabilities............................... 1,371.7 1,695.5
Deferred income taxes........................................................ 121.8 404.1
Current portion of long-term debt............................................ 206.9 460.2
---------- -----------
Total current liabilities................................................ 2,380.5 3,258.0
---------- -----------
LONG-TERM DEBT, less current portion............................................ 10,543.5 11,741.6
---------- -----------
DEFERRED INCOME TAXES........................................................... 6,755.2 6,375.7
---------- -----------
OTHER NONCURRENT LIABILITIES.................................................... 1,421.1 1,532.0
---------- -----------
MINORITY INTEREST............................................................... 986.7 880.2
---------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS' EQUITY
Class A special common stock, $1 par value - authorized,
2,500,000,000 shares; issued, 915,707,981 and 937,256,465; outstanding,
915,707,981and 913,931,554................................................. 915.7 913.9
Class A common stock, $1 par value - authorized, 200,000,000 shares;
issued, 21,591,115 and 21,829,422.......................................... 21.6 21.8
Class B common stock, $1 par value - authorized, 50,000,000 shares;
issued, 9,444,375.......................................................... 9.4 9.4
Additional capital........................................................... 11,791.5 11,752.0
Retained earnings............................................................ 1,317.3 1,631.5
Accumulated other comprehensive income (loss)................................ (23.7) 144.4
---------- -----------
Total stockholders' equity............................................... 14,031.8 14,473.0
---------- -----------
$36,118.8 $38,260.5
========== ===========
See notes to condensed consolidated financial statements.
2
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND
RETAINED EARNINGS
(Unaudited)
(Amounts in millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
--------- --------- --------- ---------
REVENUES
Service revenues....................................................... $1,714.4 $1,462.7 $3,393.4 $2,810.7
Net sales from electronic retailing.................................... 994.5 876.0 1,988.0 1,760.0
--------- --------- --------- ---------
2,708.9 2,338.7 5,381.4 4,570.7
--------- --------- --------- ---------
COSTS AND EXPENSES
Operating (excluding depreciation)..................................... 723.4 671.7 1,469.4 1,311.4
Cost of goods sold from electronic retailing (excluding depreciation).. 628.8 555.2 1,260.0 1,111.8
Selling, general and administrative.................................... 490.1 418.9 977.2 820.4
Depreciation........................................................... 342.8 273.9 676.6 514.7
Amortization........................................................... 45.4 552.3 98.7 1,046.2
--------- --------- --------- ---------
2,230.5 2,472.0 4,481.9 4,804.5
--------- --------- --------- ---------
OPERATING INCOME (LOSS).................................................... 478.4 (133.3) 899.5 (233.8)
OTHER INCOME (EXPENSE)
Interest expense....................................................... (182.6) (178.5) (369.3) (360.8)
Investment income (expense)............................................ (459.1) 502.7 (707.1) 717.4
Equity in net losses of affiliates..................................... (43.0) (9.5) (48.4) (6.6)
Other income (expense)................................................. 9.6 (6.3) (14.0) 1,187.9
--------- --------- --------- ---------
(675.1) 308.4 (1,138.8) 1,537.9
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE............................. (196.7) 175.1 (239.3) 1,304.1
INCOME TAX BENEFIT (EXPENSE)............................................... 32.9 (103.0) 30.2 (588.6)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE MINORITY INTEREST AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE................................................... (163.8) 72.1 (209.1) 715.5
MINORITY INTEREST.......................................................... (45.8) (36.9) (89.4) (63.6)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE................ (209.6) 35.2 (298.5) 651.9
CUMULATIVE EFFECT OF ACCOUNTING CHANGE..................................... 384.5
--------- --------- --------- ---------
NET INCOME (LOSS).......................................................... ($209.6) $35.2 ($298.5) $1,036.4
========= ========= ========= =========
RETAINED EARNINGS
Beginning of period.................................................... $1,541.4 $2,040.6 $1,631.5 $1,056.5
Net income (loss)...................................................... (209.6) 35.2 (298.5) 1,036.4
Retirement of common stock............................................. (14.5) (15.7) (17.1)
--------- --------- --------- ---------
End of period.......................................................... $1,317.3 $2,075.8 $1,317.3 $2,075.8
========= ========= ========= =========
BASIC EARNINGS (LOSS) PER COMMON SHARE
Income (loss) before cumulative effect of accounting change............ ($0.22) $0.04 ($0.31) $0.69
Cumulative effect of accounting change................................. 0.40
--------- --------- --------- ---------
Net income (loss)................................................... ($0.22) $0.04 ($0.31) $1.09
========= ========= ========= =========
BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING................. 952.3 951.1 951.9 948.2
========= ========= ========= =========
DILUTED EARNINGS (LOSS) PER COMMON SHARE
Income (loss) before cumulative effect of accounting change............ ($0.22) $0.04 ($0.31) $0.67
Cumulative effect of accounting change................................. 0.40
--------- --------- --------- ---------
Net income (loss)................................................... ($0.22) $0.04 ($0.31) $1.07
========= ========= ========= =========
DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING............... 952.3 965.6 951.9 965.3
========= ========= ========= =========
See notes to condensed consolidated financial statements.
3
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in millions)
Six Months Ended June 30,
2002 2001
--------- --------
OPERATING ACTIVITIES
Net income (loss)................................................................ ($298.5) $1,036.4
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation................................................................... 676.6 514.7
Amortization................................................................... 98.7 1,046.2
Non-cash interest expense, net................................................. 21.5 26.1
Equity in net losses of affiliates............................................. 48.4 6.6
Losses (gains) on investments and other income (expense), net.................. 738.8 (1,875.5)
Minority interest.............................................................. 89.4 63.6
Cumulative effect of accounting change......................................... (384.5)
Deferred income taxes.......................................................... (4.2) (131.9)
Proceeds from sales of trading security........................................ 280.3
Other.......................................................................... (9.7) 19.3
--------- --------
1,361.0 601.3
Changes in working capital, net of effects of acquisitions and divestitures:
Decrease in accounts receivable, net......................................... 8.9 111.2
Decrease (increase) in inventories, net...................................... 40.5 (33.3)
Increase in other current assets............................................. (18.2) (65.3)
(Decrease) increase in accounts payable, accrued expenses and other
current liabilities........................................................ (341.7) 360.7
--------- --------
(310.5) 373.3
Net cash provided by operating activities................................ 1,050.5 974.6
--------- --------
FINANCING ACTIVITIES
Proceeds from borrowings......................................................... 632.1 4,554.7
Retirements and repayments of debt............................................... (1,169.3) (3,206.4)
Proceeds from settlement of interest rate exchange agreements.................... 56.8
Issuances of common stock........................................................ 11.2 20.2
Deferred financing costs......................................................... (2.3) (22.5)
--------- --------
Net cash (used in) provided by financing activities...................... (471.5) 1,346.0
--------- --------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired............................................... (16.1) (872.8)
Sales (purchases) of short-term investments, net................................. 3.0 (135.5)
Purchases of investments......................................................... (31.6) (175.7)
Proceeds from sales of investments............................................... 595.9 225.3
Capital expenditures............................................................. (788.9) (1,143.7)
Additions to intangible and other noncurrent assets.............................. (133.5) (123.8)
--------- --------
Net cash used in investing activities.................................... (371.2) (2,226.2)
--------- --------
INCREASE IN CASH AND CASH EQUIVALENTS............................................... 207.8 94.4
CASH AND CASH EQUIVALENTS, beginning of period...................................... 350.0 651.5
--------- --------
CASH AND CASH EQUIVALENTS, end of period............................................ $557.8 $745.9
========= ========
See notes to condensed consolidated financial statements.
4
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
Comcast Corporation and its subsidiaries (the "Company") has prepared these
unaudited condensed consolidated financial statements based upon Securities
and Exchange Commission rules that permit reduced disclosure for interim
periods.
These financial statements include all adjustments that are necessary for a
fair presentation of the Company's results of operations and financial
condition for the interim periods shown including normal recurring accruals
and other items. The results of operations for the interim periods
presented are not necessarily indicative of results for the full year.
For a more complete discussion of the Company's accounting policies and
certain other information, refer to the financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2001.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to those classifications used in 2002 (see Note 2).
2. RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, as Amended
On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivatives and Hedging
Activities," as amended. 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. 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 and $191.3 million principally related
to the reclassification of gains previously recognized as a component of
accumulated other comprehensive income (loss) on the Company's equity
derivative instruments, net of related deferred income taxes of $207.0
million.
SFAS No. 142
The Financial Accounting Standards Board ("FASB") issued SFAS No. 142,
"Goodwill and Other Intangible Assets," in June 2001. SFAS No. 142
addresses how intangible assets that are acquired individually or with a
group of other assets should be accounted for in financial statements upon
and subsequent to their acquisition. The Company adopted SFAS No. 142 on
January 1, 2002, as required by the new statement. Upon adoption, the
Company no longer amortizes goodwill and other indefinite lived intangible
assets, which consist of cable and sports franchise rights. The Company is
required to test its goodwill and intangible assets that are determined to
have an indefinite life for impairment at least annually. The provisions of
SFAS No. 142 require the completion of an initial transitional impairment
assessment, with any impairments identified treated as a cumulative effect
of a change in accounting principle. The Company completed this assessment
and determined that no cumulative effect results from adopting this change
in accounting principle. The provisions of SFAS No. 142 also require the
completion of an annual impairment test, with any impairments recognized in
current earnings. The Company completed the annual impairment test during
the three months ended June 30, 2002 and determined that no impairment
charge is necessary (see Note 6).
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,
5
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
2002. The Company does not expect the adoption of SFAS No. 143 will have a
material impact on its financial condition or results of operations.
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. The Company
adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 had
no impact on the Company's financial condition or results of operations.
SFAS No. 145
The FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections," in
April 2002. SFAS No. 145 rescinds, amends or makes various technical
corrections to certain existing authoritative pronouncements. Among other
things, SFAS No. 145 will change the accounting for certain gains and
losses resulting from extinguishments of debt by requiring that a gain or
loss from extinguishments of debt be classified as an extraordinary item
only if it meets the specific criteria of APB Opinion No. 30. SFAS No. 145
also requires that cash flows from all trading securities, such as the
Company's investment in Sprint PCS, be classified as cash flows from
operating activities in its statement of cash flows.
The Company adopted the provisions of SFAS No. 145 effective April 1, 2002,
as permitted by the new statement. The Company previously classified losses
from debt extinguishments as extraordinary items in its statement of
operations. Upon adoption of SFAS No. 145, the Company reclassified these
losses from extraordinary items to interest expense for all periods
presented in its statement of operations. The change in classification had
no effect on the Company's net income (loss) or financial condition. The
Company previously classified cash flows from purchases, sales and
maturities of its investment in Sprint PCS as cash flows from investing
activities in its statement of cash flows. The change in classification was
to increase the Company's net cash provided by operating activities and to
increase the Company's net cash used in investing activities for the six
months ended June 30, 2001.
SFAS No. 146
The FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities," in June 2002. SFAS No. 146 changes the standards for
recognition of a liability for a cost associated with an exit or disposal
activity. SFAS No. 146 requires that a liability for a cost associated with
an exit or disposal activity be recognized when the liability is incurred.
SFAS No. 146 establishes that fair value is the objective for initial
measurement of the liability. SFAS No. 146 nullifies the guidance of
Emerging Issues Task Force ("EITF") 94-3 under which an entity recognized a
liability for an exit cost on the date that the entity committed itself to
an exit plan. The Company will adopt the provisions of SFAS No. 146 for
exit or disposal activities that are initiated after December 31, 2002, as
required by the new statement. The Company does not expect the adoption of
SFAS No. 146 will have a material impact on its financial condition or
results of operations.
EITF 01-9
In November 2001, the EITF of the FASB 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 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
previously classified the amortization of these distribution fees as
expense in its statement of operations. Upon adoption of EITF 01-9 on
January 1, 2002, the Company reclassified certain of these distribution
fees from expense to a revenue reduction for all periods presented in its
statement of operations. The change in classification had no impact on the
Company's reported operating income (loss) or financial condition. This
change does not apply to distribution fees paid by the Company's
consolidated subsidiary, QVC, Inc. ("QVC") as the counterparties to QVC's
distribution agreements
6
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
do not make revenue payments to QVC. Amortization expense includes $5.0
million, $7.0 million, $9.6 million and $14.1 million during the three
months ended June 30, 2002 and 2001 and during the six months ended June
30, 2002 and 2001, respectively, related to QVC distribution fees.
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.
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 previously classified 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 statement of operations.
EITF 01-14, by analogy, applies to franchise fees. Upon adoption of EITF
01-14 on January 1, 2002, the Company reclassified franchise fees collected
from cable subscribers from a reduction of selling, general and
administrative expenses to a component of service revenues for all periods
presented in its statement of operations. The change in classification had
no impact on the Company's reported operating income (loss) or financial
condition.
3. EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is computed by dividing net income (loss)
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 (loss) per common share ("Diluted EPS")
for the interim periods presented.
(Amounts in millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Income (loss) before cumulative effect of accounting
change used for Diluted EPS.......................... ($209.6) $35.2 ($298.5) $651.9
========= ========= ========= =========
Basic weighted average number of common shares
outstanding.......................................... 952.3 951.1 951.9 948.2
Dilutive securities:
Series B convertible preferred stock.............. 2.1
Stock option and restricted stock plans........... 14.5 15.0
--------- --------- --------- ---------
Diluted weighted average number of common shares
outstanding.......................................... 952.3 965.6 951.9 965.3
========= ========= ========= =========
Diluted income (loss) before cumulative effect of
accounting change per common share................... ($0.22) $0.04 ($0.31) $0.67
========= ========= ========= =========
Potentially dilutive securities related to the Company's Zero Coupon
Debentures, stock options and restricted stock plans (see below) were
excluded from the computation of Diluted EPS for the three and six months
ended June 30, 2002 because their effect on loss per common share was
antidilutive.
7
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The Company's Zero Coupon Convertible Debentures due 2020 (the "Zero Coupon
Debentures" - see Note 7) 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). Diluted EPS
for the three months ended June 30, 2002 and 2001 and for the six months
ended June 30, 2002 and 2001, respectively, excludes approximately 19.8
million, 21.1 million, 19.8 million and 21.1 million potential common shares
related to the Zero Coupon Debentures, respectively, 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.
Diluted EPS for the three and six months ended June 30, 2002 excludes
approximately 64.7 million and 63.7 million potential common shares related
to the Company's stock option and restricted stock plans because the assumed
issuance of such potential common shares is antidilutive in periods in which
there is a loss. Diluted EPS for the three and six months ended June 30, 2001
excludes approximately 2.3 million and 2.1 million potential common shares,
respectively, related to the Company's stock option plans because the option
exercise price was greater than the average market price of the Company's
common stock for the period.
4. 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 June 30,
2002, AT&T Broadband served approximately 13.3 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.
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, the Company currently estimates that the
combined company will require approximately $20 billion of assumed,
refinanced and new indebtedness upon completion of the AT&T Broadband
transaction. 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.
Consideration of facts and circumstances leading to the identification of the
Company as the acquiring entity is described in Note 5 to the financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001. On July 10, 2002, shareholders of both the Company
and AT&T approved the transaction. The transaction is subject to customary
closing conditions and regulatory and other approvals. The Company expects to
close the transaction by the end of 2002.
Unaudited Pro Forma Information
The following unaudited pro forma information has been presented as if the
acquisitions made by the Company in 2001 each occurred on January 1, 2001.
For a discussion of the Company's 2001 acquisitions, refer to the financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001. This information is based on historical results of
operations and has been adjusted for acquisition costs. This information is
not necessarily indicative of what the results would have been had the
Company operated the entities acquired since January 1, 2001.
8
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(Amounts in millions,
except per share data)
Six Months Ended
June 30, 2001
----------------------
Revenues...................................................... $4,806.1
Income before cumulative effect of accounting change.......... $605.9
Net income.................................................... $990.4
Diluted EPS................................................... $1.03
Other Income (Expense)
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
(expense) 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
(see Note 9).
5. INVESTMENTS
June 30, December 31,
2002 2001
--------------- ------------
(Dollars in millions)
Fair value method
AT&T Corp............................................ $444.2 $1,514.9
Sprint Corp. PCS Group............................... 758.2 2,109.5
Other................................................ 100.8 227.2
--------------- ------------
1,303.2 3,851.6
Cost method................................................. 128.3 143.6
Equity method............................................... 353.7 307.2
--------------- ------------
Total investments.................................... 1,785.2 4,302.4
Less, current investments................................... 1,057.6 2,623.2
--------------- ------------
Non-current investments..................................... $727.6 $1,679.2
=============== ============
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 available for sale investments
as of June 30, 2002 and December 31, 2001 of $32.4 million and $280.3
million, respectively, have been reported in the Company's balance sheet
principally as a component of accumulated other comprehensive income
(loss), net of related deferred income taxes of $11.3 million and $95.3
million, respectively.
9
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The cost, fair value and gross unrealized gains and losses related to the
Company's available for sale securities are as follows:
June 30, December 31,
2002 2001
----------- -----------
(Dollars in millions)
Cost................................................ $469.7 $1,355.0
Gross unrealized gains.............................. 33.1 283.2
Gross unrealized losses............................. (0.7) (2.9)
----------- -----------
Fair value.......................................... $502.1 $1,635.3
=========== ===========
Derivatives
The Company uses derivative financial instruments to manage its exposure to
fluctuations in interest rates, securities prices and certain foreign
currencies. The Company also invests in businesses, to some degree, through
the purchase of equity call option or call warrant agreements. The Company
has issued indexed debt instruments and prepaid forward sale agreements
whose value, in part, is derived from the market value of Sprint PCS common
stock.
The unrealized pre-tax losses on cash flow hedges as of June 30, 2002 and
December 31, 2001 of $1.7 million and $0.9 million have been reported in
the Company's balance sheet as a component of accumulated other
comprehensive income (loss), net of related deferred income taxes of $0.6
million and $0.3 million, respectively.
Investment Income (Expense)
Investment income (expense) for the interim periods includes the following
(in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Interest and dividend income............................... $10.6 $17.4 $17.5 $35.0
(Losses) gains on sales and exchanges of investments, net.. (102.5) 448.0 (100.9) 459.6
Investment impairment losses............................... (208.7) (45.0) (221.3) (939.1)
Reclassification of unrealized gains....................... 1,092.4
Unrealized (loss) gain on Sprint PCS common stock.......... (420.2) 392.4 (1,439.7) 265.6
Mark to market adjustments on derivatives related to
Sprint PCS common stock............................... 324.2 (317.9) 1,171.1 (191.5)
Mark to market adjustments on derivatives and
hedged items.......................................... (62.5) 7.8 (133.8) (4.6)
--------- --------- --------- ---------
Investment income (expense)........................... ($459.1) $502.7 ($707.1) $717.4
========= ========= ========= =========
The investment impairment losses for the three and six months ended June
30, 2002 and the six months ended June 30, 2001 relate principally to other
than temporary declines in the Company's investment in AT&T.
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 on January 1, 2001. In connection with this reclassification, the
Company recorded to investment income (expense) 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 (loss).
10
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
6. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill by business segment (see
Note 11) for the periods presented are as follows (in millions):
Corporate
Cable Commerce and Other Total
------------ ------------ ------------ ------------
Balance, December 31, 2001...................... $4,688.4 $834.8 $766.2 $6,289.4
Purchase price allocation adjustments....... 5.1 151.8 156.9
------------ ------------ ------------ ------------
Balance, June 30, 2002.......................... $4,693.5 $834.8 $918.0 $6,446.3
============ ============ ============ ============
During the six months ended June 30, 2002, the Company recorded the final
purchase price allocation related to the Company's acquisition, on October
30, 2001, of Outdoor Life Network, which resulted in an increase in
goodwill and a corresponding decrease in cable and satellite television
distribution rights. In addition, during the six months ended June 30,
2002, the Company recorded the final purchase price allocation related to
certain of its cable system acquisitions, which resulted in an increase in
goodwill and a corresponding decrease in franchise rights.
As of June 30, 2002, the weighted average amortization period for the
Company's intangible assets subject to amortization is 8.3 years and
estimated related amortization expense for each of the five years ended
December 31 is as follows (in millions):
2002............................ $200.7
2003............................ $188.4
2004............................ $173.4
2005............................ $159.1
2006............................ $136.9
11
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The following pro forma financial information for the three and six months
ended June 30, 2001, and for the years ended December 31, 2001, 2000 and
1999, is presented as if SFAS No. 142 was adopted as of January 1, 1999
(amounts in millions, except per share data):
Three Six
Months Months
Ended Ended
June 30, June 30, Years Ended December 31,
2001 2001 2001 2000 1999
----------- ----------- --------- --------- ---------
Net Income
As reported............................... $35.2 $1,036.4 $608.6 $2,021.5 $1,065.7
Amortization of goodwill................ 81.8 154.4 334.8 303.5 128.5
Amortization of equity method goodwill.. 6.8 11.1 15.0 15.2 4.4
Amortization of franchise rights........ 274.7 529.4 1,083.7 858.1 258.3
--------- --------- --------- --------- ---------
As adjusted............................... $398.5 $1,731.3 $2,042.1 $3,198.3 $1,456.9
========= ========= ========= ========= =========
Income before extraordinary items
and cumulative effect of
accounting change, as adjusted.......... $398.5 $1,346.8 $1,659.1 $3,221.9 $1,507.9
========= ========= ========= ========= =========
Basic EPS
As reported............................... $0.04 $1.09 $0.64 $2.24 $1.38
Amortization of goodwill................ 0.08 0.17 0.35 0.34 0.17
Amortization of equity method goodwill.. 0.01 0.01 0.02 0.02 0.01
Amortization of franchise rights........ 0.29 0.56 1.14 0.96 0.35
--------- --------- --------- --------- ---------
As adjusted............................... $0.42 $1.83 $2.15 $3.56 $1.91
========= ========= ========= ========= =========
Diluted EPS
As reported............................... $0.04 $1.07 $0.63 $2.13 $1.30
Amortization of goodwill................ 0.08 0.16 0.35 0.32 0.16
Amortization of equity method goodwill.. 0.01 0.01 0.02 0.02 0.01
Amortization of franchise rights........ 0.28 0.55 1.12 0.90 0.31
--------- --------- --------- --------- ---------
As adjusted............................... $0.41 $1.79 $2.12 $3.37 $1.78
========= ========= ========= ========= =========
7. LONG-TERM DEBT
Commercial Paper
The Company's senior bank credit facility consists of a $2.25 billion,
five-year revolving credit facility and a $1.925 billion, 364-day revolving
credit facility (together, the "Comcast Cable Revolver"). The 364-day
revolving credit facility supports the commercial paper program of Comcast
Cable Communications, Inc., a wholly owned subsidiary of the Company.
Amounts outstanding under the commercial paper program are classified as
long-term in the Company's balance sheet as of June 30, 2002 and December
31, 2001 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.
12
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Zero Coupon Convertible Debentures
The Company's 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.
Holders may require the Company to repurchase the Zero Coupon Debentures on
December 19, 2002, 2003, 2005, 2010 and 2015. 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 balance
sheet as of June 30, 2002 and December 31, 2001 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 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.
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 common stock.
Prior to maturity, each ZONES is exchangeable at the holders' option for an
amount of cash equal to 95% of the market value of Sprint PCS Stock. As of
June 30, 2002, the number of Sprint PCS shares held by the Company exceeded
the number of ZONES outstanding.
As of June 30, 2002 and December 31, 2001, long-term debt includes $689.1
million and $1.613 billion, respectively, of ZONES. Upon adoption of SFAS
No. 133, the Company split the accounting for the ZONES into derivative and
debt components. The Company records the change in the fair value of the
derivative component of the ZONES (see Note 5) and the increase in the
carrying value of the debt component of the ZONES as follows (in millions):
Three Months Six Months
Ended Ended
June 30, June 30,
2002 2001 2002 2001
-------- ------- ------- -------
Increase (decrease) in derivative component to
investment income (expense)..................... ($271.3) $245.0 ($935.0) $175.6
Increase in debt component to interest expense....... $5.8 $5.5 $11.5 $11.0
New Credit Facilities
On May 3, 2002, AT&T Broadband Corp. and AT&T Comcast Corporation, a
company owned 50% each by AT&T and the Company ("AT&T Comcast"), entered
into definitive credit agreements with a syndicate of lenders for an
aggregate of $12.825 billion of new indebtedness in order to obtain the
financing necessary to complete the AT&T Broadband transaction (see Note 4)
and for the combined company's financing needs after the transaction. This
financing requires subsidiary guarantees, including guarantees by certain
of the Company's wholly owned subsidiaries and by subsidiaries of AT&T
Broadband. Under the terms of the new credit facilities, the obligations of
the lenders to provide the financing upon the completion of the AT&T
Broadband transaction are subject to a number of conditions, including the
condition that the combined company holds investment-grade credit ratings
from both the Standard & Poor's and Moody's rating agencies at the time of
closing. Accordingly, there can be no
13
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
assurance that AT&T Broadband Corp. and AT&T Comcast will be able to obtain
the financing necessary to complete the AT&T Broadband transaction.
Interest Rates
Excluding the derivative component of the ZONES whose changes in fair value
are recorded to investment income (expense), the Company's effective
weighted average interest rate on its long-term debt outstanding was 6.35%
and 6.03% as of June 30, 2002 and December 31, 2001, respectively.
Interest Rate Risk Management
During the six months ended June 30, 2002, the Company settled $950.0
million aggregate notional amount of fixed to variable interest rate
exchange agreements ("Swaps") and received proceeds of $56.8 million. This
amount is being recognized as an adjustment to interest expense over the
term of the related debt. During the six months ended June 30, 2002,
variable to fixed Swaps with an aggregate notional amount of $70.2 million
expired. As of June 30, 2002, the Company has variable to fixed Swaps with
an aggregate notional amount of $180.1 million with an average pay rate of
4.9% and an average receive rate of 1.9%. The Swaps mature between 2002 and
2003.
In June 2002, the Company entered into interest rate lock agreements ("Rate
Locks") to hedge the risk that the cash flows related to the interest
payments on an anticipated issuance or assumption of certain fixed rate
debt in connection with the AT&T Broadband transaction may be adversely
affected by interest rate fluctuations. The Rate Locks mature in the fourth
quarter of 2002, the timing of the anticipated issuance or assumption of
the fixed rate debt. To the extent the Rate Locks are effective in
offsetting the variability of the hedged cash flows, changes in the fair
value of the Rate Locks will not be included in earnings but will be
reported as a component of accumulated other comprehensive income (loss).
Upon the issuance or assumption of the debt, the value of the Rate Locks
will be recognized as an adjustment to interest expense over the same
period in which the related interest costs on the debt are recognized in
earnings.
Lines and Letters of Credit
As of June 30, 2002, certain subsidiaries of the Company had unused lines
of credit of $3.363 billion under their respective credit facilities.
As of June 30, 2002, the Company and certain of its subsidiaries had unused
irrevocable standby letters of credit totaling $85.4 million to cover
potential fundings under various agreements.
8. STOCKHOLDERS' EQUITY
Retirement of Shares
In March 2002, as a result of the merger of a wholly owned subsidiary into
the Company, approximately 23.3 million shares of the Company's Class A
Special Common Stock held by the subsidiary were retired and returned to
authorized but unissued status.
14
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Comprehensive Income (Loss)
The Company's total comprehensive income (loss) for the interim periods was
as follows (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
--------- ---------- --------- ----------
Net income (loss).................................... ($209.6) $35.2 ($298.5) $1,036.4
Unrealized (losses) gains on marketable securities... (223.0) 82.3 (364.3) 196.9
Reclassification adjustments for losses (gains)
included in net income (loss)...................... 198.4 (65.4) 203.1 (329.1)
Unrealized gains (losses) on the effective portion
of cash flow hedges................................ 3.7 (0.5) (0.5) (1.7)
Foreign currency translation gains (losses).......... 5.2 2.7 (6.4) (6.7)
--------- ---------- --------- ----------
Comprehensive income (loss).......................... ($225.3) $54.3 ($466.6) $895.8
========= ========== ========= ==========
9. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The fair values of the assets and liabilities acquired by the Company
through noncash transactions during the six months ended June 30, 2001 are
as follows (in millions):
Current assets.............................. $56.6
Property, plant & equipment................. 686.1
Intangible assets........................... 2,755.8
Current liabilities......................... (37.0)
-----------
Net assets acquired.................... $3,461.5
===========
The Company made cash payments for interest and income taxes during the
interim periods as follows (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
-------- -------- -------- --------
Interest........................................................ $237.5 $193.5 $347.3 $296.7
Income taxes.................................................... $128.9 $111.3 $158.4 $126.4
10. COMMITMENTS AND CONTINGENCIES
Certain litigation has been filed, and other litigation has been
threatened, against the Company as a result of alleged conduct of the
Company with respect to its investment in and distribution relationship
with At Home Corporation ("At Home"). At Home was a provider of high-speed
Internet access and content services, which filed for bankruptcy protection
in September 2001. Filed actions are: (i) class action lawsuits against the
Company, Brian L. Roberts (the Company's President and a director), AT&T
(the former controlling shareholder of At Home and also a former
distributor of the At Home service) and other corporate and individual
defendants in the Superior Court of San Mateo County, California, alleging
breaches of fiduciary duty on the part of the Company and the other
defendants in connection with transactions agreed to in March 2000 among At
Home, the Company, AT&T, Cox Communications, Inc. ("Cox," also an investor
in At Home and a former distributor of the At Home service); and (ii) class
action lawsuits against the Company, AT&T and others in the United States
District Court for the Southern District of New York, alleging securities
law violations and common law fraud in connection with disclosures made by
At Home in 2001. The actions in San Mateo County, California have been
stayed by the United States Bankruptcy Court for the Northern District of
California, the court in which At Home filed for bankruptcy,
15
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
as violating the automatic bankruptcy stay. The plaintiffs have submitted
an amended complaint to the Bankruptcy Court, which is expected to decide
in September 2002 whether the amended complaint can proceed. In the
Southern District of New York actions, the court has ordered the actions
consolidated into a single action. It is expected that an amended
consolidated complaint will be served in mid-October 2002.
In the At Home bankruptcy proceeding, certain creditors of At Home have
been threatening, and have negotiated for themselves the right to bring,
claims against the Company, AT&T and Cox arising from the March 2000
agreements and for alleged breaches of fiduciary duty. Further, the
creditors have negotiated for the right to bring claims against the Company
and Cox seeking recovery of alleged short-swing profits pursuant to Section
16(b) of the Securities Exchange Act of 1934 purported to have arisen in
connection with certain transactions relating to At Home stock effected
pursuant to the March 2000 agreements.
Following closing of the AT&T Broadband transaction, the Company may be
contractually liable for 50% of the liabilities of AT&T relating to At Home
(AT&T would be liable for the other 50% of such liabilities). The Company
denies any wrongdoing in connection with these actual and potential claims,
and intends to defend all such claims vigorously. In management's opinion,
the final disposition of all such claims (including taking into account any
liability of the Company on account of AT&T as described in the second
preceding sentence), will not have a material adverse effect on the
Company's or, following the closing of the AT&T Broadband transaction, the
combined company's consolidated financial condition or results of
operations.
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 future 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.
16
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
11. FINANCIAL DATA BY BUSINESS SEGMENT
The following represents the Company's significant business segments,
"Cable" and "Commerce." 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 and
Cable Commerce Other (1) Total
----- -------- --------- -----
Three Months Ended June 30, 2002
- --------------------------------
Revenues (2)................................................ $1,540.8 $994.5 $173.6 $2,708.9
Operating income before depreciation and
amortization (3)....................................... 653.2 194.5 18.9 866.6
Depreciation and amortization............................... 298.1 28.1 62.0 388.2
Operating income (loss) .................................... 355.1 166.4 (43.1) 478.4
Interest expense............................................ 141.8 2.9 37.9 182.6
Capital expenditures........................................ 330.6 50.6 8.6 389.8
Three Months Ended June 30, 2001
- --------------------------------
Revenues (2)................................................ $1,325.9 $876.0 $136.8 $2,338.7
Operating income (loss) before
depreciation and amortization (3)...................... 548.6 159.8 (15.5) 692.9
Depreciation and amortization............................... 740.8 36.8 48.6 826.2
Operating income (loss) .................................... (192.2) 123.0 (64.1) (133.3)
Interest expense............................................ 128.9 7.1 42.5 178.5
Capital expenditures........................................ 513.2 41.9 71.7 626.8
Six Months Ended June 30, 2002
- ------------------------------
Revenues (2)................................................ $3,010.2 $1,988.0 $383.2 $5,381.4
Operating income before depreciation and
amortization (3)....................................... 1,250.7 386.8 37.3 1,674.8
Depreciation and amortization............................... 590.7 55.5 129.1 775.3
Operating income (loss)..................................... 660.0 331.3 (91.8) 899.5
Interest expense............................................ 287.3 6.4 75.6 369.3
Capital expenditures........................................ 688.7 82.4 17.8 788.9
Six Months Ended June 30, 2001
- ------------------------------
Revenues (2)................................................ $2,520.3 $1,760.0 $290.4 $4,570.7
Operating income (loss) before
depreciation and amortization (3)...................... 1,035.7 332.5 (41.1) 1,327.1
Depreciation and amortization............................... 1,424.8 71.4 64.7 1,560.9
Operating income (loss)..................................... (389.1) 261.1 (105.8) (233.8)
Interest expense............................................ 261.7 15.1 84.0 360.8
Capital expenditures........................................ 950.9 68.0 124.8 1,143.7
As of June 30, 2002
- -------------------
Assets...................................................... $28,840.3 $2,800.9 $4,477.6 $36,118.8
Long-term debt, less current portion........................ 8,147.7 1.4 2,394.4 10,543.5
As of December 31, 2001
- -----------------------
Assets...................................................... $29,084.6 $2,809.2 $6,366.7 $38,260.5
Long-term debt, less current portion........................ 8,363.2 62.7 3,315.7 11,741.6
_______________
17
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
(1) Other includes segments not meeting certain quantitative guidelines for
reporting including the Company's content 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 5).
(2) Revenues include $151.4 million, $113.1 million, $296.6 million and
$234.4 million during the three months ended June 30, 2002 and 2001 and
during the six months ended June 30, 2002 and 2001, 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 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.
18
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
ITEM 2. 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 Note 4 to our financial statements included in Item 1 and Note 5
to our financial statements included in our Annual Report on Form 10-K for the
year ended December 31, 2001 for a discussion of our acquisitions and other
significant events.
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 $1.1 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 June 30, 2002, certain of our subsidiaries
had unused lines of credit of $3.363 billion under their respective credit
facilities.
Refer to Note 7 to our financial statements included in Item 1 for a
discussion of our Zero Coupon Debentures. Refer to Note 10 to our financial
statements included in Item 1 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 the combined
company will require approximately $20 billion of assumed, refinanced and new
indebtedness upon completion of the AT&T Broadband transaction. Of this $20
billion of indebtedness, approximately $7 billion to $8 billion will be assumed
indebtedness of AT&T Broadband's subsidiaries, $9 billion to $10 billion will
retire amounts we expect AT&T Broadband will owe AT&T Corp. ("AT&T") at, and
will be required to pay, upon closing of the AT&T Broadband transaction, and $2
billion to $4 billion will be needed to refinance AT&T Broadband debt that will
become due on or shortly after the closing of the AT&T Broadband transaction and
to provide appropriate cash reserves to fund AT&T Broadband's operations and
capital expenditures. We can not provide assurances that the actual amount of
this indebtedness will not exceed $20 billion.
On August 12, 2002, AT&T, AT&T Comcast Corporation ("AT&T Comcast"), AT&T
Broadband, our wholly owned subsidiary Comcast Cable Communications, Inc.
("Comcast Cable"), and two of AT&T's broadband subsidiaries filed a registration
statement with the Securities and Exchange Commission detailing a potential
exchange offer for some of AT&T's existing public indebtedness. The exchange
offer is designed to satisfy one of the conditions to the AT&T Broadband
transaction and, if successful, would result in the assumption of a portion of
AT&T's indebtedness by AT&T Broadband. The exchange offer is subject to market
conditions and the resolution of continued negotiations between us and AT&T. The
$9 billion to $10 billion that we expect AT&T Broadband will be required to pay
AT&T upon closing of the AT&T Broadband transaction would be reduced based upon
the amount of AT&T indebtedness assumed by AT&T Broadband in the exchange in an
amount to be mutually agreed.
On May 3, 2002, AT&T Broadband Corp. and
19
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
AT&T Comcast entered into definitive credit agreements with a syndicate of
lenders for an aggregate of $12.825 billion to provide the financing to complete
the AT&T Broadband transaction and for the combined company's financing needs
after the transaction. The amount of AT&T's indebtedness assumed by AT&T
Broadband in the exchange offer, if any, will not reduce the amounts available
under these credit agreements.
Refer to Note 7 to our financial statements included in Item 1 for a
discussion of the new credit facilities.
In addition to any assumption of AT&T indebtedness by AT&T Broadband in the
exchange offer and amounts available under the new credit agreements, we may
also use other available sources of financing to fund these requirements,
including:
o our existing cash, cash equivalents and short- term investments,
o amounts available under our subsidiaries' lines of credit, which
totaled $3.363 billion as of June 30, 2002, 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 June 30,
2002 were $1.615 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 5 to our financial statements included in Item 1 for a
discussion of our investments.
Financing
As of June 30, 2002 and December 31, 2001, our long-term debt, including
current portion, was $10.750 billion and $12.202 billion, respectively.
The $1.452 billion decrease from December 31, 2001 to June 30, 2002 results
principally from the $923.5 million aggregate reduction to the carrying value of
our ZONES during 2002, and the effects of our net repayments during 2002.
Excluding the effects of interest rate risk management instruments, 12.1%
and 13.4% of our long-term debt as of June 30, 2002 and December 31, 2001,
respectively, was at variable rates.
We have and may 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 Note 7 to our financial statements included in Item 1 for a
discussion of our long-term debt.
Equity Price Risk
We have entered into cashless collar agreements (the "Equity Collars") and
prepaid forward sales agreements ("Prepaid Forward Sales") which we account for
at fair value. The Equity Collars and Prepaid Forward Sales limit our exposure
to and benefits from price fluctuations in Sprint PCS common stock.
During the 2002 and 2001 interim periods, the change in the fair value of
our investment in Sprint PCS common stock, classified as a trading security,
were substantially offset by the changes in the fair values of the
20
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
Equity Collars, the derivative components of the ZONES, and the Prepaid Forward
Sales. See "Results of Operations - Investment Income (Expense)" below.
Interest Rate Risk
During the six months ended June 30, 2002, we settled $950.0 million
aggregate notional amount of our fixed to variable interest rate exchange
agreements ("Swaps") and received proceeds of $56.8 million. This amount is
being recognized as an adjustment to interest expense over the term of the
related debt. During the six months ended June 30, 2002, variable to fixed Swaps
with an aggregate notional amount of $70.2 million expired. As of June 30, 2002,
we have $180.1 million aggregate notional amount of variable to fixed Swaps with
an average pay rate of 4.9% and an average receive rate of 1.9%. The Swaps
mature between 2002 and 2003.
In June 2002, we entered into interest rate lock agreements ("Rate Locks")
to hedge the risk that the cash flows related to the interest payments on an
anticipated issuance or assumption of certain fixed rate debt in connection with
the AT&T Broadband transaction may be adversely affected by interest rate
fluctuations. The Rate Locks mature in the fourth quarter of 2002, the timing of
the anticipated issuance or assumption of the fixed rate debt.
Accumulated Other Comprehensive Income (Loss)
The change in accumulated other comprehensive income (loss) from December
31, 2001 to June 30, 2002 is principally attributable to declines in unrealized
gains on our investments classified as available for sale held throughout the
period, and to realized losses on sales of investments and investment impairment
losses on investments classified as available for sale during the six months
ended June 30, 2002. Refer to Note 5 to our financial statements included in
Item 1.
_________________________
Statement of Cash Flows
Cash and cash equivalents increased $207.8 million as of June 30, 2002 from
December 31, 2001. The increase in cash and cash equivalents resulted from cash
flows from operating, financing and investing activities which are explained
below.
Net cash provided by operating activities amounted to $1.051 billion for
the six months ended June 30, 2002, due principally to our operating income
before depreciation and amortization (see "Results of Operations"), and 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 used in financing activities includes borrowings and repayments of
debt, proceeds from settlement of Swaps, as well as proceeds from the issuances
of our common stock. Net cash used in financing activities was $471.5 million
for the six months ended June 30, 2002. During the six months ended June 30,
2002, we borrowed $632.1 million, consisting of:
o $223.9 million under Comcast Cable's commercial paper program, and
o $408.2 million under revolving credit facilities.
During the six months ended June 30, 2002, we repaid $1.169 billion of our
long-term debt, consisting of:
o $240.2 million under Comcast Cable's commercial paper program,
o $200.0 million of our 9.625% Senior Notes due 2002, and
o $729.1 million on certain of our revolving credit facilities.
In addition, during the six months ended June 30, 2002, we received
proceeds of $56.8 million from settlement of certain of our Swaps and proceeds
of $11.2 million from issuances of our common stock.
Net cash used in investing activities includes the effects of acquisitions,
net of cash acquired, purchases of investments, capital expenditures, and
additions to intangible and other noncurrent assets, offset by proceeds from
sales of investments. Net cash used in investing activities was $371.2 million
for the six months ended June 30, 2002, consisting primarily of capital
expenditures of $788.9 million and additions to intangible and other noncurrent
assets of $133.5 million, including $62.3 million related to the satellite and
cable television affiliation agreements of QVC and our content subsidiaries.
Such amounts were offset, in part, by proceeds from sales of investments of
$595.9 million.
_______________________
21
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
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.
We adopted Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets," on January 1, 2002, as required by the
new statement. Refer to Notes 2 and 6 to our financial statements included in
Item 1 for a discussion of the impact the adoption of the new statement had on
our consolidated financial condition and results of operations.
Our summarized financial information for the interim periods is as follows
(dollars in millions, "NM" denotes percentage is not meaningful):
Three Months Ended
June 30, Increase / (Decrease)
2002 2001 $ %
--------- --------- --------- ---------
Revenues....................................................... $2,708.9 $2,338.7 $370.2 15.8%
Cost of goods sold from electronic retailing................... 628.8 555.2 73.6 13.3
Operating, selling, general and administrative expenses........ 1,213.5 1,090.6 122.9 11.3
Depreciation................................................... 342.8 273.9 68.9 25.2
Amortization................................................... 45.4 552.3 (506.9) (91.8)
--------- --------- --------- ---------
Operating income (loss)........................................ 478.4 (133.3) 611.7 NM
--------- --------- --------- ---------
Interest expense............................................... (182.6) (178.5) 4.1 2.3
Investment income (expense).................................... (459.1) 502.7 (961.8) NM
Equity in net losses of affiliates............................. (43.0) (9.5) 33.5 352.6
Other income (expense)......................................... 9.6 (6.3) 15.9 NM
Income tax benefit (expense)................................... 32.9 (103.0) 135.9 NM
Minority interest.............................................. (45.8) (36.9) 8.9 24.1
--------- --------- --------- ---------
Income (loss) before cumulative effect of accounting change.... ($209.6) $35.2 ($244.8) NM
========= ========= ========= =========
Operating income before depreciation and amortization (1)...... $866.6 $692.9 $173.7 25.1%
========= ========= ========= =========
Six Months Ended
June 30, Increase / (Decrease)
2002 2001 $ %
--------- --------- --------- ---------
Revenues....................................................... $5,381.4 $4,570.7 $810.7 17.7%
Cost of goods sold from electronic retailing................... 1,260.0 1,111.8 148.2 13.3
Operating, selling, general and administrative expenses........ 2,446.6 2,131.8 314.8 14.8
Depreciation................................................... 676.6 514.7 161.9 31.5
Amortization................................................... 98.7 1,046.2 (947.5) (90.6)
--------- --------- --------- ---------
Operating income (loss)........................................ 899.5 (233.8) 1,133.3 NM
--------- --------- --------- ---------
Interest expense............................................... (369.3) (360.8) 8.5 2.4
Investment income (expense).................................... (707.1) 717.4 (1,424.5) NM
Equity in net losses of affiliates............................. (48.4) (6.6) 41.8 633.3
Other income (expense)......................................... (14.0) 1,187.9 (1,201.9) NM
Income tax benefit (expense)................................... 30.2 (588.6) (618.8) NM
Minority interest.............................................. (89.4) (63.6) 25.8 40.6
--------- --------- --------- ---------
Income (loss) before cumulative effect of accounting change.... ($298.5) $651.9 ($950.4) NM
========= ========= ========= =========
Operating income before depreciation and amortization (1)...... $1,674.8 $1,327.1 $347.7 26.2%
========= ========= ========= =========
____________
(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,
22
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
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 expense 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.
Consolidated Operating Results
Revenues
The increases in consolidated revenues for the interim periods from 2001 to
2002 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.
On January 1, 2002, we adopted Emerging Issues Task Force ("EITF") 01-9,
"Accounting for Consideration Given to a Customer (Including a Reseller of the
Vendor's Products)" and EITF 01-14, "Income Statement Characterization of
Reimbursements Received for 'Out-of-Pocket' Expenses Incurred."
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. Upon adoption of EITF 01-9, we reclassified certain of these
distribution fees from expense to a revenue reduction for all periods presented
in our statement of operations. This change does not apply to distribution fees
paid by our consolidated subsidiary, QVC, Inc. ("QVC") as the counterparties to
QVC's distribution agreements do not make revenue payments to QVC.
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. Upon
adoption of EITF 01-14, we reclassified franchise fees collected from cable
subscribers from a reduction of selling, general and administrative expenses to
a component of service revenues for all periods presented in our statement of
operations.
The changes in classification had no impact on our reported operating
income (loss) or financial condition. Refer to Note 2 to our financial
statements included in Item 1 for a discussion of the adoption of EITF 01-9 and
EITF 01-14.
Cost of goods sold from electronic retailing
Refer to the "Commerce" section of "Operating Results by Business Segment"
below for a discussion of the increase in cost of goods sold from electronic
retailing.
Operating, selling, general and administrative expenses
The increases in consolidated operating, selling, general and
administrative expenses for the interim periods from 2001 to 2002 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.
Depreciation
The increases in depreciation expense for the interim periods from 2001 to
2002 in our Cable segment are primarily due to the effects of our recent
acquisitions and our capital expenditures. The increases in depreciation expense
for the interim periods from 2001 to 2002 in our Commerce segment are primarily
due to the effects of our capital expenditures. The remaining increases are
primarily the result of increases in depreciation in our
23
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
content operations, principally due to the effects of our acquisitions.
Amortization
Of the $506.9 million and $947.5 million decreases in amortization expense
for the interim periods from 2001 and 2002, $504.3 million and $968.8 million
are attributable to the adoption of SFAS No. 142 on January 1, 2002. The
remaining changes are primarily the result of increases in amortization expense
in our content operations, principally due to the effects of our acquisitions.
Refer to Note 6 to our financial statements included in Item 1 for the pro forma
impact of adoption of SFAS No. 142 on amortization expense.
Operating Results by Business Segment
The following represent the operating results of our significant business
segments, "Cable" and "Commerce." The remaining components of our operations are
not independently significant to our consolidated financial condition or results
of operations. Refer to Note 11 to our financial statements included in Item 1
for a summary of our financial data by business segment (dollars in millions).
Cable Three Months Ended
June 30, Increase/(Decrease)
2002 2001 $ %
--------- --------- --------- --------
Video........................................................ $1,186.6 $1,059.5 $127.1 12.0%
High-speed Internet.......................................... 139.6 64.8 74.8 115.4
Advertising sales............................................ 99.9 85.7 14.2 16.6
Other........................................................ 64.4 67.7 (3.3) (4.9)
Franchise fees............................................... 50.3 48.2 2.1 4.4
--------- --------- --------- --------
Revenues................................................ 1,540.8 1,325.9 214.9 16.2
Operating, selling, general and administrative expenses...... 887.6 777.3 110.3 14.2
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $653.2 $548.6 $104.6 19.1%
========= ========= ========= ========
Six Months Ended
June 30, Increase
2002 2001 $ %
--------- --------- --------- --------
Video........................................................ $2,336.2 $2,044.3 $291.9 14.3%
High-speed Internet.......................................... 259.2 119.3 139.9 117.3
Advertising sales............................................ 181.0 151.9 29.1 19.2
Other........................................................ 132.3 113.4 18.9 16.7
Franchise fees............................................... 101.5 91.4 10.1 11.1
--------- --------- --------- --------
Revenues................................................ 3,010.2 2,520.3 489.9 19.4
Operating, selling, general and administrative expenses...... 1,759.5 1,484.6 274.9 18.5
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $1,250.7 $1,035.7 $215.0 20.8%
========= ========= ========= ========
_______________
(a) See footnote (1) on page 22.
Video revenue consists of our basic, expanded basic, premium, pay-per-view,
equipment and digital subscriptions. Of the $127.1 million and $291.9 million
increases in video revenues for the interim periods from 2001 to 2002, $50.2
million and $142.5 million are attributable to the effects of our acquisitions
of cable systems and $76.9 million and $149.4 million relate to increased rates
and subscriber growth in our historical operations, driven principally by growth
in digital subscriptions. During the three and six months ended June 30, 2002,
we added approximately 197,900 and 401,600 digital subscriptions.
The increases in high-speed Internet revenue for the interim periods from
2001 to 2002 are primarily due to the addition of approximately 128,400 and
220,800 high-speed Internet subscribers during the three and six months ended
June 30, 2002, and to the effects of rate increases.
24
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
The increases in advertising sales revenue for the interim periods from
2001 to 2002 are primarily attributable to the effects of a stronger advertising
market and the continued leveraging of our market-wide fiber interconnects.
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 for the six month period
from 2001 to 2002 is primarily attributable to the effects of our acquisitions
and to growth in our regional sports programming networks. The decrease for the
three month period from 2001 to 2002 is primarily attributable to a decrease in
installation revenue.
The increases in franchise fees collected from our cable subscribers under
the terms of our franchise agreements for the interim periods from 2001 to 2002
are attributable to the increases in our revenues upon which the fees apply.
The increases in operating, selling, general and administrative expense for
the interim periods from 2001 to 2002 are primarily due to the effects of our
acquisitions 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. 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 (QVC, Inc. and Subsidiaries) Three Months Ended
June 30, Increase
2002 2001 $ %
--------- --------- --------- --------
Net sales from electronic retailing.......................... $994.5 $876.0 $118.5 13.5%
Cost of goods sold from electronic retailing................. 628.8 555.2 73.6 13.3
Operating, selling, general and administrative
expenses................................................ 171.2 161.0 10.2 6.3
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $194.5 $159.8 $34.7 21.7%
========= ========= ========= ========
Gross margin................................................. 36.8% 36.6%
========= =========
Six Months Ended
June 30, Increase
2002 2001 $ %
--------- --------- --------- --------
Net sales from electronic retailing.......................... $1,988.0 $1,760.0 $228.0 13.0%
Cost of goods sold from electronic retailing................. 1,260.0 1,111.8 148.2 13.3
Operating, selling, general and administrative
expenses................................................ 341.2 315.7 25.5 8.1
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $386.8 $332.5 $54.3 16.3%
========= ========= ========= ========
Gross margin................................................. 36.6% 36.8%
========= =========
_______________
(a) See footnote (1) on page 22.
Of the $118.5 million and $228.0 million increases in net sales from
electronic retailing for the interim periods from 2001 to 2002, $80.6 million
and $166.5 million are attributable to increases in net sales in the United
States. This growth is principally the result of increases over the prior year
interim period in the average number of homes receiving QVC services and in net
sales per home as follows:
25
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
Three Months Six Months
Ended Ended
June 30, 2002 June 30, 2002
----------------- ---------------
Increase in average number of homes.......................... 3.5% 3.6%
Increase in net sales per home............................... 6.9% 7.2%
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 96% 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 $37.9 million and $61.5 million in net sales
from electronic retailing for the interim periods from 2001 to 2002 are
primarily attributable to increases in net sales in Germany and Japan, and to
the effects of fluctuations in foreign currency exchange rates during the
periods.
The increases in cost of goods sold are primarily related to the growth in
net sales. The changes in gross margin are primarily due to the effects of
shifts in sales mix.
The increases in operating, selling, general and administrative expenses
are primarily attributable to higher variable costs and personnel costs
associated with the increases in sales volume.
Consolidated Analysis
Interest Expense
The increases in interest expense for the interim periods from 2001 to 2002
are primarily due to the effects of Comcast Cable's senior notes offerings in
May and June 2001.
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.
_______________________
Investment Income (Expense)
Investment income (expense) for the interim periods includes the following
(in millions):
Three Months Six Months Ended
Ended June 30, June 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Interest and dividend income.................................. $10.6 $17.4 $17.5 $35.0
(Losses) gains on sales and exchanges of investments, net..... (102.5) 448.0 (100.9) 459.6
Investment impairment losses.................................. (208.7) (45.0) (221.3) (939.1)
Reclassification of unrealized gains.......................... 1,092.4
Unrealized (loss) gain on Sprint PCS common stock............. (420.2) 392.4 (1,439.7) 265.6
Mark to market adjustments on derivatives
related to Sprint PCS common stock....................... 324.2 (317.9) 1,171.1 (191.5)
Mark to market adjustments on derivatives and
hedged items............................................. (62.5) 7.8 (133.8) (4.6)
--------- --------- --------- ---------
Investment income (expense).............................. ($459.1) $502.7 ($707.1) $717.4
========= ========= ========= =========
26
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
The investment impairment losses for the three and six months ended June
30, 2002 and the six months ended June 30, 2001 relate principally to other than
temporary declines in our investment in AT&T.
In connection with the reclassification of our investment in Sprint PCS
from an available for sale security to a trading security, we recorded to
investment income (expense) 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 (loss).
Equity in Net Losses of Affiliates
The increases in equity in net losses of affiliates for the interim periods
from 2001 to 2002 are primarily attributable to effects of the consolidation of
The Golf Channel in June 2001, the effects of our additional investments and to
changes in the net income or loss of our equity method investees, offset, in
part, by decreases in the amortization of equity method goodwill as a result of
the adoption of SFAS No. 142 on January 1, 2002.
Other Income (Expense)
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 and Adelphia received certain of
our cable systems serving approximately 441,000 subscribers. We recorded to
other income (expense) 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.
Income Tax Benefit (Expense)
The changes in income tax benefit (expense) for the interim periods from
2001 to 2002 are primarily the result of the effects of changes in our income
before taxes, minority interest and cumulative effect of accounting change.
Minority Interest
The increases in minority interest for the interim periods from 2001 to
2002 are attributable to the effects of changes in the net income or loss of our
less than wholly owned consolidated subsidiaries.
Cumulative Effect of Accounting Change
In connection with the adoption of SFAS No. 142, we completed an initial
transitional impairment assessment of goodwill and other indefinite lived
intangible assets, which consist of our cable and sports franchise rights. Based
upon further guidance provided by the EITF, we determined that no cumulative
effect results from adopting this change in accounting principle.
In connection with the adoption of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, we recognized as income a
cumulative effect of accounting change, net of related income taxes, of $384.5
million during the six months ended June 30, 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 (loss) 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.
27
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
PART II. OTHER INFORMATION
- -------- -----------------
ITEM 1. LEGAL PROCEEDINGS
Certain litigation has been filed, and other litigation has been
threatened, against the Company as a result of alleged conduct of the
Company with respect to its investment in and distribution relationship
with At Home Corporation ("At Home"). At Home was a provider of high-speed
Internet access and content services, which filed for bankruptcy protection
in September 2001. Filed actions are: (i) class action lawsuits against the
Company, Brian L. Roberts (the Company's President and a director), AT&T
(the former controlling shareholder of At Home and also a former
distributor of the At Home service) and other corporate and individual
defendants in the Superior Court of San Mateo County, California, alleging
breaches of fiduciary duty on the part of the Company and the other
defendants in connection with transactions agreed to in March 2000 among At
Home, the Company, AT&T, Cox Communications, Inc. ("Cox," also an investor
in At Home and a former distributor of the At Home service); and (ii) class
action lawsuits against the Company, AT&T and others in the United States
District Court for the Southern District of New York, alleging securities
law violations and common law fraud in connection with disclosures made by
At Home in 2001. The actions in San Mateo County, California have been
stayed by the United States Bankruptcy Court for the Northern District of
California, the court in which At Home filed for bankruptcy, as violating
the automatic bankruptcy stay. The plaintiffs have submitted an amended
complaint to the Bankruptcy Court, which is expected to decide in September
2002 whether the amended complaint can proceed. In the Southern District of
New York actions, the court has ordered the actions consolidated into a
single action. It is expected that an amended consolidated complaint will
be served in mid-October 2002.
In the At Home bankruptcy proceeding, certain creditors of At Home have
been threatening, and have negotiated for themselves the right to bring,
claims against the Company, AT&T and Cox arising from the March 2000
agreements and for alleged breaches of fiduciary duty. Further, the
creditors have negotiated for the right to bring claims against the Company
and Cox seeking recovery of alleged short-swing profits pursuant to Section
16(b) of the Securities Exchange Act of 1934 purported to have arisen in
connection with certain transactions relating to At Home stock effected
pursuant to the March 2000 agreements.
Following closing of the AT&T Broadband transaction, the Company may be
contractually liable for 50% of the liabilities of AT&T relating to At Home
(AT&T would be liable for the other 50% of such liabilities). The Company
denies any wrongdoing in connection with these actual and potential claims,
and intends to defend all such claims vigorously. In management's opinion,
the final disposition of all such claims (including taking into account any
liability of the Company on account of AT&T as described in the second
preceding sentence), will not have a material adverse effect on the
Company's or, following the closing of the AT&T Broadband transaction, the
combined company's consolidated financial condition or results of
operations.
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.
28
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting on July 10, 2002, the shareholders approved the
following proposals:
To elect ten directors to serve for the ensuing year and until their
respective successors shall have been duly elected and qualified.
Director Class of Stock For Withheld
-------- -------------- --- --------
Ralph J. Roberts Class A 18,098,310 30,377
Class B 141,665,625
Julian A. Brodsky Class A 18,104,463 24,224
Class B 141,665,625
Brian L. Roberts Class A 18,109,917 18,770
Class B 141,665,625
Decker Anstrom Class A 18,111,843 16,844
Class B 141,665,625
Sheldon M. Bonovitz Class A 18,090,050 38,637
Class B 141,665,625
Joseph L. Castle II Class A 18,107,111 21,576
Class B 141,665,625
Felix G. Rohatyn Class A 18,100,304 28,383
Class B 141,665,625
Bernard C. Watson Class A 18,117,675 11,012
Class B 141,665,625
Irving A. Wechsler Class A 18,098,290 30,397
Class B 141,665,625
Anne Wexler Class A 18,082,491 46,196
Class B 141,665,625
To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the 2002 fiscal year.
Class of Stock For Against Abstain
-------------- --- ------- -------
Class A 18,067,949 94,439 72,721
Class B 141,665,625
To consider a proposal to approve an amendment to the Comcast Corporation
1996 Stock Option Plan.
Class of Stock For Against Abstain
-------------- --- ------- -------
Class A 17,455,304 645,438 134,367
Class B 141,665,625
29
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
10.1 Comcast Corporation 1996 Stock Option Plan, as amended and
restated, effective April 29, 2002.
10.2 Comcast Corporation 1997 Deferred Stock Option Plan, as amended
and restated, effective April 29, 2002.
10.3 Comcast Corporation 1996 Deferred Compensation Plan, as amended
and restated, effective July 9, 2002.
99.1 Certifications of Chief Executive Officer and Co-Chief
Financial Officers of Comcast Corporation pursuant to Section
1350 of Chapter 63 of Title 18 of the United States Code.
(b) Reports on Form 8-K:
(i) We filed a Current Report on Form 8-K under Items 5 and 7(c) on
May 3, 2002 reporting the results of our operations for the
three months ended March 31, 2002.
30
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2002
SIGNATURE
Pursuant to the requirements 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.
COMCAST CORPORATION
----------------------------------
/S/ LAWRENCE J. SALVA
----------------------------------
Lawrence J. Salva
Senior Vice President
(Principal Accounting Officer)
Date: August 14, 2002
31
COMCAST CORPORATION
1996 STOCK OPTION PLAN
(As Amended and Restated, Effective April 29, 2002)
1. Purpose of Plan
The purpose of the Plan is to assist the Company in retaining
valued employees, officers and directors by offering them a greater stake in the
Company's success and a closer identity with it, and to aid in attracting
individuals whose services would be helpful to the Company and would contribute
to its success.
2. Definitions
(a) "Affiliate" means, with respect to any Person,
any other Person that, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, the term "control," including its correlative terms "controlled by"
and "under common control with," mean, with respect to any Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
(b) "Board" means the board of directors of the
Sponsor.
(c) "Cash Right" means any right to receive cash in
lieu of Shares granted under the Plan and described in Paragraph 3(a)(iii).
(d) "Cause" means:
(i) for an employee of a Company, a finding
by the Committee, after full consideration of the facts presented on behalf of
both the Company and the employee, that the employee has breached his employment
contract with a Company, has disclosed trade secrets of a Company or has been
engaged in any sort of disloyalty to a Company, including, without limitation,
fraud, embezzlement, theft, commission of a felony or proven dishonesty in the
course of his employment.
(ii) for a Non-Employee Director, a finding
by the Committee, after full consideration of the facts presented on behalf of
both the Company and the Director, that such Non-Employee Director has disclosed
trade secrets of a Company, or has been engaged in any sort of disloyalty to a
Company, including, without limitation, fraud, embezzlement, theft, commission
of a felony or proven dishonesty in the course of his service as a Non-Employee
Director.
(e) "Change of Control" means any transaction or
series of transactions as a result of which any Person who was a Third Party
immediately before such transaction or series of transactions owns
then-outstanding securities of the Sponsor having more than 50 percent of the
voting power for the election of directors of the Sponsor.
(f) "Code" means the Internal Revenue Code of 1986,
as amended.
(g) "Comcast Plan" means any restricted stock, stock
bonus, stock option or other compensation plan, program or arrangement
established or maintained by the Company or an Affiliate, including but not
limited to this Plan, the Comcast Corporation 1997 Deferred Stock Option Plan,
the Comcast Corporation 1990 Restricted Stock Plan and the Comcast Corporation
1987 Stock Option Plan.
(h) "Committee" means the committee described in
Paragraph 5.
(i) "Common Stock" means:
(i) the Sponsor's Class A Special Common
Stock, par value, $1.00; and
(ii) Subject to the approval of the
Sponsor's shareholders, the Sponsor's Class B Common Stock, par value, $1.00.
(j) "Company" means the Sponsor and each of the
Parent Companies and Subsidiary Companies.
(k) "Date of Grant" means the date as of which an
Option is granted.
(l) "Disability" means a disability within the
meaning of section 22(e)(3) of the Code.
(m) "Election Date" means the date on which an
individual is first elected to the Board as a Non-Employee Director, or is
elected to the Board as a Non-Employee Director following a period of one year
or more during which such individual was not a member of the Board.
(n) "Fair Market Value." If Shares are listed on a
stock exchange, Fair Market Value shall be determined based on the last reported
sale price of a Share on the principal exchange on which Shares are listed on
the last trading day prior to the date of determination, or, if Shares are not
so listed, but trades of Shares are reported on the Nasdaq National Market, the
last quoted sale price of a Share on the Nasdaq National Market on the last
trading day prior to the date of determination, or, if Shares are not so
reported, the fair market value as determined by the Board or the Committee in
good faith.
(o) "Grant Date" means each February 1st after the
date of adoption of the Plan by the Board.
(p) "Immediate Family" means an Optionee's spouse and
lineal descendants, any trust all beneficiaries of which are any of such persons
and any partnership all partners of which are any of such persons.
-2-
(q) "Incentive Stock Option" means an Option granted
under the Plan, designated by the Committee at the time of such grant as an
Incentive Stock Option within the meaning of section 422 of the Code and
containing the terms specified herein for Incentive Stock Options; provided,
however, that to the extent an Option granted under the Plan and designated by
the Committee at the time of grant as an Incentive Stock Option fails to satisfy
the requirements for an incentive stock option under section 422 of the Code for
any reason, such Option shall be treated as a Non-Qualified Option.
(r) "Non-Employee Director" means an individual who
is a member of the Board, and who is not an employee of a Company, including an
individual who is a member of the Board and who previously was an employee of a
Company.
(s) "Non-Qualified Option" means:
(i) an Option granted under the Plan,
designated by the Committee at the time of such grant as a Non-Qualified Option
and containing the terms specified herein for Non-Qualified Options; and
(ii) an Option granted under the Plan and
designated by the Committee at the time of grant as an Incentive Stock Option,
to the extent such Option fails to satisfy the requirements for an incentive
stock option under section 422 of the Code for any reason.
(t) "Option" means any stock option granted under the
Plan and described in Paragraph 3(a).
(u) "Optionee" means a person to whom an Option has
been granted under the Plan, which Option has not been exercised in full and has
not expired or terminated.
(v) "Other Available Shares" means, as of any date,
the excess, if any of:
(i) the total number of Shares owned by an
Optionee; over
(ii) the sum of:
(A) the number of Shares owned by
such Optionee for less than six months; plus
(B) the number of Shares owned by
such Optionee that has, within the preceding six months, been the subject of a
withholding certification pursuant to Paragraph 16(b) or any similar withholding
certification under any other Comcast Plan; plus
(C) the number of Shares owned by
such Optionee that has, within the preceding six months, been received in
exchange for Shares surrendered as payment, in full or in part, of the exercise
price for an option to purchase any securities of the Sponsor or an Affiliate
under any Comcast Plan, but only to the extent of the number of Shares
surrendered; plus
-3-
(D) The number of Shares owned by
such Optionee as to which evidence of ownership has, within the preceding six
months, been provided to the Company in connection with the crediting of
"Deferred Stock Units" to such Optionee's Account under the Comcast Corporation
1997 Deferred Stock Option Plan.
For purposes of this Paragraph 2(v), a Share that is subject to a deferral
election pursuant to another Comcast Plan shall not be treated as owned by an
Optionee until all conditions to the delivery of such Share have lapsed. For
purposes of Paragraphs 7(d), 8(d) and 16(b), the number of Other Available
Shares shall be determined separately for the Sponsor's Class A Special Common
Stock, par value, $1.00, the Sponsor's Class A Common Stock, par value, $1.00
and the Sponsor's Class B Common Stock, par value, $1.00.
(w) "Outside Director" means a member of the Board
who is an "outside director" within the meaning of section 162(m)(4)(C) of the
Code and applicable Treasury Regulations issued thereunder.
(x) "Parent Company" means all corporations that, at
the time in question, are parent corporations of the Sponsor within the meaning
of section 424(e) of the Code.
(y) "Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization.
(z) "Plan" means the Comcast Corporation 1996 Stock
Option Plan.
(aa) "Roberts Family." Each of the following is a
member of the Roberts Family:
(i) Brian L. Roberts;
(ii) a lineal descendant of Brian L.
Roberts; or
(iii) a trust established for the benefit of
any of Brian L. Roberts and/or a lineal descendant or descendants of Brian L.
Roberts.
(bb) "Share" or "Shares" means:
(i) for all purposes of the Plan, a share or
shares of Common Stock or such other securities issued by the Sponsor as may be
the subject of an adjustment under Paragraph 11.
(ii) solely for purposes of Paragraphs 2(n),
2(v), 7(d), 8(d) and 16(b), the term "Share" or "Shares" also means a share or
shares of the Sponsor's Class A Common Stock, par value, $1.00.
(cc) "Sponsor" means Comcast Corporation, a
Pennsylvania corporation, including any successor thereto by merger,
consolidation, acquisition of all or substantially all the assets thereof, or
otherwise.
-4-
(dd) "Subsidiary Companies" means all corporations
that, at the time in question, are subsidiary corporations of the Sponsor within
the meaning of section 424(f) of the Code.
(ee) "Ten Percent Shareholder" means a person who on
the Date of Grant owns, either directly or within the meaning of the attribution
rules contained in section 424(d) of the Code, stock possessing more than 10% of
the total combined voting power of all classes of stock of his employer
corporation or of its parent or subsidiary corporations, as defined respectively
in sections 424(e) and (f) of the Code, provided that the employer corporation
is a Company.
(ff) "Terminating Event" means any of the following
events:
(i) the liquidation of the Sponsor; or
(ii) a Change of Control.
(gg) "Third Party" means any Person other than a
Company, together with such Person's Affiliates, provided that the term "Third
Party" shall not include the Sponsor, an Affiliate of the Sponsor or any member
or members of the Roberts Family.
(hh) "1933 Act" means the Securities Act of 1933, as
amended.
(ii) "1934 Act" means the Securities Exchange Act of
1934, as amended.
3. Rights To Be Granted
(a) Types of Options and Other Rights Available for
Grant. Rights that may be granted under the Plan are:
(i) Incentive Stock Options, which give an
Optionee who is an employee of a Company the right for a specified time period
to purchase a specified number of Shares for a price not less than the Fair
Market Value on the Date of Grant;
(ii) Non-Qualified Options, which give the
Optionee the right for a specified time period to purchase a specified number of
Shares for a price determined by the Committee; and
(iii) Cash Rights, which give an Optionee
the right for a specified time period, and subject to such conditions, if any,
as shall be determined by the Committee and stated in the option document, to
receive a cash payment of such amount per Share as shall be determined by the
Committee and stated in the option document, in lieu of exercising a
Non-Qualified Option.
In addition, rights that may be granted under the Plan shall include Incentive
Stock Options or Non-Qualified Options to purchase a specified number of Shares
of the Sponsor's Class A Special Common Stock, par value $1.00, which shall be
automatically converted into Incentive Stock Options or Non-Qualified Options to
-5-
purchase the same number of Shares of the Sponsor's Class B Common Stock, par
value $1.00, upon and subject to the approval by the Sponsor's shareholders of
the amendment to the Plan adopted by the Board on October 5, 2000 to make the
Sponsor's Class B Common Stock, par value $1.00 available for the grant of
Options under the Plan.
(b) Limit on Grant of Options. The maximum number of
Shares for which Options may be granted to any single individual in any calendar
year, adjusted as provided in Paragraph 11, shall be 10,000,000 Shares.
(c) Presumption of Incentive Stock Option Status.
Each Option granted under the Plan to an employee of a Company is intended to be
an Incentive Stock Option, except to the extent any such grant would exceed the
limitation of Paragraph 9 and except for any Option specifically designated at
the time of grant as an Option that is not an Incentive Stock Option.
4. Shares Subject to Plan
Subject to adjustment as provided in Paragraph 11, not more
than 75,000,000 Shares in the aggregate may be issued pursuant to the Plan upon
exercise of Options. Shares delivered pursuant to the exercise of an Option may,
at the Sponsor's option, be either treasury Shares or Shares originally issued
for such purpose. If an Option covering Shares terminates or expires without
having been exercised in full, other Options may be granted covering the Shares
as to which the Option terminated or expired.
5. Administration of Plan
(a) Committee. The Plan shall be administered by the
Subcommittee on Performance Based Compensation of the Compensation Committee of
the Board or any other committee or subcommittee designated by the Board,
provided that the committee administering the Plan is composed of two or more
non-employee members of the Board, each of whom is an Outside Director.
Notwithstanding the foregoing, if Non-Employee Directors are granted Options in
accordance with the provisions of Paragraph 8, the directors to whom such
Options will be granted, the timing of grants of such Options, the Option Price
of such Options and the number of Option Shares included in such Options shall
be as specifically set forth in Paragraph 8. No member of the Committee shall
participate in the resolution of any issue that exclusively involves an Option
granted to such member.
(b) Meetings. The Committee shall hold meetings at
such times and places as it may determine. Acts approved at a meeting by a
majority of the members of the Committee or acts approved in writing by the
unanimous consent of the members of the Committee shall be the valid acts of the
Committee.
(c) Exculpation. No member of the Committee shall be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options thereunder unless (i) the member of the Committee has
breached or failed to perform the duties of his office, and (ii) the breach or
failure to perform constitutes self-dealing, wilful misconduct or recklessness;
-6-
provided, however, that the provisions of this Paragraph 5(c) shall not apply to
the responsibility or liability of a member of the Committee pursuant to any
criminal statute.
(d) Indemnification. Service on the Committee shall
constitute service as a member of the Board. Each member of the Committee shall
be entitled without further act on his part to indemnity from the Sponsor to the
fullest extent provided by applicable law and the Sponsor's By-laws in
connection with or arising out of any actions, suit or proceeding with respect
to the administration of the Plan or the granting of Options thereunder in which
he may be involved by reasons of his being or having been a member of the
Committee, whether or not he continues to be such member of the Committee at the
time of the action, suit or proceeding.
6. Eligibility
(a) Eligible individuals to whom Options may be
granted shall be employees, officers or directors of a Company who are selected
by the Committee for the grant of Options. Eligible individuals to whom Cash
Rights may be granted shall be individuals who are employees of a Company on the
Date of Grant. The terms and conditions of Options granted to individuals other
than Non-Employee Directors shall be determined by the Committee, subject to
Paragraph 7. The terms and conditions of Cash Rights shall be determined by the
Committee, subject to Paragraph 7. The terms and conditions of Options granted
to Non-Employee Directors shall be determined by the Committee, subject to
Paragraph 8.
(b) An Incentive Stock Option shall not be granted to
a Ten Percent Shareholder except on such terms concerning the option price and
term as are provided in Paragraph 7(b) and 7(g) with respect to such a person.
An Option designated as Incentive Stock Option granted to a Ten Percent
Shareholder but which does not comply with the requirements of the preceding
sentence shall be treated as a Non-Qualified Option. An Option designated as an
Incentive Stock Option shall be treated as a Non-Qualified Option if (i) the
Optionee is not an employee of a Company on the Date of Grant or (ii) the only
Company by which the Optionee is employed on the Date of Grant is an entity
described in Paragraph 2(dd)(ii).
7. Option Documents and Terms - In General
All Options granted to Optionees other than Non-Employee
Directors shall be evidenced by option documents. The terms of each such option
document shall be determined from time to time by the Committee, consistent,
however, with the following:
(a) Time of Grant. All Options shall be granted
within 10 years from the earlier of (i) the date of adoption of the Plan by the
Board, or (ii) approval of the Plan by the shareholders of the Sponsor.
(b) Option Price. The option price per Share with
respect to any Option shall be determined by the Committee, provided, however,
that with respect to any Incentive Stock Options, the option price per share
shall not be less than 100% of the Fair Market Value of such Share on the Date
of Grant, and provided further that with respect to any Incentive Stock Options
granted to a Ten Percent Shareholder, the option price per Share shall not be
less than 110% of the Fair Market Value of such Share on the Date of Grant.
-7-
(c) Restrictions on Transferability. No Option
granted under this Paragraph 7 shall be transferable otherwise than by will or
the laws of descent and distribution and, during the lifetime of the Optionee,
shall be exercisable only by him or for his benefit by his attorney-in-fact or
guardian; provided that the Committee may, in its discretion, at the time of
grant of a Non-Qualified Option or by amendment of an option document for an
Incentive Stock Option or a Non-Qualified Option, provide that Options granted
to or held by an Optionee may be transferred, in whole or in part, to one or
more transferees and exercised by any such transferee; provided further that (i)
any such transfer is without consideration and (ii) each transferee is a member
of such Optionee's Immediate Family; and provided further that any Incentive
Stock Option granted pursuant to an option document which is amended to permit
transfers during the lifetime of the Optionee shall, upon the effectiveness of
such amendment, be treated thereafter as a Non-Qualified Option. No transfer of
an Option shall be effective unless the Committee is notified of the terms and
conditions of the transfer and the Committee determines that the transfer
complies with the requirements for transfers of Options under the Plan and the
option document. Any person to whom an Option has been transferred may exercise
any Options only in accordance with the provisions of Paragraph 7(g) and this
Paragraph 7(c).
(d) Payment Upon Exercise of Options. Full payment
for Shares purchased upon the exercise of an Option shall be made in cash, by
certified check payable to the order of the Sponsor, or, at the election of the
Optionee and as the Committee may, in its sole discretion, approve, by
surrendering Shares with an aggregate Fair Market Value equal to the aggregate
option price, or by delivering such combination of Shares and cash as the
Committee may, in its sole discretion, approve; provided, however, that Shares
may be surrendered in satisfaction of the option price only if the Optionee
certifies in writing to the Sponsor that the Optionee owns a number of Other
Available Shares as of the date the Option is exercised that is at least equal
to the number of Shares to be surrendered in satisfaction of the Option Price;
provided further, however, that the option price may not be paid in Shares if
the Committee determines that such method of payment would result in liability
under section 16(b) of the 1934 Act to an Optionee. Except as otherwise provided
by the Committee, if payment is made in whole or in part in Shares, the Optionee
shall deliver to the Sponsor certificates registered in the name of such
Optionee representing Shares legally and beneficially owned by such Optionee,
free of all liens, claims and encumbrances of every kind and having a Fair
Market Value on the date of delivery that is not greater than the option price
accompanied by stock powers duly endorsed in blank by the record holder of the
Shares represented by such certificates. If the Committee, in its sole
discretion, should refuse to accept Shares in payment of the option price, any
certificates representing Shares which were delivered to the Sponsor shall be
returned to the Optionee with notice of the refusal of the Committee to accept
such Shares in payment of the option price. The Committee may impose such
limitations and prohibitions on the use of Shares to exercise an Option as it
deems appropriate.
(e) Issuance of Certificate Upon Exercise of Options;
Payment of Cash. Only whole Shares shall be issuable upon exercise of Options.
Any right to a fractional Share shall be satisfied in cash. Upon satisfaction of
the conditions of Paragraph 10, a certificate for the number of whole Shares and
a check for the Fair Market Value on the date of exercise of any fractional
Share to which the Optionee is entitled shall be delivered to such Optionee by
the Sponsor.
-8-
(f) Termination of Employment. For purposes of the
Plan, a transfer of an employee between two employers, each of which is a
Company, shall not be deemed a termination of employment. For purposes of
Paragraph 7(g), an Optionee's termination of employment shall be deemed to occur
on the date an Optionee ceases to have a regular obligation to perform services
for a Company, without regard to whether (i) the Optionee continues on the
Company's payroll for regular, severance or other pay or (ii) the Optionee
continues to participate in one or more health and welfare plans maintained by
the Company on the same basis as active employees. Whether an Optionee ceases to
have a regular obligation to perform services for a Company shall be determined
by the Committee in its sole discretion. Notwithstanding the foregoing, if an
Optionee is a party to an employment agreement or severance agreement with a
Company which establishes the effective date of such Optionee's termination of
employment for purposes of this Paragraph 7(g), that date shall apply.
(g) Periods of Exercise of Options. An Option shall
be exercisable in whole or in part at such time or times as may be determined by
the Committee and stated in the option document, provided, however, that if the
grant of an Option would be subject to section 16(b) of the 1934 Act, unless the
requirements for exemption therefrom in Rule 16b-3(c)(1), under such Act, or any
successor provision, are met, the option document for such Option shall provide
that such Option is not exercisable until not less than six months have elapsed
from the Date of Grant. Except as otherwise provided by the Committee in its
discretion, no Option shall first become exercisable following an Optionee's
termination of employment for any reason; provided further, that:
(i) In the event that an Optionee terminates
employment with the Company for any reason other than death or Cause, any Option
held by such Optionee and which is then exercisable shall be exercisable for a
period of 90 days following the date the Optionee terminates employment with the
Company (unless a longer period is established by the Committee); provided,
however, that if such termination of employment with the Company is due to the
Disability of the Optionee, he shall have the right to exercise those of his
Options which are then exercisable for a period of one year following such
termination of employment (unless a longer period is established by the
Committee); provided, however, that in no event shall an Incentive Stock Option
be exercisable after five years from the Date of Grant in the case of a grant to
a Ten Percent Shareholder, nor shall any other Option be exercisable after ten
years from the Date of Grant.
(ii) In the event that an Optionee
terminates employment with the Company by reason of his death, any Option held
at death by such Optionee which is then exercisable shall be exercisable for a
period of one year from the date of death (unless a longer period is established
by the Committee) by the person to whom the rights of the Optionee shall have
passed by will or by the laws of descent and distribution; provided, however,
that in no event shall an Incentive Stock Option be exercisable after five years
from the Date of Grant in the case of a grant to a Ten Percent Shareholder, nor
shall any other Option be exercisable after ten years from the Date of Grant.
(iii) In the event that an Optionee's
employment with the Company is terminated for Cause, each unexercised Option
held by such Optionee shall terminate and cease to be exercisable; provided
further, that in such event, in addition to immediate termination of the Option,
the Optionee, upon a determination by the Committee shall automatically forfeit
-9-
all Shares otherwise subject to delivery upon exercise of an Option but for
which the Sponsor has not yet delivered the Share certificates, upon refund by
the Sponsor of the option price.
(h) Date of Exercise. The date of exercise of an
Option shall be the date on which written notice of exercise, addressed to the
Sponsor at its main office to the attention of its Secretary, is hand delivered,
telecopied or mailed first class postage prepaid; provided, however, that the
Sponsor shall not be obligated to deliver any certificates for Shares pursuant
to the exercise of an Option until the Optionee shall have made payment in full
of the option price for such Shares. Each such exercise shall be irrevocable
when given. Each notice of exercise must (i) specify the Incentive Stock Option,
Non-Qualified Option or combination thereof being exercised; and (ii) include a
statement of preference (which shall binding on and irrevocable by the Optionee
but shall not be binding on the Committee) as to the manner in which payment to
the Sponsor shall be made (Shares or cash or a combination of Shares and cash).
Each notice of exercise shall also comply with the requirements of Paragraph 15.
(i) Cash Rights. The Committee may, in its sole
discretion, provide in an option document for an eligible Optionee that Cash
Rights shall be attached to Non-Qualified Options granted under the Plan. All
Cash Rights that are attached to Non-Qualified Options shall be subject to the
following terms:
(i) Such Cash Right shall expire no later
than the Non-Qualified Option to which it is attached.
(ii) Such Cash Right shall provide for the
cash payment of such amount per Share as shall be determined by the Committee
and stated in the option document.
(iii) Such Cash Right shall be subject to
the same restrictions on transferability as the Non-Qualified Option to which it
is attached.
(iv) Such Cash Right shall be exercisable
only when such conditions to exercise as shall be determined by the Committee
and stated in the option document, if any, have been satisfied.
(v) Such Cash Right shall expire upon the
exercise of the Non-Qualified Option to which it is attached.
(vi) Upon exercise of a Cash Right that is
attached to a Non-Qualified Option, the Option to which the Cash Right is
attached shall expire.
(j) Type of Shares. Each Option granted under this
Paragraph 7 to an employee of a Company shall be an Option to purchase Shares of
the Company's Class A Special Common Stock, par value, $1.00, except for (i) any
Option specifically designated at the time of grant as an Option to purchase
Shares of the Company's Class B Common Stock, par value, $1.00, or (ii) any
Option specifically designated at the time of grant as an Option to purchase
Shares of the Company's Class A Special Common Stock, par value, $1.00, that
will automatically convert to an Option to purchase Shares of the Company's
Class B Special Common Stock, par value, $1.00, upon and subject to the approval
-10-
by the Sponsor's shareholders of the amendment to the Plan adopted by the Board
on October 5, 2000 to make the Sponsor's Class B Common Stock, par value $1.00
available for the grant of Options under the Plan.
8. Option Documents and Terms - Non-Employee Directors
Options granted pursuant to the Plan to Non-Employee Directors
shall be granted, without any further action by the Committee, in accordance
with the terms and conditions set forth in this Paragraph 8. Options granted
pursuant to Paragraph 8(a) shall be evidenced by option documents. The terms of
each such option document shall be consistent with Paragraphs 8(b) through 8(g),
as follows:
(a) Grant of Options to Non-Employee Directors. Each
Non-Employee Director shall be granted, commencing on the Grant Date next
following the adoption of this Plan by the Board and on each successive Grant
Date thereafter, a Non-Qualified Option to purchase 5,400 Shares.
Notwithstanding the preceding sentence, each newly elected Non-Employee
Director:
(i) shall be granted a Non-Qualified Option
to purchase 9,000 Shares on the Election Date; and
(ii) shall not be entitled to the grant of
an Option hereunder on the Grant Date immediately following the Non-Employee
Director's Election Date if such Election Date is within ninety (90) days of the
Grant Date.
(b) Option Price. The option price per Share with
respect to any Option granted under this Paragraph 8 shall be 100% of the Fair
Market Value of such Share on the Grant Date.
(c) Restrictions on Transferability. No Option
granted under this Paragraph 8 shall be transferable otherwise than by will or
the laws of descent and distribution and, during the lifetime of the Optionee,
shall be exercisable only by him or for his benefit by his attorney-in-fact or
guardian; provided that the Committee may, in its discretion, at the time of
grant of an Option or by amendment of an option document for an Option, provide
that Options may be transferred, in whole or in part, to one or more transferees
and exercised by any such transferee; provided further that (i) any such
transfer is without consideration, and (ii) each transferee is a member of such
Optionee's Immediate Family. No transfer of an Option shall be effective unless
the Committee is notified of the terms and conditions of the transfer and the
Committee determines that the transfer complies with the requirements for
transfers of Options under the Plan and the option document. Any person to whom
an Option has been transferred may exercise any Options only in accordance with
the provisions of Paragraph 8(f) and this Paragraph 8(c).
(d) Payment Upon Exercise of Options. Full payment
for Shares purchased upon the exercise of an Option shall be made in cash, by
certified check payable to the order of the Sponsor, or, at the election of the
Optionee and as the Committee may, in its sole discretion, approve, by
surrendering Shares with an aggregate Fair Market Value equal to the aggregate
option price, or by delivering such combination of Shares and cash as the
Committee may, in its sole discretion, approve; provided, however, that Shares
may be surrendered in satisfaction of the option price only if the Optionee
certifies in writing to the Sponsor that the Optionee owns a number of Other
-11-
Available Shares as of the date the Option is exercised that is at least equal
to the number of Shares to be surrendered in satisfaction of the Option Price;
provided further, however, that the option price may not be paid in Shares if
the Committee determines that such method of payment would result in liability
under section 16(b) of the 1934 Act to an Optionee. Except as otherwise provided
by the Committee, if payment is made in whole or in part in Shares, the Optionee
shall deliver to the Sponsor certificates registered in the name of such
Optionee representing Shares legally and beneficially owned by such Optionee,
free of all liens, claims and encumbrances of every kind and having a Fair
Market Value on the date of delivery that is not greater than the option price
accompanied by stock powers duly endorsed in blank by the record holder of the
Shares represented by such certificates. If the Committee, in its sole
discretion, should refuse to accept Shares in payment of the option price, any
certificates representing Shares which were delivered to the Sponsor shall be
returned to the Optionee with notice of the refusal of the Committee to accept
such Shares in payment of the option price. The Committee may impose such
limitations and prohibitions on the use of Shares to exercise an Option as it
deems appropriate.
(e) Issuance of Certificate Upon Exercise of Options;
Payment of Cash. Only whole Shares shall be issuable upon exercise of Options
granted under this Paragraph 8. Any right to a fractional Share shall be
satisfied in cash. Upon satisfaction of the conditions of Paragraph 10, a
certificate for the number of whole Shares and a check for the Fair Market Value
on the date of exercise of any fractional Share to which the Optionee is
entitled shall be delivered to such Optionee by the Sponsor.
(f) Periods of Exercise of Options. An Option granted
under this Paragraph 8 shall not be exercisable for six months after the Date of
Grant, and shall then be exercisable in its entirety. No Option shall first
become exercisable following an Optionee's termination of service as a
Non-Employee Director for any reason other than the Non-Employee Director's
termination of service because of the Non-Employee Director's death, Disability
or attainment of mandatory retirement age under any mandatory retirement policy
established by the Board as in effect from time to time ("Mandatory
Retirement"). All Options granted to a Non-Employee Director shall become
immediately exercisable in full upon an Optionee's termination of service as a
Non-Employee Director because of death, Disability or Mandatory Retirement;
provided further, that the following rules shall apply to all Options previously
granted under the Plan to Non-Employee Directors that are outstanding as of June
5, 2001, and to all Options granted under the Plan to Non-Employee Directors
after June 5, 2001:
(i) In the event that an Optionee terminates
service as a Non-Employee Director for any reason other than the Disability or
Mandatory Retirement of the Optionee, death or Cause, any Option held by such
Optionee and which is then exercisable shall continue to be exercisable for a
period of 90 days following the date the Optionee terminates service as a
Non-Employee Director; provided, however, that in no event shall an Option be
exercisable after the day before the fifth anniversary of the Date of Grant.
(ii) In the event that an Optionee
terminates service as a Non-Employee Director due to the Disability, death or
Mandatory Retirement of the Optionee, any Option held by such Optionee and which
is then exercisable shall continue to be exercisable by the Optionee or, in the
-12-
case of the Optionee's death, by the person to whom the rights of the Optionee
shall have passed by will or by the laws of descent and distribution until the
day before the fifth anniversary of the Date of Grant.
(iii) In the event that an Optionee's
service as a Non-Employee Director is terminated for Cause, each unexercised
Option shall terminate and cease to be exercisable; provided further, that in
such event, in addition to immediate termination of the Option, the Optionee
shall automatically forfeit all Shares otherwise subject to delivery upon
exercise of an Option but for which the Sponsor has not yet delivered the Share
certificates, upon refund by the Sponsor of the option price.
(g) Date of Exercise. The date of exercise of an
Option granted under this Paragraph 8 shall be the date on which written notice
of exercise, addressed to the Sponsor at its main office to the attention of its
Secretary, is hand delivered, telecopied or mailed first class postage prepaid;
provided, however, that the Sponsor shall not be obligated to deliver any
certificates for Shares pursuant to the exercise of an Option until the Optionee
shall have made payment in full of the option price for such Shares. Each such
exercise shall be irrevocable when given. Each notice of exercise must (i)
specify the Option being exercised; and (ii) include a statement as to the
manner in which payment to the Sponsor shall be made (Shares or cash or a
combination of Shares and cash). Each notice of exercise shall also comply with
the requirements of Paragraph 15.
(h) Type of Shares. Each Option granted under this
Paragraph 8 shall be an Option to purchase Shares of the Company's Class A
Special Common Stock, par value, $1.00.
9. Limitation on Exercise of Incentive Stock Options.
The aggregate Fair Market Value (determined as of the time
Options are granted) of the Shares with respect to which Incentive Stock Options
may first become exercisable by an Optionee in any one calendar year under the
Plan and any other plan of the Company shall not exceed $100,000. The
limitations imposed by this Paragraph 9 shall apply only to Incentive Stock
Options granted under the Plan, and not to any other options or stock
appreciation rights. In the event an individual receives an Option intended to
be an Incentive Stock Option which is subsequently determined to have exceeded
the limitation set forth above, or if an individual receives Options that first
become exercisable in a calendar year (whether pursuant to the terms of an
option document, acceleration of exercisability or other change in the terms and
conditions of exercise or any other reason) that have an aggregate Fair Market
Value (determined as of the time the Options are granted) that exceeds the
limitations set forth above, the Options in excess of the limitation shall be
treated as Non-Qualified Options.
10. Rights as Shareholders
An Optionee shall not have any right as a shareholder with
respect to any Shares subject to his Options until the Option shall have been
exercised in accordance with the terms of the Plan and the option document and
the Optionee shall have paid the full purchase price for the number of Shares in
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respect of which the Option was exercised and the Optionee shall have made
arrangements acceptable to the Sponsor for the payment of applicable taxes
consistent with Paragraph 16.
11. Changes in Capitalization
(a) Except as provided in Paragraph 11(b), in the
event that Shares are changed into or exchanged for a different number or kind
of shares of stock or other securities of the Sponsor, whether through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split-up
or other substitution of securities of the Sponsor, the Board shall make
appropriate equitable anti-dilution adjustments to the number and class of
shares of stock available for issuance under the Plan, and subject to
outstanding Options, and to the option prices and the amounts payable pursuant
to any Cash Rights. Any reference to the option price in the Plan and in option
documents shall be a reference to the option price as so adjusted. Any reference
to the term "Shares" in the Plan and in option documents shall be a reference to
the appropriate number and class of shares of stock available for issuance under
the Plan, as adjusted pursuant to this Paragraph 11. The Board's adjustment
shall be effective and binding for all purposes of this Plan.
(b) Paragraph 11(a) shall not apply to the number of
Shares that become subject to the grant of Options under Paragraph 8(a).
Paragraph 11(a) shall apply for the purpose of making appropriate equitable
anti-dilution adjustments to Options granted pursuant to Paragraph 8(a) before
the effective date of the relevant event giving rise to the adjustment under
Paragraph 11(a).
12. Terminating Events
(a) The Sponsor shall give Optionees at least thirty
(30) days' notice (or, if not practicable, such shorter notice as may be
reasonably practicable) prior to the anticipated date of the consummation of a
Terminating Event. Upon receipt of such notice, and for a period of ten (10)
days thereafter (or such shorter period as the Board shall reasonably determine
and so notify the Optionees), each Optionee shall be permitted to exercise the
Option to the extent the Option is then exercisable; provided that, the Sponsor
may, by similar notice, require the Optionee to exercise the Option, to the
extent the Option is then exercisable, or to forfeit the Option (or portion
thereof, as applicable). The Committee may, in its discretion, provide that upon
the Optionee's receipt of the notice of a Terminating Event under this Paragraph
12(a), the entire number of Shares covered by Options shall become immediately
exercisable.
(b) Notwithstanding Paragraph 12(a), in the event the
Terminating Event is not consummated, the Option shall be deemed not to have
been exercised and shall be exercisable thereafter to the extent it would have
been exercisable if no such notice had been given.
13. Interpretation
The Committee shall have the power to interpret the Plan and
to make and amend rules for putting it into effect and administering it. It is
intended that the Incentive Stock Options granted under the Plan shall
-14-
constitute incentive stock options within the meaning of section 422 of the
Code, and that Shares transferred pursuant to the exercise of Non-Qualified
Options shall constitute property subject to federal income tax pursuant to the
provisions of section 83 of the Code. The provisions of the Plan shall be
interpreted and applied insofar as possible to carry out such intent.
14. Amendments
The Board or the Committee may amend the Plan from time to
time in such manner as it may deem advisable. Nevertheless, neither the Board
nor the Committee may, without obtaining approval within twelve months before or
after such action by such vote of shareholders as may be required by
Pennsylvania law for any action requiring shareholder approval, or by a majority
of votes cast at a duly held shareholders' meeting at which a majority of all
voting stock is present and voting on such amendment, either in person or in
proxy (but not, in any event, less than the vote required pursuant to Rule
16b-3(b) under the 1934 Act) change the class of individuals eligible to receive
an Incentive Stock Option, extend the expiration date of the Plan, decrease the
minimum option price of an Incentive Stock Option granted under the Plan or
increase the maximum number of shares as to which Options may be granted, except
as provided in Paragraph 11 hereof. In addition, the provisions of Paragraph 8
that determine (i) which directors shall be granted Options; (ii) the number of
Shares subject to Options; (iii) the option price of Shares subject to Options;
and (iv) the timing of grants of Options shall not be amended more than once
every six months, other than to comport with changes in the Code or the Employee
Retirement Income Security Act of 1974, as amended, if applicable. No
outstanding Option shall be affected by any such amendment without the written
consent of the Optionee or other person then entitled to exercise such Option.
15. Securities Law
(a) In General. The Committee shall have the power to
make each grant under the Plan subject to such conditions as it deems necessary
or appropriate to comply with the then-existing requirements of the 1933 Act or
the 1934 Act, including Rule 16b-3 (or any similar rule) of the Securities and
Exchange Commission.
(b) Acknowledgment of Securities Law Restrictions on
Exercise. To the extent required by the Committee, unless the Shares subject to
the Option are covered by a then current registration statement or a
Notification under Regulation A under the 1933 Act, each notice of exercise of
an Option shall contain the Optionee's acknowledgment in form and substance
satisfactory to the Committee that:
(i) the Shares subject to the Option are
being purchased for investment and not for distribution or resale (other than a
distribution or resale which, in the opinion of counsel satisfactory to the
Sponsor, may be made without violating the registration provisions of the Act);
(ii) the Optionee has been advised and
understands that (A) the Shares subject to the Option have not been registered
under the 1933 Act and are "restricted securities" within the meaning of Rule
144 under the 1933 Act and are subject to restrictions on transfer and (B) the
-15-
Sponsor is under no obligation to register the Shares subject to the Option
under the 1933 Act or to take any action which would make available to the
Optionee any exemption from such registration;
(iii) the certificate evidencing the Shares
may bear a restrictive legend; and
(iv) the Shares subject to the Option may
not be transferred without compliance with all applicable federal and state
securities laws.
(c) Delay of Exercise Pending Registration of
Securities. Notwithstanding any provision in the Plan or an option document to
the contrary, if the Committee determines, in its sole discretion, that issuance
of Shares pursuant to the exercise of an Option should be delayed pending
registration or qualification under federal or state securities laws or the
receipt of a legal opinion that an appropriate exemption from the application of
federal or state securities laws is available, the Committee may defer exercise
of any Option until such Shares are appropriately registered or qualified or an
appropriate legal opinion has been received, as applicable.
16. Withholding of Taxes on Exercise of Option
(a) Whenever the Company proposes or is required to
deliver or transfer Shares in connection with the exercise of an Option, the
Company shall have the right to (i) require the recipient to remit to the
Sponsor an amount sufficient to satisfy any federal, state and local withholding
tax requirements prior to the delivery or transfer of any certificate or
certificates for such Shares or (ii) take any action whatever that it deems
necessary to protect its interests with respect to tax liabilities. The
Sponsor's obligation to make any delivery or transfer of Shares on the exercise
of an Option shall be conditioned on the recipient's compliance, to the
Sponsor's satisfaction, with any withholding requirement. In addition, if the
Committee grants Options or amends option documents to permit Options to be
transferred during the life of the Optionee, the Committee may include in such
option documents such provisions as it determines are necessary or appropriate
to permit the Company to deduct compensation expenses recognized upon exercise
of such Options for federal or state income tax purposes.
(b) Except as otherwise provided in this Paragraph
16(b), any tax liabilities incurred in connection with the exercise of an Option
under the Plan other than an Incentive Stock Option shall be satisfied by the
Sponsor's withholding a portion of the Shares underlying the Option exercised
having a Fair Market Value approximately equal to the minimum amount of taxes
required to be withheld by the Sponsor under applicable law, unless otherwise
determined by the Committee with respect to any Optionee. Notwithstanding the
foregoing, the Committee may permit an Optionee to elect one or both of the
following: (i) to have taxes withheld in excess of the minimum amount required
to be withheld by the Sponsor under applicable law; provided that the Optionee
certifies in writing to the Sponsor that the Optionee owns a number of Other
-16-
Available Shares having a Fair Market Value that is at least equal to the Fair
Market Value of Option Shares to be withheld by the Company for the then-current
exercise on account of withheld taxes in excess of such minimum amount, and (ii)
to pay to the Sponsor in cash all or a portion of the taxes to be withheld upon
the exercise of an Option. In all cases, the Shares so withheld by the Company
shall have a Fair Market Value that does not exceed the amount of taxes to be
withheld minus the cash payment, if any, made by the Optionee. Any election
pursuant to this Paragraph 16(b) must be in writing made prior to the date
specified by the Committee, and in any event prior to the date the amount of tax
to be withheld or paid is determined. An election pursuant to this Paragraph
16(b) may be made only by an Optionee or, in the event of the Optionee's death,
by the Optionee's legal representative. No Shares withheld pursuant to this
Paragraph 16(b) shall be available for subsequent grants under the Plan. The
Committee may add such other requirements and limitations regarding elections
pursuant to this Paragraph 16(b) as it deems appropriate.
(c) Except as otherwise provided in this Paragraph
16(c), any tax liabilities incurred in connection with the exercise of an
Incentive Stock Option under the Plan shall be satisfied by the Optionee's
payment to the Sponsor in cash all of the taxes to be withheld upon exercise of
the Incentive Stock Option. Notwithstanding the foregoing, the Committee may
permit an Optionee to elect to have the Sponsor withhold a portion of the Shares
underlying the Incentive Stock Option exercised having a Fair Market Value
approximately equal to the minimum amount of taxes required to be withheld by
the Sponsor under applicable law. Any election pursuant to this Paragraph 16(c)
must be in writing made prior to the date specified by the Committee, and in any
event prior to the date the amount of tax to be withheld or paid is determined.
An election pursuant to this Paragraph 16(c) may be made only by an Optionee or,
in the event of the Optionee's death, by the Optionee's legal representative. No
Shares withheld pursuant to this Paragraph 16(c) shall be available for
subsequent grants under the Plan. The Committee may add such other requirements
and limitations regarding elections pursuant to this Paragraph 16(c) as it deems
appropriate.
17. Effective Date and Term of Plan
This amendment and restatement of the Plan is effective as of
April 29, 2002. The Plan shall expire no later than March 13, 2006, the tenth
anniversary of the date the Plan was initially adopted by the Board, unless
sooner terminated by the Board.
18. General
Each Option shall be evidenced by a written instrument
containing such terms and conditions not inconsistent with the Plan as the
Committee may determine. The issuance of Shares on the exercise of an Option
shall be subject to all of the applicable requirements of the corporation law of
the Sponsor's state of incorporation and other applicable laws, including
federal or state securities laws, and all Shares issued under the Plan shall be
subject to the terms and restrictions contained in the Articles of Incorporation
and By-Laws of the Sponsor, as amended from time to time.
Executed as of the 29th day of April, 2002.
COMCAST CORPORATION
By: /s/ Stanley Wang
-----------------------------
Attest: /s/ Arthur Block
-------------------------
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COMCAST CORPORATION
1997 DEFERRED STOCK OPTION PLAN
(As Amended and Restated Effective April 29, 2002)
Page
TABLE OF CONTENTS
ARTICLE 1 - CONTINUATION AND COVERAGE OF PLAN.....................................................................1
1.1. Continuation of Plan..................................................................................1
1.2. Plan Unfunded and Limited to Outside Directors and Select Group of Management or Highly Compensated
Employees......................................................................................................1
ARTICLE 2 - DEFINITIONS...........................................................................................1
2.1. "Account".............................................................................................1
2.2. "Active Participant"..................................................................................1
2.3. "Administrator".......................................................................................1
2.4. "Affiliate"...........................................................................................1
2.5. "Annual Rate of Pay"..................................................................................2
2.6. "Applicable Interest Rate"............................................................................2
2.7. "Beneficiary".........................................................................................2
2.8. "Board"...............................................................................................2
2.9. "Change of Control"...................................................................................2
2.10. "Code"................................................................................................2
2.11. "Comcast Option Plan or Plans"........................................................................3
2.12. "Comcast Plan"........................................................................................3
2.13. "Committee"...........................................................................................3
2.14. "Common Stock"........................................................................................3
2.15. "Company".............................................................................................3
2.16. "Company Stock".......................................................................................3
2.17. "Company Stock Fund"..................................................................................3
2.18. "Date of Grant".......................................................................................3
2.19. "Death Tax Clearance Date"............................................................................3
2.20. "Death Taxes".........................................................................................3
2.21. "Deceased Participant"................................................................................4
2.22. "Deferred Stock Units"................................................................................4
2.23. "Disabled Participant"................................................................................4
2.24. "Diversification Election"............................................................................5
2.25. "Eligible Employee"...................................................................................5
2.26. "Fair Market Value"...................................................................................5
2.27. "Former Eligible Employee"............................................................................5
2.28. "Former Outside Director".............................................................................5
2.29. "Immediate Family"....................................................................................5
2.30. "Income Fund".........................................................................................6
2.31. "Initial Election"....................................................................................6
2.32. "New Key Employee"....................................................................................6
2.33. "Normal Retirement"...................................................................................7
2.34. "Option"..............................................................................................7
2.35. "Option Shares".......................................................................................7
2.36. "Other Available Shares"..............................................................................7
2.37. "Outside Director"....................................................................................7
2.38. "Participant".........................................................................................8
2.39. "Participating Company"...............................................................................8
2.40. "Permitted Transferee"................................................................................8
2.41. "Person"..............................................................................................8
2.42. "Personal Representative".............................................................................8
2.43. "Plan"................................................................................................8
2.44. "Prime Rate"..........................................................................................8
2.45. "Related Corporation".................................................................................8
2.46. "Retired Participant".................................................................................8
2.47. "Roberts Family"......................................................................................8
2.48. "Share" or "Shares"...................................................................................8
2.49. "Share Withholding Election"..........................................................................8
2.50. "Special Common Stock"................................................................................9
2.51. "Subsequent Election".................................................................................9
2.52. "Successor-in-Interest"...............................................................................9
2.53. "Surviving Spouse"....................................................................................9
2.54. "Terminating Event"...................................................................................9
2.55. "Third Party".........................................................................................9
ARTICLE 3 - INITIAL AND SUBSEQUENT ELECTIONS......................................................................9
3.1. Elections.............................................................................................9
3.2. Filing of Initial Election: General..................................................................10
3.3. Options to which Initial Elections May Apply.........................................................10
3.4. Initial Election of Distribution Date................................................................10
3.5. Subsequent Elections.................................................................................10
3.6. Distribution in Full upon Terminating Event..........................................................13
3.7. Withholding and Payment of Death Taxes...............................................................14
3.8. Effect of Distribution within Five Years of Effective Date of Diversification
Election......................................................................................................15
ARTICLE 4 - MANNER OF DISTRIBUTION...............................................................................15
4.1. Manner of Distribution...............................................................................15
ARTICLE 5 - BOOK ACCOUNTS........................................................................................16
5.1. Account..............................................................................................16
5.2. Crediting of Income, Gains and Losses on Accounts....................................................16
5.3. Status of Deferred Amounts...........................................................................17
5.4. Participants' Status as General Creditors............................................................17
ARTICLE 6 - NONALIENATION OF BENEFITS............................................................................17
6.1. Alienation Prohibited................................................................................17
ARTICLE 7 - DEATH OF PARTICIPANT.................................................................................17
7.1. Death of Participant.................................................................................17
7.2. Designation of Beneficiaries.........................................................................17
ARTICLE 8 - INTERPRETATION.......................................................................................18
8.1. Authority of Committee...............................................................................18
8.2. Claims Procedure.....................................................................................18
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ARTICLE 9 - AMENDMENT OR TERMINATION.............................................................................19
9.1. Amendment or Termination.............................................................................19
ARTICLE 10 - WITHHOLDING OF TAXES ON EXERCISE OF OPTION..........................................................19
10.1. In General...........................................................................................19
10.2. Share Withholding Election...........................................................................19
ARTICLE 11 - CAPITAL ADJUSTMENTS.................................................................................20
11.1. Capital Adjustments..................................................................................20
ARTICLE 12 - MISCELLANEOUS PROVISIONS............................................................................20
12.1. No Right to Continued Employment.....................................................................20
12.2. Expenses of Plan.....................................................................................20
12.3. Gender and Number....................................................................................20
12.4. Law Governing Construction...........................................................................20
12.5. Headings Not a Part Hereof...........................................................................20
12.6. Severability of Provisions...........................................................................20
12.7. Expiration of Options................................................................................20
ARTICLE 13 - EFFECTIVE DATE......................................................................................21
13.1. Effective Date.......................................................................................21
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COMCAST CORPORATION
1997 DEFERRED STOCK OPTION PLAN
(as amended and restated effective April 29, 2002)
ARTICLE 1 - CONTINUATION AND COVERAGE OF PLAN
1.1. Continuation of Plan. COMCAST CORPORATION, a Pennsylvania
corporation, hereby amends and restates the Comcast Corporation 1997 Deferred
Stock Option Plan (the "Plan"), effective April 29, 2002. The Plan was initially
adopted effective September 16, 1997 and was amended and restated effective June
21, 1999, December 19, 2000 and November 29, 2001.
1.2. Plan Unfunded and Limited to Outside Directors and Select Group of
Management or Highly Compensated Employees. The Plan is unfunded and is
maintained primarily for the purpose of providing outside directors and a select
group of management or highly compensated employees the opportunity to defer
compensation otherwise payable to such outside directors and management or
highly compensated employees. The Plan provides an opportunity for outside
directors and management or highly compensated employees to defer the receipt of
Shares upon the exercise of Options and to convert the right to receive Shares
to the right to receive the cash value thereof as of the date of such
conversion, plus interest thereon from the date of such conversion, in
accordance with the terms of the Plan.
ARTICLE 2 - DEFINITIONS
2.1. "Account" means unfunded bookkeeping accounts established pursuant
to
Section 5.1 and maintained by the Administrator in the names of the respective
Participants (a) to which Deferred Stock Units, dividend equivalents and
earnings on dividend equivalents shall be credited with respect to the portion
of the Account allocated to the Company Stock Fund and (b) to which an amount
equal to the Fair Market Value of Deferred Stock Units with respect to which a
Diversification Election has been made and interest thereon from the date of
such election shall be credited with respect to the portion of the Account
allocated to the Income Fund, and from which all amounts distributed pursuant to
the Plan shall be debited.
2.2. "Active Participant" means:
(a) Each Participant who is in active service as an Outside
Director;
(b) Each Participant who is actively employed by a Participating
Company as an Eligible Employee; and
(c) A Permitted Transferee of an individual described in Section
2.2(a) or Section 2.2(b), if applicable.
2.3. "Administrator" means the Committee.
2.4. "Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition, the term
"control," including its correlative terms "controlled by" and "under common
control with," mean, with respect to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
2.5. "Annual Rate of Pay" means, as of any date, an employee's
annualized base pay rate. An employee's Annual Rate of Pay shall not include
sales commissions or other similar payments or awards.
2.6. "Applicable Interest Rate" means:
(a) Except as otherwise provided in Section 2.6(b), the
Applicable Interest Rate means 8% per annum, compounded annually as of the last
day of the calendar year, or such other interest rate established by the
Administrator from time to time. The effective date of any reduction in the
Applicable Interest Rate shall not precede the latest of (i) November 29, 2003,
(ii) the 30th day following the date of the Administrator's action to establish
a reduced rate or (ii) the lapse of 24 full calendar months from the date of the
most recent adjustment of the Applicable Interest Rate by the Administrator.
(b) Effective for the period extending from a Participant's
employment termination date to the date the Participant's Account is distributed
in full, the Administrator, in its sole and absolute discretion, may designate
the term "Applicable Interest Rate" for such Participant's Account to mean the
lesser of (i) the rate in effect under Section 2.6(a) or (ii) the Prime Rate
plus one percent, compounded annually as of the last day of the calendar year.
Notwithstanding the foregoing, the Administrator may delegate its authority to
determine the Applicable Interest Rate under this Section 2.6(b) to an officer
of the Company or committee of two or more officers of the Company.
2.7. "Beneficiary" means such person or persons or legal entity or
entities, including, but not limited to, an organization exempt from federal
income tax under section 501(c)(3) of the Code, designated by a Participant or
Beneficiary to receive benefits pursuant to the terms of the Plan after such
Participant's or Beneficiary's death. If no Beneficiary is designated by the
Participant or Beneficiary or if no Beneficiary survives the Participant or
Beneficiary (as the case may be), the Participant's Beneficiary shall be the
Participant's Surviving Spouse if the Participant has a Surviving Spouse and
otherwise the Participant's estate and the Beneficiary of a Beneficiary shall be
the Beneficiary's Surviving Spouse if the Beneficiary has a Surviving Spouse and
otherwise the Beneficiary's estate.
2.8. "Board" means the Board of Directors of the Company, or the
Executive Committee of the Board of Directors of the Company.
2.9. "Change of Control" means any transaction or series of
transactions as a result of which any Person who was a Third Party immediately
before such transaction or series of transactions directly or indirectly owns
then-outstanding securities of the Company having more than 50 percent of the
voting power for the election of directors of the Company.
2.10. "Code" means the Internal Revenue Code of 1986, as amended.
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2.11. "Comcast Option Plan or Plans" means the Comcast Corporation 1986
Non-Qualified Stock Option Plan, the Comcast Corporation 1987 Stock Option Plan,
or the Comcast Corporation 1996 Stock Option Plan, or any other incentive or
non-qualified stock option plan subsequently adopted by the Company or a Related
Corporation.
2.12. "Comcast Plan" means any restricted stock, stock bonus, stock
option or other compensation plan, program or arrangement established or
maintained by the Company or an Affiliate, including, but not limited to this
Plan, the Comcast Corporation 1990 Restricted Stock Plan and the Comcast Option
Plans.
2.13. "Committee" means the Subcommittee on Performance Based
Compensation of the Compensation Committee of the Board of Directors of the
Company.
2.14. "Common Stock" means the Company's Class A Common Stock, par
value $1.00 per share, including a fractional share.
2.15. "Company" means Comcast Corporation, a Pennsylvania corporation,
including any successor thereto by merger, consolidation, acquisition of all or
substantially all the assets thereof, or otherwise.
2.16. "Company Stock" means Common Stock, Special Common Stock, or such
other securities as may be issued by the Company pursuant to adjustments as
provided in Article 11.
2.17. "Company Stock Fund" means a hypothetical investment fund
pursuant to which Deferred Stock Units are credited with respect to an Option
subject to an Initial Election, and thereafter until the date of distribution or
the effective date of a Diversification Election, to the extent a
Diversification Election applies to such Deferred Stock Units, as applicable.
The portion of a Participant's Account deemed invested in the Company Stock Fund
shall be treated as if such portion of the Account were invested in hypothetical
shares of Common Stock or Special Common Stock otherwise deliverable as Option
Shares on the exercise of an Option, and all dividends and other distributions
paid with respect to Common Stock or Special Common Stock were held uninvested
in cash and credited with interest at the Applicable Interest Rate as of the
next succeeding December 31 (to the extent the Account continues to be deemed
credited in the form of Deferred Stock Units through such December 31).
2.18. "Date of Grant" means the date as of which an Option is granted.
2.19. "Death Tax Clearance Date" means the date upon which a Deceased
Participant's or a deceased Beneficiary's Personal Representative certifies to
the Administrator that (a) such Deceased Participant's or deceased Beneficiary's
Death Taxes have been finally determined, (b) all of such Deceased Participant's
or deceased Beneficiary's Death Taxes apportioned against the Deceased
Participant's or deceased Beneficiary's Account have been paid in full and (c)
all potential liability for Death Taxes with respect to the Deceased
Participant's or deceased Beneficiary's Account has been satisfied.
2.20. "Death Taxes" means any and all estate, inheritance,
generation-skipping transfer, and other death taxes as well as any interest and
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penalties thereon imposed by any governmental entity (a "taxing authority") as a
result of the death of the Participant or the Participant's Beneficiary.
2.21. "Deceased Participant" means:
(a) A Participant whose employment, or, in the case of a
Participant who was an Outside Director, a Participant whose service as an
Outside Director, is terminated by death;
(b) A Participant who dies following termination of active
employment or active service; or
(c) A Permitted Transferee of an individual described in Section
2.21(a) or 2.21(b), if applicable.
2.22. "Deferred Stock Units" mean the number of hypothetical Shares
determined as the excess of (a) the number of Option Shares over (b) the number
of Other Available Shares having a Fair Market Value as of the date of exercise
of an Option equal to the exercise price for such Option Shares (hereinafter
referred to in this Section 2.22 as the "Payment Shares"), as to which an
Outside Director, Former Outside Director, Eligible Employee, Former Eligible
Employee or Successor-in-Interest provides to the Company evidence of ownership
of sufficient Payment Shares to pay the exercise price for such Option Shares;
provided, however, that if the Option is for Common Stock, the Deferred Stock
Units shall be credited to the Participant's Account as Deferred Common Stock
Units, and if the Option is for Special Common Stock, the Deferred Stock Units
shall be credited to the Participant's Account as Deferred Special Common Stock
Units. Provision of a notarized statement under oath to the Company by the
Outside Director, Former Outside Director, Eligible Employee, Former Eligible
Employee or Successor-in-Interest attesting to the number of Payment Shares
owned by the Outside Director, Former Outside Director, Eligible Employee,
Former Eligible Employee or Successor-in-Interest and held by a securities
broker for the Outside Director, Former Outside Director, Eligible Employee,
Former Eligible Employee or Successor-in-Interest in "street name" or provision
of the certificate numbers to the Company by the Outside Director, Former
Outside Director, Eligible Employee, Former Eligible Employee or
Successor-in-Interest of the Payment Share stock certificates actually held by
the Outside Director, Former Outside Director, Eligible Employee, Former
Eligible Employee or Successor-in-Interest shall constitute acceptable evidence
of ownership.
2.23. "Disabled Participant" means
(a) A Participant whose employment or, in the case of a
Participant who is an Outside Director, a Participant whose service as an
Outside Director, is terminated by reason of disability;
(b) A Participant who becomes disabled (as determined by the
Committee) following termination of active service;
(c) The duly-appointed legal guardian of an individual described
in Section 2.23(a) or 2.23(b) acting on behalf of such individual; or
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(d) A Permitted Transferee of an individual described in Section
2.23(a) or 2.23(b), if applicable.
2.24. "Diversification Election" means a Participant's election to have
a portion of the Participant's Account credited in the form of Deferred Stock
Units under the Company Stock Fund deemed liquidated and credited thereafter
under the Income Fund, as provided in Section 5.2(a), if (and to the extent
that) it is approved by the Administrator as described in Section 2.31 or
Section 5.2(a).
2.25. "Eligible Employee" means:
(a) Each employee of a Participating Company whose Annual Rate of
Pay is $200,000 or more as of both (i) the date on which an Initial Election is
filed with the Administrator and (ii) the first day of the calendar year in
which such Initial Election is filed.
(b) Each employee of a Participating Company who has an Annual
Rate of Pay of $125,000 as of each of (i) June 30, 2002; (ii) the date on which
an Initial Election is filed with the Administrator and (iii) the first day of
each calendar year beginning after December 31, 2002.
(c) Each New Key Employee.
(d) Each other employee of a Participating Company who is
designated by the Committee, in its sole and absolute discretion, as an Eligible
Employee.
2.26. "Fair Market Value" shall mean:
(a) If Shares are listed on a stock exchange, Fair Market Value
shall be determined based on the last reported sale price of a Share on the
principal exchange on which Shares are listed on the last trading day prior to
the date of determination.
(b) If Shares are not so listed, but trades of Shares are
reported on the NASDAQ National Market, the last quoted sale price of a share on
the NASDAQ National Market on the last trading day prior to the date of
determination.
(c) If Shares are not so listed nor trades of Shares so reported,
Fair Market Value shall be determined by the Committee in good faith.
2.27. "Former Eligible Employee" means an individual who has ceased to
be actively employed by a Participating Company for any reason but who,
immediately preceding his termination of employment, was an Eligible Employee.
2.28. "Former Outside Director" means an individual who has ceased to
be a member of the Board, but who, immediately preceding his cessation of
service as a member of the Board was an Outside Director.
2.29. "Immediate Family" means an Outside Director's, Former Outside
Director's, Eligible Employee's or Former Eligible Employee's spouse and lineal
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descendants, any trust all beneficiaries of which are any of such persons and
any other entity all members or owners of which are any of such persons.
2.30. "Income Fund" means a hypothetical investment fund pursuant to
which an amount equal to the Fair Market Value of Deferred Stock Units subject
to a Diversification Election is credited as of the effective date of such
Diversification Election and as to which interest is credited thereafter until
the date of distribution at the Applicable Interest Rate.
2.31. "Initial Election" means a written election on a form provided by
the Administrator, filed with the Administrator in accordance with Article 3,
pursuant to which an Outside Director, Former Outside Director, Eligible
Employee, Former Eligible Employee, Successor-in-Interest or Permitted
Transferee who:
(a) Elects, within the time or times specified in Article 3, to
defer the receipt of Shares pursuant to the exercise of all or part of an
Option; and
(b) Designates the time that such Shares and any dividend
equivalents shall be distributed.
A Former Outside Director, Eligible Employee, Former Eligible Employee,
Successor-in-Interest or Permitted Transferee may also make the effectiveness of
an Initial Election contingent on the Administrator's approval of a proposed
Diversification Election as to a specified percentage of Deferred Stock Units
creditable to an Account with respect to an Option potentially subject to the
Initial Election. If the Administrator does not approve the proposed
Diversification Election within 30 days of the date such contingent Initial
Election is filed with the Administrator, such Initial Election shall be null
and void. Such a proposed Diversification Election shall be effective only if
(and to the extent) approved (or, pursuant to Section 5.2(b)(iii), deemed
approved).
2.32. "New Key Employee" means each employee of a Participating
Company:
(a) Effective as of July 1, 2002, each employee of a
Participating Company:
(i) Who becomes an employee of a Participating Company and
has an Annual Rate of Pay of $200,000 or more as of his employment commencement
date; and
(ii) Who has an Annual Rate of Pay that is increased to
$200,000 or more and who, immediately preceding such increase, was not an
Eligible Employee.
(b) Effective for the period beginning April 29, 2002 and ending
June 30, 2002, each employee of a Participating Company:
(i) Who becomes an employee of a Participating Company and
has an Annual Rate of Pay of $125,000 or more as of his employment commencement
date.
(ii) Who has an Annual Rate of Pay that is increased to
$125,000 or more and who, immediately preceding such increase, was not an
Eligible Employee.
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2.33. "Normal Retirement" means:
(a) For a Participant who is an employee of a Participating
Company immediately preceding his termination of employment, a termination of
employment that is treated by the Participating Company as a retirement under
its employment policies and practices as in effect from time to time; and
(b) For a Participant who is an Outside Director immediately
preceding his termination of service, his normal retirement from the Board.
2.34. "Option" means a non-qualified stock option to purchase Shares
granted pursuant to a Comcast Option Plan; provided that each Option with a
different Date of Grant shall be considered a separate Option.
2.35. "Option Shares" mean the Shares that are subject to the portion
of an Option as to which an Initial Election or Subsequent Election is in effect
as adjusted to reflect a Share Withholding Election.
2.36. "Other Available Shares" means, as of any date, the excess, if
any of:
(a) The total number of Shares owned by a Person; over
(b) The sum of:
(i) The number of Shares owned by such Person for less than
six months; plus
(ii) The number of Shares owned by such Person that has,
within the preceding six months, been the subject of a withholding certification
under any Comcast Plan; plus
(iii) The number of Shares owned by such Person that has,
within the preceding six months, been received in exchange for Shares
surrendered as payment, in full or in part of the exercise price for an option
to purchase any securities of the Company or an Affiliate under any Comcast
Plan, but only to the extent of the number of Shares surrendered; plus
(iv) The number of Shares owned by such Person as to which
evidence of ownership has, within the preceding six months, been provided to the
Company in connection with the crediting of Deferred Stock Units to such
Person's Account.
For purposes of this Section 2.36, a Share that is subject to a deferral
election pursuant to this Plan or another Comcast Plan shall not be treated as
owned by a Person until all conditions to the delivery of such Share have
lapsed. The number of Other Available Shares shall be determined separately for
Common Stock and Special Common Stock.
2.37. "Outside Director" means a member of the Board, who is not an
employee of a Participating Company.
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2.38. "Participant" means each Outside Director, Former Outside
Director, Eligible Employee, Former Eligible Employee, Successor-in-Interest or
Permitted Transferee who is the grantee or transferee of an Option that has made
an Initial Election or Subsequent Election and that has an undistributed amount
credited to an Account under the Plan.
2.39. "Participating Company" means the Company and each Related
Corporation.
2.40. "Permitted Transferee" means a member of the Immediate Family of
an Outside Director, Former Outside Director, Eligible Employee or Former
Eligible Employee to whom the right to exercise an Option has been transferred
pursuant to a Comcast Option Plan.
2.41. "Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization.
2.42. "Personal Representative" means the executor, the administrator,
or the personal representative of a deceased individual's estate.
2.43. "Plan" means the Comcast Corporation 1997 Deferred Stock Option
Plan, as set forth herein, and as amended from time to time.
2.44. "Prime Rate" means the annual rate of interest identified by PNC
Bank as its prime rate as of the first day of each calendar year.
2.45. "Related Corporation" means a corporate subsidiary of the
Company, as defined in section 424(f) of the Code, or the corporate parent of
the Company, as defined in section 424(e) of the Code.
2.46. "Retired Participant" means a Participant who has terminated
employment pursuant to a Normal Retirement.
2.47. "Roberts Family" means each of the following:
(a) Brian L. Roberts;
(b) A lineal descendant of Brian L. Roberts; or
(c) A trust established for the benefit of Brian L. Roberts
and/or a lineal descendant or descendants of Brian L. Roberts.
2.48. "Share" or "Shares" means for all purposes of the Plan, a share
or shares of Common Stock or Special Common Stock, or such other securities as
may be issued by the Company pursuant to adjustments as provided in Article 11.
2.49. "Share Withholding Election" means a written election on a form
provided by the Administrator, filed with the Administrator in accordance with
the rules applicable to the filing of Initial Elections under Article 3,
pursuant to which an Eligible Employee, Former Eligible Employee,
Successor-in-Interest or Permitted Transferee elects to have the number of
Shares deferred pursuant to the exercise of all or part of an Option and
credited under the Plan as Deferred Stock Units adjusted so that Deferred Stock
Units that would, but for a Share Withholding Election, be credited to an
Account under the Plan, shall be deemed distributed pursuant to the Plan to
satisfy applicable withholding tax liabilities, as described in Section 10.2.
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With respect to Options that become subject to an Initial Election after June
21, 1999, a Share Withholding Election must be filed not later than the
applicable deadline for filing such Initial Election under Article 3. With
respect to Options that are subject to an Initial Election on June 21, 1999, a
Share Withholding Election must be filed on or before February 26, 1999.
2.50. "Special Common Stock" means the Company's Class A Special Common
Stock, par value $1.00 per share, including a fractional share.
2.51. "Subsequent Election" means a written election on a form provided
by the Administrator, filed with the Administrator in accordance with Article 3,
pursuant to which a Participant or Beneficiary may elect to defer (or, in
limited cases, accelerate) the time of receipt of amounts credited to an Account
previously deferred in accordance with the terms of a previously made Initial
Election or Subsequent Election.
2.52. "Successor-in-Interest" means the Beneficiary of a deceased
Former Outside Director, a deceased Former Eligible Employee or another deceased
Participant, to whom the right to exercise an Option or the right to payment
under the Plan shall have passed, as applicable.
2.53. "Surviving Spouse" means the widow or widower, as the case may
be, of a Deceased Participant or a Deceased Beneficiary (as applicable).
2.54. "Terminating Event" means either of the following events:
(a) The liquidation of the Company; or
(b) A Change of Control.
2.55. "Third Party" means any Person, together with such Person's
Affiliates, provided that the term "Third Party" shall not include the Company,
an Affiliate of the Company or any member or members of the Roberts Family.
ARTICLE 3 - INITIAL AND SUBSEQUENT ELECTIONS
3.1. Elections.
(a) Initial Elections. Each Outside Director, Former Outside
Director, Eligible Employee, Former Eligible Employee, Successor-in-Interest or
Permitted Transferee who is the grantee or transferee of an Option, shall have
the right to make an Initial Election to defer the receipt of Shares upon
exercise of all or part of such Option by filing an Initial Election at the time
and in the manner described in this Article 3. Unless otherwise specifically
provided in the Initial Election, following a Diversification Election, an
Initial Election shall apply to the portion of a Participant's Account credited
to the Income Fund on the same basis as the portion of such Participant's
Account credited to the Company Stock Fund.
-9-
(b) Subsequent Elections. Each Participant and Beneficiary shall
have the right to elect to defer (or, in limited cases, accelerate) the time of
receipt of amounts previously deferred in accordance with the terms of a
previously made Initial Election by filing a Subsequent Election at the time, to
the extent, and in the manner described in this Article 3. Unless otherwise
specifically provided in the Subsequent Election, a Subsequent Election shall
apply to the portion of a Participant's Account credited to the Income Fund on
the same basis as the portion of such Participant's Account credited to the
Company Stock Fund.
3.2. Filing of Initial Election: General. An Initial Election shall be
made on the form provided by the Administrator for this purpose. No such Initial
Election shall be effective unless it is filed with the Administrator on or
before a date that is both (i) more than six (6) months prior to the exercise of
such Option and (ii) in the calendar year preceding the calendar year in which
such Option is exercised, provided that an Initial Election filed with the
Administrator on or before December 31, 1997, shall be effective with respect to
the exercise of any Option after December 31, 1997.
3.3. Options to which Initial Elections May Apply. A separate Initial
Election may be made for each Option, or a portion of such Option, with respect
to which an Outside Director, Former Outside Director, Eligible Employee, Former
Eligible Employee, Successor-in-Interest or Permitted Transferee desires to
defer receipt of Shares upon exercise of all or a portion of such Option. The
failure of such a Person to make an Initial Election with respect to an Option
shall not affect such Person's right to make an Initial Election for any other
Option.
3.4. Initial Election of Distribution Date. Each Participant who elects
to defer the receipt of Shares shall, on the Initial Election, also elect the
distribution date for such Shares or any corresponding amounts which may be
credited to the Income Fund following a Diversification Election; provided,
however, that subject to acceleration pursuant to Section 3.5(d), Section
3.5(e), Section 3.6, Section 3.7, Section 3.8 or Section 7.1, no distribution
may be made earlier than January 2nd of the third calendar year beginning after
the date of the Initial Election nor later than January 2nd of the eleventh
calendar year beginning after the date of the Initial Election. The designation
of the distribution date may vary with each separate Initial Election.
3.5. Subsequent Elections.
(a) Active Participants. Each Active Participant who has made an
Initial Election, or who has made a Subsequent Election pursuant to this Section
3.5(a), may elect to defer the time of payment of part or all of such Active
Participant's Account for a minimum of two and a maximum of ten additional years
from the previously-elected payment date, by filing a Subsequent Election with
the Administrator on or before the close of business on June 30 of the calendar
year preceding the calendar year in which the distribution would otherwise be
made. The number of Subsequent Elections under this Section 3.5(a) shall not be
limited.
(b) Surviving Spouses.
(i) General Rule. A Surviving Spouse who is a Deceased
Participant's Beneficiary may elect to defer the time of payment, of any part or
all of such Deceased Participant's Account the payment of which would be made
neither within six (6) months after, nor within the calendar year of, the date
of such election. Such election shall be made by filing a Subsequent Election
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with the Administrator in which the Surviving Spouse shall specify the change in
the time of payment, which shall be no less than two nor more than ten years
from the previously-elected payment date, or such Surviving Spouse may elect to
defer payment until such Surviving Spouse's death. A Surviving Spouse may make a
total of two (2) Subsequent Elections under this Section 3.5(b)(i), with respect
to all or any part of the Deceased Participant's Account. Subsequent Elections
pursuant to this Section 3.5(b)(i) may specify different changes with respect to
different parts of the Deceased Participant's Account.
(ii) Exception. Notwithstanding the above Section 3.5(b)(i),
a Subsequent Election may be made by a Surviving Spouse within sixty (60) days
of the Deceased Participant's death; provided, however, such election may only
be made with respect to amounts which would not be paid under the Deceased
Participant's election as in effect on the date of the Deceased Participant's
death until a date which is at least six (6) months from the Deceased
Participant's date of death. Such election shall be made by filing a Subsequent
Election with the Administrator in which the Surviving Spouse shall specify the
change in the time of payment, which shall be no less than two (2) nor more than
ten (10) years from the previously-elected payment date, or such Surviving
Spouse may elect to defer payment until such Surviving Spouse's death. A
Surviving Spouse may only make one (1) Subsequent Election under this Section
3.5(b)(ii) with respect to all or any part of the Deceased Participant's
Account. Such Surviving Spouse may, however, make one additional Subsequent
Election under Section 3.5(b)(i) in accordance with the terms of Section
3.5(b)(i). The one (1) Subsequent Election permitted under this Section
3.5(b)(ii) may specify different changes for different parts of the Deceased
Participant's Account.
(c) Beneficiary of a Deceased Participant Other Than a Surviving
Spouse
(i) General Rule. A Beneficiary of a Deceased Participant
(other than a Surviving Spouse) may elect to defer the time of payment, of any
part or all of such Deceased Participant's Account the payment of which would be
made neither within six (6) months after, nor within the calendar year of, the
date of such election. Such election shall be made by filing a Subsequent
Election with the Administrator in which the Beneficiary shall specify the
change in the time of payment, which shall be no less than two (2) nor more than
ten (10) years from the previously-elected payment date. A Beneficiary may make
one (1) Subsequent Election under this Section 3.5(c)(i), with respect to all or
any part of the Deceased Participant's Account. Subsequent Elections pursuant to
this Section 3.5(c)(i) may specify different changes for different parts of the
Deceased Participant's Account.
(ii) Exception. Notwithstanding the above Section 3.5(c)(i),
a Subsequent Election may be made by a Beneficiary within sixty (60) days of the
Deceased Participant's death; provided, however, such election may only be made
with respect to amounts which would not be paid under the Deceased Participant's
election as in effect on the date of the Deceased Participant's death until a
date which is at least six (6) months from the Deceased Participant's date of
death. Such election shall be made by filing a Subsequent Election with the
Administrator in which the Beneficiary shall specify the change in the time of
payment, which shall be no less than two (2) nor more than ten (10) years from
the previously-elected payment date. A Beneficiary may make one (1) Subsequent
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Election under this Section 3.5(c)(ii) with respect to all or any part of the
Deceased Participant's Account. Subsequent Elections pursuant to this Section
3.5(c)(ii) may specify different changes for different parts of the Deceased
Participant's Account.
(d) Other Deferral and Acceleration by a Beneficiary. Any
Beneficiary (other than a Surviving Spouse who has made a Subsequent Election
under Section 3.5(b) or a Beneficiary who has made a Subsequent Election under
Section 3.5(c)) may elect to:
(i) Defer the time of payment of any part or all of the
Deceased Participant's Account or deceased Beneficiary's Account for one
additional year from the date payment would otherwise be made (provided that if
a Subsequent Election is made pursuant to this Section 3.5(d)(i), the Deceased
Participant's Account or deceased Beneficiary's Account shall be in all events
distributed in full on or before the fifth anniversary of the Deceased
Participant's or deceased Beneficiary's death); or
(ii) Accelerate the time of payment of a Deceased
Participant's Account or deceased Beneficiary's Account from the date or dates
that payment would otherwise be made to the date that is the later of (A) six
(6) months after the date of the Deceased Participant's or deceased
Beneficiary's death and (B) January 2nd of the calendar year beginning after the
Deceased Participant's or deceased Beneficiary's death, provided that if a
Subsequent Election is made pursuant to this Section 3.5(d)(ii), the Deceased
Participant's Account or deceased Beneficiary's Account shall be distributed in
full on such accelerated payment date.
A Subsequent Election pursuant to this Section 3.5(d) must be filed with the
Administrator within one hundred twenty (120) days following the Deceased
Participant's or deceased Beneficiary's death. One and only one Subsequent
Election shall be permitted pursuant to this Section 3.5(d) with respect to a
Deceased Participant's Account or deceased Beneficiary's Account, although if
such Subsequent Election is filed pursuant to Section 3.5(d)(i), it may specify
different changes for different parts of the Account.
(e) Acceleration by Disabled Participant or Permitted Transferee
of Disabled Participant. A Disabled Participant, or the Permitted Transferee of
a Disabled Participant if applicable, may elect to accelerate the time of
payment of the Disabled Participant's Account from the date payment would
otherwise be made to January 2nd of the calendar year beginning after the
Participant became disabled. A Subsequent Election pursuant to this Section
3.5(e) must be filed with the Administrator on or before the close of business
on the later of (i) the June 30 following the date the Participant becomes a
Disabled Participant if the Participant becomes a Disabled Participant on or
before May 1 of a calendar year, (ii) the 60th day following the date the
Participant becomes a Disabled Participant if the Participant becomes a Disabled
Participant after May 1 and before November 2 of a calendar year or (iii) the
December 31 following the date the Participant becomes a Disabled Participant if
the Participant becomes a Disabled Participant after November 1 of a calendar
year.
(f) Retired Participants and Disabled Participants. The Committee
may, in its sole and absolute discretion, permit a Retired Participant or a
Disabled Participant to make a Subsequent Election to defer the time of payment
of any part or all of such Retired or Disabled Participant's Account for a
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minimum of two years and a maximum of ten additional years from the
previously-elected payment date, by filing a Subsequent Election with the
Administrator on or before the close of business on June 30 of the calendar year
preceding the calendar year in which the lump-sum distribution or initial
installment payment would otherwise be made. The number of Subsequent Elections
under this Section 3.5(f) shall be determined by the Committee in its sole and
absolute discretion.
(g) Retired Participant or Permitted Transferee of Retired
Participant. A Retired Participant (who has not been permitted to make a
Subsequent Election under Section 3.5(f)) or a Permitted Transferee of a Retired
Participant may elect to defer the time of payment of the Retired Participant's
Account for a minimum of two additional years from the date payment would
otherwise be made (provided that if a Subsequent Election is made pursuant to
this Section 3.5(g), the Retired Participant's Account shall be distributed in
full on or before the fifth anniversary of the Retired Participant's Normal
Retirement). A Subsequent Election pursuant to this Section 3.5(g) must be filed
with the Administrator on or before the close of business on the later of (i)
the June 30 following the Participant's Normal Retirement on or before May 1 of
a calendar year, (ii) the 60th day following the Participant's Normal Retirement
after May 1 and before November 2 of a calendar year or (iii) the December 31
following the Participant's Normal Retirement after November 1 of a calendar
year.
(h) Disabled Participant or Permitted Transferee of Disabled
Participant. A Disabled Participant (who has not been permitted to make a
Subsequent Election under 3.5(f)) or a Permitted Transferee of a Disabled
Participant may elect to defer the time of payment of the Disabled Participant's
Account for a minimum of two additional years from the date payment would
otherwise be made (provided that if a Subsequent Election is made pursuant to
this Section 3.5(h), the Disabled Participant's Account shall be distributed in
full on or before the fifth anniversary of the date the Participant became a
Disabled Participant). A Subsequent Election pursuant to this Section 3.5(h)
must be filed with the Administrator on or before the close of business on the
later of (i) the June 30 following the date the Participant becomes a Disabled
Participant if the Participant becomes a Disabled Participant on or before May 1
of a calendar year, (ii) the 60th day following the date the Participant becomes
a Disabled Participant if the Participant becomes a Disabled Participant after
May 1 and before November 2 of a calendar year or (iii) the December 31
following the date the Participant becomes a Disabled Participant if the
Participant becomes a Disabled Participant after November 1 of a calendar year.
(i) Most Recently Filed Initial Election or Subsequent Election
Controlling. Subject to acceleration pursuant to Section 3.5(d), or 3.5(e),
Section 3.6 or 7.1, no distribution of the amounts deferred pursuant to this
Article 3 for any calendar year shall be made before the distribution date
designated by the Participant or Beneficiary, Permitted Transferee or
Successor-in-Interest, as applicable, on the most recently filed Initial
Election or Subsequent Election with respect to each deferred amount.
3.6. Distribution in Full upon Terminating Event. The Company shall
give Participants at least thirty (30) days notice (or, if not practicable, such
shorter notice as may be reasonably practicable) prior to the anticipated date
of the consummation of a Terminating Event. The Company may, in its sole and
absolute discretion, provide in such notice that notwithstanding any other
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provision of the Plan or the terms of any Initial or Subsequent Election, upon
the consummation of a Terminating Event, the Account balance of each Participant
shall be distributed in full and any outstanding Initial Elections or Subsequent
Elections shall be revoked.
3.7. Withholding and Payment of Death Taxes.
(a) Notwithstanding any other provisions of this Plan to the
contrary, including but not limited to the provisions of Article 3 and Article
7, or any Initial or Subsequent Election filed by a Deceased Participant or a
Deceased Participant's Beneficiary (for purposes of this Section, the
"Decedent"), the Administrator shall apply the terms of Section 3.7(b) to the
Decedent's Account unless the Decedent affirmatively has elected, in writing,
filed with the Administrator, to waive the application of Section 3.7(b).
(b) Unless the Decedent affirmatively has elected, pursuant to
Section 3.7(a), that the terms of this Section 3.7(b) not apply:
(i) The Administrator shall prohibit the Decedent's
Beneficiary from taking any action under any of the provisions of the Plan with
regard to the Decedent's Account other than the Beneficiary's making of a
Subsequent Election pursuant to Section 3.5;
(ii) The Administrator shall defer payment of the Decedent's
Account until the later of the Death Tax Clearance Date and the payment date
designated in the Decedent's Initial Election or Subsequent Election;
(iii) The Administrator shall withdraw from the Decedent's
Account such amount or amounts as the Decedent's Personal Representative shall
certify to the Administrator as being necessary to pay the Death Taxes
apportioned against the Decedent's Account; the Administrator shall remit the
amounts so withdrawn to the Personal Representative, who shall apply the same to
the payment of the Decedent's Death Taxes, or the Administrator may pay such
amounts directly to any taxing authority as payment on account of Decedent's
Death Taxes, as the Administrator elects;
(iv) If the Administrator makes a withdrawal from the
Decedent's Account to pay the Decedent's Death Taxes and such withdrawal causes
the recognition of income to the Beneficiary, the Administrator shall pay to the
Beneficiary from the Decedent's Account, within thirty (30) days of the
Beneficiary's request, the amount necessary to enable the Beneficiary to pay the
Beneficiary's income tax liability resulting from such recognition of income;
additionally, the Administrator shall pay to the Beneficiary from the Decedent's
Account, within thirty (30) days of the Beneficiary's request, such additional
amounts as are required to enable the Beneficiary to pay the Beneficiary's
income tax liability attributable to the Beneficiary's recognition of income
resulting from a distribution from the Decedent's Account pursuant to this
Section 3.7(b)(iv);
(v) Amounts withdrawn from the Decedent's Account by the
Administrator pursuant to Sections 3.7(b)(iii) and 3.7(b)(iv) shall be withdrawn
from the portions of Decedent's Account having the earliest distribution dates
as specified in Decedent's Initial Election or Subsequent Election; and
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(vi) Within a reasonable time after the later to occur of
the Death Tax Clearance Date and the payment date designated in the Decedent's
Initial Election or Subsequent Election, the Administrator shall pay the
Decedent's Account to the Beneficiary.
3.8. Effect of Distribution within Five Years of Effective Date of
Diversification Election. If, pursuant to Section 3.1 through 3.7, Shares
distributable with respect to Deferred Stock Units credited to the Company Stock
Fund that are attributable to the Option as to which a Diversification Election
was made are distributed on or before the fifth anniversary of the effective
date of such Diversification Election (and, in the case of a Participant who is
a Successor-in-Interest or a Permitted Transferee, whether or not such
Diversification Election was made by a Participant's predecessor-in-interest),
then, except as may otherwise be provided by the Committee its sole and absolute
discretion, the following percentage of the Participant's Account credited to
the Income Fund and attributable to such Diversification Election shall be
distributed simultaneously with such Shares, without regard to any election to
the contrary:
Distributable Percentage of
Time that Shares are Distributable Corresponding Income Fund Amount
On or before the third anniversary of a Diversification Election 60%
After the third anniversary of a Diversification Election and on or before 40%
the fourth anniversary of a Diversification Election
After the fourth anniversary of a Diversification Election and on or before 20%
the fifth anniversary of a Diversification Election
After the fifth anniversary of a Diversification Election 0%
ARTICLE 4 - MANNER OF DISTRIBUTION
4.1. Manner of Distribution.
(a) Deferred Stock Units credited to an Account shall be
distributed in a lump sum in shares of Common Stock and/or Special Common Stock,
as applicable. Dividend equivalents shall be distributed in a lump sum in cash.
Amounts credited to the Income Fund pursuant to a Diversification Election shall
be distributed in a lump sum in cash.
(b) Notwithstanding any Initial Election or Subsequent
Election or any other provision of the Plan to the contrary, following a
Participant's termination of employment for any reason, if the amount credited
to the Participant's Account has a value of $25,000 or less, the Administrator
may, in its sole discretion, direct that such amount be distributed to the
Participant (or Beneficiary, as applicable) in one lump sum payment; provided,
however, that this Section 4.1(b) shall not apply to any amount credited to a
Participant's Account until the expiration of the deferral period applicable
under any Initial Election or Subsequent Election in effect as of April 29,
2002.
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ARTICLE 5 - BOOK ACCOUNTS
5.1. Account. An Account shall be established for each Outside
Director, Former Outside Director, Eligible Employee, Former Eligible Employee,
Successor-in-Interest or Permitted Transferee when such Person becomes a
Participant. Deferred Stock Units shall be credited to the Account as of the
date of exercise of an Option as to which an Initial or Subsequent Election is
in effect. To the extent an Account is deemed invested in the Income Fund, the
Administrator shall credit earnings with respect to such Account at the
Applicable Interest Rate, as further provided in Section 5.2.
5.2. Crediting of Income, Gains and Losses on Accounts.
(a) In General. Except as otherwise provided in this Section 5.2,
the value of a Participant's Account as of any date shall be determined as if it
were invested in the Company Stock Fund.
(b) Diversification Elections.
(i) In General. A Diversification Election shall be
available (A) at any time that a Registration Statement filed under the
Securities Act of 1933, as amended (a "Registration Statement"), is effective
with respect to the Plan and (B) if and to the extent that the opportunity to
make a Diversification Election has been approved (or, pursuant to Section 2.24,
deemed approved) by the Administrator.
(ii) Administrator Approval of Diversification Elections.
The opportunity to make a Diversification Election and the extent to which a
Diversification Election applies to Deferred Stock Units credited to the Company
Stock Fund may be approved or rejected by the Administrator in connection with
the filing of a contingent Initial Election (as described in Section 2.31),
provided that an Outside Director, Former Outside Director, Eligible Employee,
Former Eligible Employee, Successor-in-Interest or Permitted Transferee who has
Deferred Stock Units credited to an Account at the time that a Registration
Statement first becomes effective with respect to the Plan, may at any time
thereafter file a proposed Diversification Election with respect to such
Deferred Stock Units. Such a proposed Diversification Election shall only be
effective if (and to the extent) approved (or, pursuant to Section 5.2(b)(iii),
deemed approved) by the Administrator.
(iii) Conversion of Deferred Stock Units to Cash
Equivalents. Each Outside Director, Former Outside Director, Eligible Employee,
Former Eligible Employee, Successor-in-Interest or Permitted Transferee who is a
Participant and whose Diversification Election has been approved (or deemed
approved) by the Administrator may make a Diversification Election to convert up
to the approved percentage of Deferred Stock Units credited to the Company Stock
Fund that are attributable to any Option to the Income Fund. No deemed transfers
shall be permitted from the Income Fund to the Company Stock Fund.
Notwithstanding the foregoing, an Outside Director's Diversification Election to
convert up to 40 percent of the Deferred Stock Units credited to the Company
Stock Fund and attributable to any Option to the Income Fund shall be deemed
approved by the Administrator, and an Outside Director's Diversification
Election to transfer any amount in excess of such 40 percent amount shall be
-16-
deemed null and void to the extent of such excess amount. Diversification
Elections under this Section 5.2(b) shall be prospectively effective on the
later of (A) the date designated by the Participant on a Diversification
Election filed with the Administrator or (B) the business day next following the
lapse of six months from the date Deferred Stock Units are credited to the
Participant's Account.
(c) Timing of Credits. Account balances subject to a
Diversification Election under Section 5.2(b) shall be deemed transferred from
the Company Stock Fund to the Income Fund as of the effective date of such
Diversification Election. The value of amounts deemed invested in the Income
Fund immediately following the effective date of a Diversification Election
shall be based on hypothetical sales of Company Stock underlying liquidated
Deferred Stock Units at Fair Market Value as of the effective date of a
Diversification Election.
5.3. Status of Deferred Amounts. Regardless of whether or not the
Company is a Participant's employer, all amounts deferred under this Plan shall
continue for all purposes to be a part of the general funds of the Company.
5.4. Participants' Status as General Creditors. Regardless of whether
or not the Company is a Participant's employer, an Account shall at all times
represent a general obligation of the Company. The Participant shall be a
general creditor of the Company with respect to this obligation, and shall not
have a secured or preferred position with respect to the Participant's Accounts.
Nothing contained herein shall be deemed to create an escrow, trust, custodial
account or fiduciary relationship of any kind. Nothing contained herein shall be
construed to eliminate any priority or preferred position of a Participant in a
bankruptcy matter with respect to claims for wages.
ARTICLE 6 - NONALIENATION OF BENEFITS
6.1. Alienation Prohibited. Except as otherwise required by applicable
law, the right of any Participant or Beneficiary to any benefit or interest
under any of the provisions of this Plan shall not be subject to encumbrance,
attachment, execution, garnishment, assignment, pledge, alienation, sale,
transfer, or anticipation, either by the voluntary or involuntary act of any
Participant or any Participant's Beneficiary or by operation of law, nor shall
such payment, right, or interest be subject to any other legal or equitable
process.
ARTICLE 7 - DEATH OF PARTICIPANT
7.1. Death of Participant. Except as provided in Section 3.7, a
Deceased Participant's Account shall be distributed in accordance with the last
Initial Election or Subsequent Election made by the Deceased Participant before
the Deceased Participant's death, unless the Deceased Participant's Surviving
Spouse, Permitted Transferee, Successor-in-Interest or Beneficiary timely elects
to accelerate or defer the time of payment pursuant to Section 3.5(b), Section
3.5(c), Section 3.5(d), Section 3.5(e), or Section 3.5(f).
7.2. Designation of Beneficiaries. Each Participant and Beneficiary
shall have the right to designate one or more Beneficiaries to receive
distributions in the event of the Participant's or Beneficiary's death by filing
with the Administrator a Beneficiary designation on the form provided by the
Administrator for such purpose. The designation of a Beneficiary or
-17-
Beneficiaries may be changed by a Participant or Beneficiary at any time prior
to such Participant's or Beneficiary's death by the delivery to the
Administrator of a new Beneficiary designation form.
ARTICLE 8 - INTERPRETATION
8.1. Authority of Committee. The Committee shall have full and
exclusive authority to construe, interpret and administer this Plan and the
Committee's construction and interpretation thereof shall be binding and
conclusive on all persons for all purposes.
8.2. Claims Procedure. An individual (hereinafter referred to as the
"Applicant," which reference shall include the legal representative, if any, of
the individual) does not receive timely payment of benefits to which the
Applicant believes he is entitled under the Plan, the Applicant may make a claim
for benefits in the manner hereinafter provided.
An Applicant may file a claim for benefits with the
Administrator on a form supplied by the Administrator. If the Administrator
wholly or partially denies a claim, the Administrator shall provide the
Applicant with a written notice stating:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information
necessary for Applicant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) Appropriate information as to the steps to be taken in order
to submit a claim for review.
Written notice of a denial of a claim shall be provided within 90 days of the
receipt of the claim, provided that if special circumstances require an
extension of time for processing the claim, the Administrator may notify the
Applicant in writing that an additional period of up to 90 days will be required
to process the claim.
If the Applicant's claim is denied, the Applicant shall have
60 days from the date of receipt of written notice of the denial of the claim to
request a review of the denial of the claim by the Administrator. Request for
review of the denial of a claim must be submitted in writing. The Applicant
shall have the right to review pertinent documents and submit issues and
comments to the Administrator in writing. The Administrator shall provide a
written decision within 60 days of its receipt of the Applicant's request for
review, provided that if special circumstances require an extension of time for
processing the review of the Applicant's claim, the Administrator may notify the
Applicant in writing that an additional period of up to 60 days shall be
required to process the Applicant's request for review.
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It is intended that the claims procedures of this Plan be
administered in accordance with the claims procedure regulations of the
Department of Labor set forth in 29 CFR ss. 2560.503-1.
Claims for benefits under the Plan must be filed with the
Administrator at the following address:
Comcast Corporation
1500 Market Street
Philadelphia, PA 19102
Attention: General Counsel
ARTICLE 9 - AMENDMENT OR TERMINATION
9.1. Amendment or Termination. The Company, by action of the Board or
by action of the Committee, reserves the right at any time, or from time to
time, to amend or modify this Plan. The Company, by action of the Board,
reserves the right to terminate this Plan at any time.
ARTICLE 10 - WITHHOLDING OF TAXES ON EXERCISE OF OPTION
10.1. In General. Whenever the Company proposes or is required to
credit Deferred Stock Units to an Account in connection with the exercise of an
Option, the Company shall have the right to require the Participant to remit to
the Company an amount sufficient to satisfy any federal, state and local
withholding tax requirements prior to the date on which Deferred Stock Units
shall be deemed credited to the Account, or take any action whatever that it
deems necessary to protect its interests with respect to tax liabilities. The
Company's obligation to credit Deferred Stock Units to an Account on the
exercise of an Option subject to an Initial or Subsequent Election shall be
conditioned on the Participant's compliance, to the Company's satisfaction, with
any withholding requirement. Except as otherwise provided in Section 10.2, the
Company shall satisfy all applicable withholding tax requirements by withholding
tax from other compensation payable by the Company to the Participant, or by the
Participant's delivery of cash or other property acceptable to the Company
having a value equal to the applicable withholding tax.
10.2. Share Withholding Election. With respect to any Option subject to
an Initial Election, an Eligible Employee, Former Eligible Employee,
Successor-in-Interest or Permitted Transferee may elect to have the number of
Option Shares determined such that Shares subject to such Option are withheld by
the Company to the extent necessary to satisfy any withholding tax liabilities
incurred in connection with the exercise of such Option. The number of Shares
subject to an Option to be withheld pursuant to such a Share Withholding
Election shall have a Fair Market Value approximately equal to the sum of:
(a) The minimum amount of withholding taxes required to be
withheld by the Company under applicable law, plus
(b) Either (i) the minimum amount of withholding taxes arising
because of the recognition of income (and consequent non-deferral of income)
with respect to such withheld Shares, or (ii) the amount of withholding taxes
-19-
arising because of the recognition of income (and consequent non-deferral of
income) with respect to such withheld Shares, calculated at the highest
applicable marginal tax rates, as indicated on the Share Withholding Election.
Notwithstanding any other provision of the Plan or the terms of any Initial or
Subsequent Election, the number of Deferred Stock Units credited to
Participants' Accounts shall be adjusted appropriately to reflect the
withholding of Shares pursuant to such Share Withholding Elections.
ARTICLE 11 - CAPITAL ADJUSTMENTS
11.1. Capital Adjustments. In the event that the Common Stock or
Special Common Stock is changed into, or exchanged for, a different number or
kind of shares of stock or other securities of the Company, whether through
merger, consolidation, reorganization, recapitalization, stock dividends, stock
split-ups or other substitution of securities of the Company, the Committee
shall make appropriate equitable anti-dilution adjustments to the number of
Deferred Stock Units credited to Participants' Accounts. The Committee's
adjustment shall be effective and binding for all purposes of the Plan.
ARTICLE 12 - MISCELLANEOUS PROVISIONS
12.1. No Right to Continued Employment. Nothing contained herein shall
be construed as conferring upon any Participant the right to remain in service
as an Outside Director or in the employment of a Participating Company as an
executive or in any other capacity.
12.2. Expenses of Plan. All expenses of the Plan shall be paid by the
Participating Companies.
12.3. Gender and Number. Whenever any words are used herein in any
specific gender, they shall be construed as though they were also used in any
other applicable gender. The singular form, whenever used herein, shall mean or
include the plural form, and vice versa, as the context may require.
12.4. Law Governing Construction. The construction and administration
of the Plan and all questions pertaining thereto, shall be governed by the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and other
applicable federal law and, to the extent not governed by federal law, by the
laws of the Commonwealth of Pennsylvania.
12.5. Headings Not a Part Hereof. Any headings preceding the text of
the several Articles, Sections, subsections, or paragraphs hereof are inserted
solely for convenience of reference and shall not constitute a part of the Plan,
nor shall they affect its meaning, construction, or effect.
12.6. Severability of Provisions. If any provision of this Plan is
determined to be void by any court of competent jurisdiction, the Plan shall
continue to operate and, for the purposes of the jurisdiction of that court
only, shall be deemed not to include the provision determined to be void.
12.7. Expiration of Options. Notwithstanding any provision of the Plan
or an Initial or Subsequent Election, no Initial or Subsequent Election shall be
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effective with respect to an Option that has expired. In addition, no provision
of the Plan or an Initial or Subsequent Election shall be construed to extend
the expiration date of any Option.
ARTICLE 13 - EFFECTIVE DATE
13.1. Effective Date. The effective date of the Plan this amendment and
restatement of the Plan shall be April 29, 2002.
IN WITNESS WHEREOF, COMCAST CORPORATION has caused this Plan
to be executed by its officers thereunto duly authorized, and its corporate seal
to be affixed hereto, as of the 29th day of April, 2002.
COMCAST CORPORATION
BY: /s/ Stanley Wang
-------------------------------
ATTEST: /s/ Arthur Block
----------------------------
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COMCAST CORPORATION
1996 DEFERRED COMPENSATION PLAN
As Amended and Restated, Effective July 9, 2002
TABLE OF CONTENTS
Page
ARTICLE 1 - CONTINUATION AND COVERAGE OF PLAN..............................1
ARTICLE 2 - DEFINITIONS....................................................1
ARTICLE 3 - INITIAL AND SUBSEQUENT ELECTIONS...............................8
ARTICLE 4 - MANNER OF DISTRIBUTION........................................13
ARTICLE 5 - BOOK ACCOUNTS.................................................14
ARTICLE 6 - NONALIENATION OF BENEFITS; PAYEE DESIGNATION..................15
ARTICLE 7 - DEATH OF PARTICIPANT..........................................16
ARTICLE 8 - HARDSHIP DISTRIBUTIONS........................................16
ARTICLE 9 - INTERPRETATION................................................16
ARTICLE 10 - AMENDMENT OR TERMINATION.....................................17
ARTICLE 11 - WITHHOLDING OF TAXES.........................................18
ARTICLE 12 - MISCELLANEOUS PROVISIONS.....................................18
ARTICLE 13 - EFFECTIVE DATE...............................................19
-i-
COMCAST CORPORATION
1996 DEFERRED COMPENSATION PLAN
(As Amended and Restated, Effective July 9, 2002)
ARTICLE 1 - CONTINUATION AND COVERAGE OF PLAN
1.1. Continuation of Plan. COMCAST CORPORATION, a Pennsylvania
corporation, hereby amends and restates the Comcast Corporation 1996 Deferred
Compensation Plan (the "Plan"), effective July 9, 2002. The Plan was initially
adopted effective February 12, 1974 and was amended and restated effective
August 15, 1996, June 21, 1999, December 19, 2000, October 26, 2001 and April
29, 2002.
1.2. Plan Unfunded and Limited to Outside Directors and Select Group of
Management or Highly Compensated Employees. The Plan is unfunded and is
maintained primarily for the purpose of providing outside directors and a select
group of management or highly compensated employees the opportunity to defer the
receipt of compensation otherwise payable to such outside directors and eligible
employees in accordance with the terms of the Plan.
ARTICLE 2 - DEFINITIONS
2.1. "Account" means the bookkeeping accounts established pursuant to
Section 5.1 and maintained by the Administrator in the names of the respective
Participants, to which all amounts deferred and earnings allocated under the
Plan shall be credited, and from which all amounts distributed pursuant to the
Plan shall be debited.
2.2. "Active Participant" means:
(a) Each Participant who is in active service as an Outside
Director; and
(b) Each Participant who is actively employed by a Participating
Company as an Eligible Employee.
2.3. "Administrator" means the Committee.
2.4. "Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition, the term
"control," including its correlative terms "controlled by" and "under common
control with," mean, with respect to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
2.5. "Annual Rate of Pay" means, as of any date, an employee's
annualized base pay rate. An employee's Annual Rate of Pay shall not include
sales commissions or other similar payments or awards.
2.6. "Applicable Interest Rate" means:
(a) Except as otherwise provided in Section 2.6(b), the
Applicable Interest Rate means 12% per annum, compounded annually as of the last
day of the calendar year.
(b) Except to the extent otherwise required by Section 10.2,
effective for the period extending from a Participant's employment termination
date to the date the Participant's Account is distributed in full, the
Administrator, in its sole discretion, may designate the term "Applicable
Interest Rate" for such Participant's Account to mean the lesser of (i) the rate
in effect under Section 2.6(a) or (ii) the Prime Rate plus one percent,
compounded annually as of the last day of the calendar year. Notwithstanding the
foregoing, the Administrator may delegate its authority to determine the
Applicable Interest Rate under this Section 2.6(b) to an officer of the Company
or committee of two or more officers of the Company.
2.7. "Beneficiary" means such person or persons or legal entity or
entities, including, but not limited to, an organization exempt from federal
income tax under section 501(c)(3) of the Code, designated by a Participant or
Beneficiary to receive benefits pursuant to the terms of the Plan after such
Participant's or Beneficiary's death. If no Beneficiary is designated by the
Participant or Beneficiary, or if no Beneficiary survives the Participant or
Beneficiary (as the case may be), the Participant's Beneficiary shall be the
Participant's Surviving Spouse if the Participant has a Surviving Spouse and
otherwise the Participant's estate, and the Beneficiary of a Beneficiary shall
be the Beneficiary's Surviving Spouse if the Beneficiary has a Surviving Spouse
and otherwise the Beneficiary's estate.
2.8. "Board" means the Board of Directors of the Company, or the
Executive Committee of the Board of Directors of the Company.
2.9. "Change of Control" means any transaction or series of
transactions as a result of which any Person who was a Third Party immediately
before such transaction or series of transactions directly or indirectly owns
then-outstanding securities of the Company having more than 50 percent of the
voting power for the election of directors of the Company.
2.10. "Code" means the Internal Revenue Code of 1986, as amended.
2.11. "Committee" means the Subcommittee on Performance Based
Compensation of the Compensation Committee of the Board of Directors of the
Company.
2.12. "Company" means Comcast Corporation, a Pennsylvania corporation,
including any successor thereto by merger, consolidation, acquisition of all or
substantially all the assets thereof, or otherwise.
2.13. "Company Stock" means Comcast Corporation Class A Special Common
Stock, par value, $1.00, including a fractional share, or such other securities
issued by Comcast Corporation as may be subject to adjustment in the event that
shares of Company Stock are changed into, or exchanged for, a different number
or kind of shares of stock or other securities of the Company, whether through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split-up or other substitution of securities of the Company. In such event, the
Committee shall make appropriate equitable anti-dilution adjustments to the
number and class of hypothetical shares of Company Stock credited to
Participants' Accounts under the Company Stock Fund. Any reference to the term
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"Company Stock" in the Plan shall be a reference to the appropriate number and
class of shares of stock as adjusted pursuant to this Section 2.13. The
Committee's adjustment shall be effective and binding for all purposes of the
Plan.
2.14. "Company Stock Fund" means a hypothetical investment fund
pursuant to which income, gains and losses are credited to a Participant's
Account as if the Account, to the extent deemed invested in the Company Stock
Fund, were invested in hypothetical shares of Company Stock, and all dividends
and other distributions paid with respect to Company Stock were held uninvested
in cash, and reinvested in additional hypothetical shares of Company Stock as of
the next succeeding December 31 (to the extent the Account continues to be
deemed invested in the Company Stock Fund through such December 31), based on
the Fair Market Value of the Company Stock for such December 31.
2.15. "Compensation" means:
(a) In the case of an Outside Director, the total cash
remuneration for services as a member of the Board and as a member of any
Committee of the Board; and
(b) In the case of an Eligible Employee, the total cash
remuneration for services payable by a Participating Company, excluding sales
commissions or other similar payments or awards.
2.16. "Death Tax Clearance Date" means the date upon which a Deceased
Participant's or a deceased Beneficiary's Personal Representative certifies to
the Administrator that (i) such Deceased Participant's or deceased Beneficiary's
Death Taxes have been finally determined, (ii) all of such Deceased
Participant's or deceased Beneficiary's Death Taxes apportioned against the
Deceased Participant's or deceased Beneficiary's Account have been paid in full
and (iii) all potential liability for Death Taxes with respect to the Deceased
Participant's or deceased Beneficiary's Account has been satisfied.
2.17. "Death Taxes" means 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 (a "taxing authority") as a
result of the death of the Participant or the Participant's Beneficiary.
2.18. "Deceased Participant" means a Participant whose employment, or,
in the case of a Participant who was an Outside Director, a Participant whose
service as an Outside Director, is terminated by death.
2.19. "Disabled Participant" means:
(a) A Participant whose employment or, in the case of a
Participant who is an Outside Director, a Participant whose service as an
Outside Director, is terminated by reason of disability;
(b) The duly-appointed legal guardian of an individual described
in Section 2.19(a) acting on behalf of such individual.
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2.20. "Eligible Employee" means:
(a) Each employee of a Participating Company who, as of December
31, 1989, was eligible to participate in the Prior Plan.
(b) Each employee of a Participating Company who was, at any time
before January 1, 1995, eligible to participate in the Prior Plan and whose
Annual Rate of Pay is $90,000 or more as of both (i) the date on which an
Initial Election is filed with the Administrator and (ii) the first day of each
calendar year beginning after December 31, 1994.
(c) Each employee of a Participating Company who has an Annual
Rate of Pay of $125,000 as of each of (i) June 30, 2002; (ii) the date on which
an Initial Election is filed with the Administrator and (iii) the first day of
each calendar year beginning after December 31, 2002.
(d) Each employee of a Participating Company whose Annual Rate of
Pay is $200,000 or more as of both (i) the date on which an Initial Election is
filed with the Administrator and (ii) the first day of the calendar year in
which such Initial Election is filed.
(e) Each New Key Employee.
(f) Each other employee of a Participating Company who is
designated by the Committee, in its discretion, as an Eligible Employee.
2.21. "Fair Market Value"
(a) If shares of Company Stock are listed on a stock exchange,
Fair Market Value shall be determined based on the last reported sale price of a
Share on the principal exchange on which Shares are listed on the last trading
day prior to the date of determination; or
(b) If shares of Company Stock are not so listed, but trades of
Shares are reported on the Nasdaq National Market the last quoted sale price of
a share on the Nasdaq National Market on the last trading day prior to the date
of determination.
(c) If shares of Company Stock are not so listed nor trades of
Shares so reported, Fair Market Value shall be determined by the Committee in
good faith.
2.22. "Former Eligible Employee" means an employee of a Participating
Company who, as of any relevant date, does not satisfy the requirements of an
"Eligible Employee" but who previously met such requirements under the Plan or
the Prior Plan.
2.23. "Grandfathered Participant" means an Inactive Participant who, on
or before December 31, 1991, entered into a written agreement with the Company
to terminate service to the Company or gives written notice of intention to
terminate service to the Company, regardless of the actual date of termination
of service.
2.24. "Hardship" means a Participant's severe financial hardship due to
an unforeseeable emergency resulting from a sudden and unexpected illness or
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accident of the Participant, or, a sudden and unexpected illness or accident of
a dependent (as defined by section 152(a) of the Code) of the Participant, or
loss of the Participant's property due to casualty, or other similar and
extraordinary unforeseeable circumstances arising as a result of events beyond
the control of the Participant. A need to send the Participant's child to
college or a desire to purchase a home is not an unforeseeable emergency. No
Hardship shall be deemed to exist to the extent that the financial hardship is
or may be relieved (a) through reimbursement or compensation by insurance or
otherwise, (b) by borrowing from commercial sources on reasonable commercial
terms to the extent that this borrowing would not itself cause a severe
financial hardship, (c) by cessation of deferrals under the Plan, or (d) by
liquidation of the Participant's other assets (including assets of the
Participant's spouse and minor children that are reasonably available to the
Participant) to the extent that this liquidation would not itself cause severe
financial hardship. For the purposes of the preceding sentence, the
Participant's resources shall be deemed to include those assets of his spouse
and minor children that are reasonably available to the Participant; however,
property held for the Participant's child under an irrevocable trust or under a
Uniform Gifts to Minors Act custodianship or Uniform Transfers to Minors Act
custodianship shall not be treated as a resource of the Participant. The Board
shall determine whether the circumstances of the Participant constitute an
unforeseeable emergency and thus a Hardship within the meaning of this Section.
Following a uniform procedure, the Board's determination shall consider any
facts or conditions deemed necessary or advisable by the Board, and the
Participant shall be required to submit any evidence of the Participant's
circumstances that the Board requires. The determination as to whether the
Participant's circumstances are a case of Hardship shall be based on the facts
of each case; provided however, that all determinations as to Hardship shall be
uniformly and consistently made according to the provisions of this Section for
all Participants in similar circumstances.
2.25. "Inactive Participant" means each Participant (other than a
Retired Participant, Deceased Participant or Disabled Participant) who is not in
active service as an Outside Director and is not actively employed by a
Participating Company.
2.26. "Income Fund" means a hypothetical investment fund pursuant to
which income, gains and losses are credited to a Participant's Account as if the
Account, to the extent deemed invested in the Income Fund, were credited with
interest at the Applicable Interest Rate.
2.27. "Initial Election" means a written election on a form provided by
the Administrator, filed with the Administrator in accordance with Article 3,
pursuant to which an Outside Director or an Eligible Employee may:
(a) Elect to defer all or any portion of the Compensation payable
for the performance of services as an Outside Director or as an Eligible
Employee following the time that such election is filed; and
(b) Designate the time of payment of the amount of deferred
Compensation to which the Initial Election relates.
2.28. "Insider" means an Eligible Employee or Outside Director who is
subject to the short-swing profit recapture rules of section 16(b) of the
Securities Exchange Act of 1934, as amended.
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2.29. "New Key Employee" means:
(a) Effective as of July 1, 2002, each employee of a
Participating Company:
(i) Who becomes an employee of a Participating Company
and has an Annual Rate of Pay of $200,000 or more as of his employment
commencement date; and
(ii) Who has an Annual Rate of Pay that is increased to
$200,000 or more and who, immediately preceding such increase, was not an
Eligible Employee.
(b) Effective for the period beginning April 29, 2002 and ending
June 30, 2002, each employee of a Participating Company:
(i) Who becomes an employee of a Participating Company
and has an Annual Rate of Pay of $125,000 or more as of his employment
commencement date.
(ii) Who has an Annual Rate of Pay that is increased to
$125,000 or more and who, immediately preceding such increase, was not an
Eligible Employee.
2.30. "Normal Retirement" means:
(a) For a Participant who is an employee of a Participating
Company immediately preceding his termination of employment, a termination of
employment that is treated by the Participating Company as a retirement under
its employment policies and practices as in effect from time to time; and
(b) For a Participant who is an Outside Director immediately
preceding his termination of service, his normal retirement from the Board.
2.31. "Outside Director" means a member of the Board, who is not an
employee of a Participating Company.
2.32. "Participant" means each individual who has made an Initial
Election, or for whom an Account is established pursuant to Section 5.1, and who
has an undistributed amount credited to an Account under the Plan, including an
Active Participant, a Deceased Participant and an Inactive Participant.
2.33. "Participating Company" means:
(a) The Company;
(b) Comcast Cable Communications, Inc. and its subsidiaries;
(c) Comcast International Holdings, Inc.;
(d) Comcast Online Communications, Inc.;
(e) Comcast Business Communications, Inc.; and
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(f) Any other entities identified in the discretion of the
Committee.
2.34. "Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization.
2.35. "Plan" means the Comcast Corporation 1996 Deferred Compensation
Plan, as set forth herein, and as amended from time to time.
2.36. "Prime Rate" means the annual rate of interest identified by PNC
Bank as its prime rate as of a Participant's employment termination date and as
of the first day of each calendar year beginning thereafter.
2.37. "Prior Plan" means the Comcast Corporation Deferred Compensation
Plan.
2.38. "Retired Participant" means a Participant who has terminated
service pursuant to a Normal Retirement.
2.39. "Roberts Family" means each of the following:
(a) Brian L. Roberts;
(b) A lineal descendant of Brian L. Roberts; or
(c) A trust established for the benefit of any of Brian L.
Roberts and/or a lineal descendant or descendants of Brian L. Roberts.
2.40. "Severance Pay" means any amount identified by a Participating
Company as severance-pay, or any amount which is payable on account of periods
beginning after the last date on which an employee (or former employee) is
required to report for work for a Participating Company.
2.41. "Subsequent Election" means a written election on a form provided
by the Administrator, filed with the Administrator in accordance with Article 3,
pursuant to which a Participant or Beneficiary may elect to defer (or, in
limited cases, accelerate) the time of payment or to change the manner of
payment of amounts previously deferred in accordance with the terms of a
previously made Initial Election or Subsequent Election.
2.42. "Surviving Spouse" means the widow or widower, as the case may
be, of a Deceased Participant or a Deceased Beneficiary (as applicable).
2.43. "Terminating Event" means either of the following events:
(a) The liquidation of the Company; or
(b) A Change of Control.
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2.44. "Third Party" means any Person, together with such Person's
Affiliates, provided that the term "Third Party" shall not include the Company,
an Affiliate of the Company or any member or members of the Roberts Family.
ARTICLE 3 - INITIAL AND SUBSEQUENT ELECTIONS
3.1. Elections.
(a) Initial Elections. Each Outside Director and Eligible
Employee shall have the right to defer all or any portion of the Compensation
(including bonuses, if any) that he would otherwise be entitled to receive in a
calendar year by filing an Initial Election at the time and in the manner
described in this Article 3; provided that Severance Pay shall be included as
"Compensation" for purposes of this Section 3.1 only to the extent permitted by
the Administrator in its sole discretion. The Compensation of such Outside
Director or Eligible Employee for a calendar year shall be reduced in an amount
equal to the portion of the Compensation deferred by such Outside Director or
Eligible Employee for such calendar year pursuant to such Outside Director's or
Eligible Employee's Initial Election. Such reduction shall be effected on a pro
rata basis from each periodic installment payment of such Outside Director's or
Eligible Employee's Compensation for the calendar year (in accordance with the
general pay practices of the Participating Company), and credited, as a
bookkeeping entry, to such Outside Director's or Eligible Employee's Account in
accordance with Section 5.1.
(b) Subsequent Elections. Each Participant or Beneficiary shall
have the right to elect to defer (or, in limited cases, accelerate) the time of
payment or to change the manner of payment of amounts previously deferred in
accordance with the terms of a previously made Initial Election pursuant to the
terms of the Plan by filing a Subsequent Election at the time, to the extent,
and in the manner described in this Article 3.
3.2. Filing of Initial Election: General. An Initial Election shall be
made on the form provided by the Administrator for this purpose. Except as
provided in Section 3.3, no such Initial Election shall be effective unless it
is filed with the Administrator on or before December 31 of the calendar year
preceding the calendar year to which the Initial Election applies.
3.3. Filing of Initial Election by New Key Employees. Notwithstanding
Section 3.1 and Section 3.2, a New Key Employee may elect to defer all or any
portion of his Compensation to be earned in the calendar year in which the New
Key Employee was employed, beginning with the payroll period next following the
filing of an Initial Election with the Administrator and before the close of
such calendar year by making and filing the Initial Election with the
Administrator within 30 days of such New Key Employee's date of hire or within
30 days of the date such New Key Employee first becomes eligible to participate
in the Plan Any Initial Election by such New Key Employee for succeeding
calendar years shall be made in accordance with Section 3.1 and Section 3.2.
3.4. Calendar Years to which Initial Election May Apply. A separate
Initial Election may be made for each calendar year as to which an Outside
Director or Eligible Employee desires to defer all or any portion of such
Outside Director's or Eligible Employee's Compensation. The failure of an
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Outside Director or Eligible Employee to make an Initial Election for any
calendar year shall not affect such Outside Director's or Eligible Employee's
right to make an Initial Election for any other calendar year.
(a) Initial Election of Distribution Date. Each Outside Director
or Eligible Employee shall, contemporaneously with an Initial Election, also
elect the time of payment of the amount of the deferred Compensation to which
such Initial Election relates; provided, however, that, subject to acceleration
pursuant to Section 3.6(d) or (e), Section 3.7, Section 7.1, 7.2, or Article 8,
no distribution may commence earlier than January 2nd of the second calendar
year beginning after the date the Initial Election is filed with the
Administrator, nor later than January 2nd of the eleventh calendar year
beginning after the date the Initial Election is filed with the Administrator.
Further, each Outside Director or Eligible Employee may select with each Initial
Election the manner of distribution in accordance with Article 4.
3.5. Subsequent Elections.
(a) Active Participants. Each Active Participant, who has made an
Initial Election, or who has made a Subsequent Election, may elect to change the
manner of distribution or defer the time of payment of any part or all of such
Participant's Account for a minimum of two and a maximum of ten additional years
from the previously-elected payment date, by filing a Subsequent Election with
the Administrator on or before the close of business on June 30 of the calendar
year preceding the calendar year in which the lump-sum distribution or initial
installment payment would otherwise be made. The number of Subsequent Elections
under this Section 3.6(a) shall not be limited.
(b) Inactive Participants. The Committee may, in its sole and
absolute discretion, permit an Inactive Participant to make a Subsequent
Election to change the manner of distribution, or defer the time of payment of
any part or all of such Inactive Participant's Account for a minimum of two
years and a maximum of ten additional years from the previously-elected payment
date, by filing a Subsequent Election with the Administrator on or before the
close of business on June 30 of the calendar year preceding the calendar year in
which the lump-sum distribution or initial installment payment would otherwise
be made. The number of Subsequent Elections under this Section 3.6(b) shall be
determined by the Committee in its sole and absolute discretion.
(c) Surviving Spouses.
(i) General Rule. A Surviving Spouse who is a Deceased
Participant's Beneficiary may elect to change the manner of distribution, or
defer the time of payment, of any part or all of such Deceased Participant's
Account the payment of which would be made neither within six (6) months after,
nor within the calendar year of, the date of such election. Such election shall
be made by filing a Subsequent Election with the Administrator in which the
Surviving Spouse shall specify the change in the manner of distribution or the
change in the time of payment, which shall be no less than two nor more than ten
years from the previously-elected payment date, or such Surviving Spouse may
elect to defer payment until such Surviving Spouse's death. A Surviving Spouse
may make a total of two (2) Subsequent Elections under this Section 3.6(c)(i),
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with respect to all or any part of the Deceased Participant's Account.
Subsequent Elections pursuant to this Section 3.6(c)(i) may specify different
changes with respect to different parts of the Deceased Participant's Account.
(ii) Exception. Notwithstanding the above Section
3.6(c)(i), a Subsequent Election may be made by a Surviving Spouse within sixty
(60) days of the Deceased Participant's death; provided, however, such election
may only be made with respect to amounts which would not be paid under the
Deceased Participant's election as in effect on the date of the Deceased
Participant's death until a date which is at least six (6) months from the
Deceased Participant's date of death. Such election shall be made by filing a
Subsequent Election with the Administrator in which the Surviving Spouse shall
specify the change in the manner of distribution or the change in the time of
payment, which shall be no less than two (2) nor more than ten (10) years from
the previously-elected payment date, or such Surviving Spouse may elect to defer
payment until such Surviving Spouse's death. A Surviving Spouse may only make
one (1) Subsequent Election under this Section 3.6(c)(ii) with respect to all or
any part of the Deceased Participant's Account. Such Surviving Spouse may,
however, make one additional Subsequent Election under Section 3.6(c)(i) in
accordance with the terms of Section 3.6(c)(i). The one (1) Subsequent Election
permitted under this Section 3.6(c)(ii) may specify different changes for
different parts of the Deceased Participant's Account.
(d) Beneficiary of a Deceased Participant Other Than a Surviving
Spouse.
(i) General Rule. A Beneficiary of a Deceased Participant
(other than a Surviving Spouse) may elect to change the manner of distribution,
or defer the time of payment, of any part or all of such Deceased Participant's
Account the payment of which would be made neither within six (6) months after,
nor within the calendar year of, the date of such election. Such election shall
be made by filing a Subsequent Election with the Administrator in which the
Beneficiary shall specify the change in the manner of distribution or the change
in the time of payment, which shall be no less than two (2) nor more than ten
(10) years from the previously-elected payment date. A Beneficiary may make one
(1) Subsequent Election under this Section 3.6(d)(i), with respect to all or any
part of the Deceased Participant's Account. Subsequent Elections pursuant to
this Section 3.6(d)(i) may specify different changes for different parts of the
Deceased Participant's Account.
(ii) Exception. Notwithstanding the above Section
3.6(d)(i), a Subsequent Election may be made by a Beneficiary within sixty (60)
days of the Deceased Participant's death; provided, however, such election may
only be made with respect to amounts which would not be paid under the Deceased
Participant's election as in effect on the date of the Deceased Participant's
death until a date which is at least six (6) months from the Deceased
Participant's date of death. Such election shall be made by filing a Subsequent
Election with the Administrator in which the Beneficiary shall specify the
change in the manner of distribution or the change in the time of payment, which
shall be no less than two (2) nor more than ten (10) years from the
previously-elected payment date. A Beneficiary may make one (1) Subsequent
Election under this Section 3.6(d)(ii) with respect to all or any part of the
Deceased Participant's Account. Subsequent Elections pursuant to this Section
3.6(d)(ii) may specify different changes for different parts of the Deceased
Participant's Account.
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(e) Other Deferral and Acceleration by a Beneficiary. Any
Beneficiary (other than a Surviving Spouse who has made a Subsequent Election
under Section 3.6(c) or a Beneficiary who has made a Subsequent Election under
Section 3.6(d)) may elect to change the manner of distribution from the manner
of distribution in which payment of a Deceased Participant's Account would
otherwise be made, and
(i) Defer the time of payment of any part or all of the
Deceased Participant's Account or deceased Beneficiary's Account for one
additional year from the date a payment would otherwise be made or begin
(provided that if a Subsequent Election is made pursuant to this Section
3.6(e)(i), the Deceased Participant's Account or deceased Beneficiary's Account
shall be in all events distributed in full on or before the fifth anniversary of
the Deceased Participant's or a deceased Beneficiary's death); or
(ii) Accelerate the time of payment of a Deceased
Participant's Account or deceased Beneficiary's Account from the date or dates
that payment would otherwise be made or begin to the date that is the later of
(A) six (6) months after the date of the Deceased Participant's or deceased
Beneficiary's death and (B) January 2nd of the calendar year beginning after the
Deceased Participant's or deceased Beneficiary's death, provided that if a
Subsequent Election is made pursuant to this Section 3.6(e)(ii), the Deceased
Participant's Account or deceased Beneficiary's Account shall be distributed in
full on such accelerated payment date.
A Subsequent Election pursuant to this Section 3.6(e) must be filed with the
Administrator within one hundred and twenty (120) days following the Deceased
Participant's or deceased Beneficiary's death. One and only one Subsequent
Election shall be permitted pursuant to this Section 3.6(e) with respect to a
Deceased Participant's Account or deceased Beneficiary's Account, although if
such Subsequent Election is filed pursuant to Section 3.6(e)(i), it may specify
different changes for different parts of the Account.
(f) Disabled Participant. A Disabled Participant (who has not
been permitted to make a Subsequent Election under Section 3.6(h)) may elect to
change the form of distribution from the form of distribution that the payment
of the Disabled Participant's Account would otherwise be made and may elect to
accelerate the time of payment of the Disabled Participant's Account from the
date payment would otherwise be made to January 2nd of the calendar year
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beginning after the Participant became disabled. A Subsequent Election pursuant
to this Section 3.6(f) must be filed with the Administrator on or before the
close of business on the later of (i) the June 30 following the date the
Participant becomes a Disabled Participant if the Participant becomes a Disabled
Participant on or before May 1 of a calendar year; (ii) the 60th day following
the date the Participant becomes a Disabled Participant if the Participant
becomes a Disabled Participant after May 1 and before November 2 of a calendar
year or (iii) the December 31 following the date the Participant becomes a
Disabled Participant if the Participant becomes a Disabled Participant after
November 1 of a calendar year.
(g) Retired Participant. A Retired Participant (who has not been
permitted to make a Subsequent Election under Section 3.6(h)) may elect to
change the form of distribution from the form of distribution that payment of
the Retired Participant's Account would otherwise be made and may elect to defer
the time of payment of the Retired Participant's Account for a minimum of two
additional years from the date payment would otherwise be made (provided that if
a Subsequent Election is made pursuant to this Section 3.6(g), the Retired
Participant's Account shall be distributed in full on or before the fifth
anniversary of the Retired Participant's Normal Retirement). A Subsequent
Election pursuant to this Section 3.6(g) must be filed with the Administrator on
or before the close of business on the later of (i) the June 30 following the
Participant's Normal Retirement on or before May 1 or a calendar year, (ii) the
60th day following the Participant's Normal Retirement after May 1 and before
November 2 of a calendar year or (iii) the December 31 following the
Participant's Normal Retirement after November 1 of a calendar year.
(h) Retired Participants and Disabled Participants. The Committee
may, in its sole and absolute discretion, permit a Retired Participant or a
Disabled Participant to make a Subsequent Election to change the form of
distribution that the payment of the Retired Participant's account would
otherwise be made or to defer the time of payment of any part or all of such
Retired or Disabled Participant's Account for a minimum of two years and a
maximum of ten additional years from the previously-elected payment date, by
filing a Subsequent Election with the Administrator on or before the close of
business on June 30 of the calendar year preceding the calendar year in which
the lump-sum distribution or initial installment payment would otherwise be
made. The number of Subsequent Elections under this Section 3.6(h) shall be
determined by the Committee in its sole and absolute discretion.
(i) Most Recently Filed Initial Election or Subsequent Election
Controlling. Subject to acceleration pursuant to Section 3.6(e) or 3.6(f),
Section 3.7 or Section 7.1, no distribution of the amounts deferred by a
Participant for any calendar year shall be made before the payment date
designated by the Participant or Beneficiary on the most recently filed Initial
Election or Subsequent Election with respect to each deferred amount.
3.6. Distribution in Full Upon Terminating Event. The Company shall
give Participants at least thirty (30) days notice (or, if not practicable, such
shorter notice as may be reasonably practicable) prior to the anticipated date
of the consummation of a Terminating Event. The Committee may, in its
discretion, provide in such notice that notwithstanding any other provision of
the Plan or the terms of any Initial Election or Subsequent Election, upon the
consummation of a Terminating Event, the Account balance of each Participant
shall be distributed in full and any outstanding Initial Elections or Subsequent
Elections shall be revoked.
3.7. Withholding and Payment of Death Taxes.
(a) Notwithstanding any other provisions of this Plan to the
contrary, including but not limited to the provisions of Article 3 and Article
7, or any Initial or Subsequent Election filed by a Deceased Participant or a
Deceased Participant's Beneficiary (for purposes of this Section, the
"Decedent"), the Administrator shall apply the terms of Section 3.8(b) to the
Decedent's Account unless the Decedent affirmatively has elected, in writing,
filed with the Administrator, to waive the application of Section 3.8(b).
(b) Unless the Decedent affirmatively has elected, pursuant to
Section 3.8(a), that the terms of this Section 3.8(b) not apply:
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(i) The Administrator shall prohibit the Decedent's
Beneficiary from taking any action under any of the provisions of the Plan with
regard to the Decedent's Account other than the Beneficiary's making of a
Subsequent Election pursuant to Section 3.6;
(ii) The Administrator shall defer payment of the
Decedent's Account until the later of the Death Tax Clearance Date and the
payment date designated in the Decedent's Initial Election or Subsequent
Election;
(iii) The Administrator shall withdraw from the
Decedent's Account such amount or amounts as the Decedent's Personal
Representative shall certify to the Administrator as being necessary to pay the
Death Taxes apportioned against the Decedent's Account; the Administrator shall
remit the amounts so withdrawn to the Personal Representative, who shall apply
the same to the payment of the Decedent's Death Taxes, or the Administrator may
pay such amounts directly to any taxing authority as payment on account of
Decedent's Death Taxes, as the Administrator elects;
(iv) If the Administrator makes a withdrawal from the
Decedent's Account to pay the Decedent's Death Taxes and such withdrawal causes
the recognition of income to the Beneficiary, the Administrator shall pay to the
Beneficiary from the Decedent's Account, within thirty (30) days of the
Beneficiary's request, the amount necessary to enable the Beneficiary to pay the
Beneficiary's income tax liability resulting from such recognition of income;
additionally, the Administrator shall pay to the Beneficiary from the Decedent's
Account, within thirty (30) days of the Beneficiary's request, such additional
amounts as are required to enable the Beneficiary to pay the Beneficiary's
income tax liability attributable to the Beneficiary's recognition of income
resulting from a distribution from the Decedent's Account pursuant to this
Section 3.8(b)(iv);
(v) Amounts withdrawn from the Decedent's Account by the
Administrator pursuant to Sections 3.8(b)(iii) and 3.8(b)(iv) shall be withdrawn
from the portions of Decedent's Account having the earliest distribution dates
as specified in Decedent's Initial Election or Subsequent Election; and
(vi) Within a reasonable time after the later to occur of
the Death Tax Clearance Date and the payment date designated in the Decedent's
Initial Election or Subsequent Election, the Administrator shall pay the
Decedent's Account to the Beneficiary.
ARTICLE 4 - MANNER OF DISTRIBUTION
4.1. Manner of Distribution.
(a) Amounts credited to an Account shall be distributed, pursuant
to an Initial Election or Subsequent Election in either (i) a lump sum payment
or (ii) substantially equal annual installments over a five (5), ten (10) or
fifteen (15) year period or (iii) substantially equal monthly installments over
a period not exceeding fifteen (15) years.
(b) Notwithstanding any Initial Election or Subsequent Election
or any other provision of the Plan to the contrary:
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(i) distributions pursuant to Initial Elections or
Subsequent Elections shall be made in one lump sum payment unless the portion of
a Participant's Account subject to distribution, as of both the date of the
Initial Election or Subsequent Election and the benefit commencement date, is
more than $10,000;
(ii) following a Participant's termination of employment
for any reason, if the amount credited to the Participant's Account is $25,000
or less, the Administrator may, in its sole discretion, direct that such amount
be distributed to the Participant (or Beneficiary, as applicable) in one lump
sum payment; provided, however, that this Section 4.1(b)(ii) shall not apply to
any amount credited to a Participant's Account until the expiration of the
deferral period applicable under any Initial Election or Subsequent Election in
effect as of April 29, 2002.
4.2. Determination of Account Balances for Purposes of Distribution.
The amount of any distribution made pursuant to Section 4.1 shall be based on
the balances in the Participant's Account on the date of distribution. For this
purpose, the balance in a Participant's Account shall be calculated by crediting
income, gains and losses under the Company Stock Fund and Income Fund, as
applicable, through the date immediately preceding the date of distribution.
ARTICLE 5 - BOOK ACCOUNTS
5.1. Deferred Compensation Account. A deferred Compensation Account
shall be established for each Outside Director and Eligible Employee when such
Outside Director or Eligible Employee becomes a Participant. Compensation
deferred pursuant to the Plan shall be credited to the Account on the date such
Compensation would otherwise have been payable to the Participant.
5.2. Crediting of Income, Gains and Losses on Accounts.
(a) In General. Except as otherwise provided in this Section 5.2,
the Administrator shall credit income, gains and losses with respect to each
Participant's Account as if it were invested in the Income Fund.
(b) Investment Fund Elections.
(i) All amounts credited to Participants' Accounts on and
after July 9, 2002 shall be credited with income, gains and losses as if it were
invested in the Income Fund. Each Participant who, as of July 9, 2002, has all
or any portion of his or her Account credited with income, gains and losses as
if it were invested in the Company Stock Fund may direct, as of December 31,
2002 or the last day of any Plan Year thereafter, to have all or any portion of
the amount credited to the Company Stock Fund deemed transferred to the Income
Fund. No portion of the Participant's Account credited to the Income Fund may be
deemed transferred to the Company Stock Fund.
(ii) With respect to amounts credited to Participants'
Accounts through July 9, 2002, investment fund elections shall continue in
effect until revoked or superseded. All amounts credited to Participants'
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Accounts on and after July 9, 2002 shall be deemed to be invested in the Income
Fund. Notwithstanding any investment fund election to the contrary, as of the
valuation date (as determined under Section 4.2) for the distribution of all or
any portion of a Participant's Account that is subject to distribution in the
form of installments described in Section 4.1(a) or (b), such Account, or
portion thereof, shall be deemed invested in the Income Fund (and transferred
from the Company Stock Fund to the Income Fund, to the extent necessary) until
such Account, or portion thereof, is distributed in full.
(iii) In the absence of an effective election, a
Participant shall be deemed to have elected to have the Account credited with
income, gains and losses as if it were invested in the Income Fund.
(iv) Investment fund elections under this Section 5.2(b)
shall be effective as of the first day of each calendar year, provided that the
election is filed with the Committee on or before the close of business on
December 31 of the calendar year preceding such calendar year. An Active
Participant may only make an investment fund election with respect to the
Participant's accumulated Account as of December 31, and not with respect to
Compensation to be deferred for a calendar year.
(v) If a Participant ceases to continue in service as an
Active Participant, then, notwithstanding any election to the contrary, such
Participant's Account shall be deemed invested in the Income Fund, effective as
of the first day of any calendar year beginning after such Participant ceases to
continue in service as an Active Participant.
(c) Timing of Credits. Compensation deferred pursuant to the Plan
shall be deemed invested in the Income Fund on the date such Compensation would
otherwise have been payable to the Participant. Accumulated Account balances
subject to an investment fund election under Section 5.2(b) shall be deemed
invested in the applicable investment fund as of the effective date of such
election. The value of amounts deemed invested in the Company Stock Fund shall
be based on hypothetical purchases and sales of Company Stock at Fair Market
Value as of the effective date of an investment election.
5.3. Status of Deferred Amounts. Regardless of whether or not the
Company is a Participant's employer, all Compensation deferred under this Plan
shall continue for all purposes to be a part of the general funds of the
Company.
5.4. Participants' Status as General Creditors. Regardless of whether
or not the Company is a Participant's employer, an Account shall at all times
represent a general obligation of the Company. The Participant shall be a
general creditor of the Company with respect to this obligation, and shall not
have a secured or preferred position with respect to the Participant's Accounts.
Nothing contained herein shall be deemed to create an escrow, trust, custodial
account or fiduciary relationship of any kind. Nothing contained herein shall be
construed to eliminate any priority or preferred position of a Participant in a
bankruptcy matter with respect to claims for wages.
ARTICLE 6 - NO ALIENATION OF BENEFITS; PAYEE DESIGNATION
Except as otherwise required by applicable law, the right of
any Participant or Beneficiary to any benefit or interest under any of the
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provisions of this Plan shall not be subject to encumbrance, attachment,
execution, garnishment, assignment, pledge, alienation, sale, transfer, or
anticipation, either by the voluntary or involuntary act of any Participant or
any Participant's Beneficiary or by operation of law, nor shall such payment,
right, or interest be subject to any other legal or equitable process. However,
subject to the terms and conditions of the Plan, a Participant or Beneficiary
may direct that any amount payable pursuant to an Initial Election or a
Subsequent Election on any date designated for payment be paid to any person or
persons or legal entity or entities, including, but not limited to, an
organization exempt from federal income tax under section 501(c)(3) of the Code,
instead of to the Participant or Beneficiary. Such a payee designation shall be
provided to the Administrator by the Participant or Beneficiary in writing on a
form provided by the Administrator, and shall not be effective unless it is
provided immediately preceding the time of payment. The Company's payment
pursuant to such a payee designation shall relieve the Company of all liability
for such payment.
ARTICLE 7 - DEATH OF PARTICIPANT
7.1. Death of Participant. A Deceased Participant's Account shall be
distributed in accordance with the last Initial Election or Subsequent Election
made by the Deceased Participant before the Deceased Participant's death, unless
the Deceased Participant's Surviving Spouse or other Beneficiary timely elects
to accelerate or defer the time or change the manner of payment pursuant to
Section 3.6.
7.2. Designation of Beneficiaries. Each Participant and Beneficiary
shall have the right to designate one or more Beneficiaries to receive
distributions in the event of the Participant's or Beneficiary's death by filing
with the Administrator a Beneficiary designation on the form provided by the
Administrator for such purpose. The designation of a Beneficiary or
Beneficiaries may be changed by a Participant or Beneficiary at any time prior
to such Participant's or Beneficiary's death by the delivery to the
Administrator of a new Beneficiary designation form.
ARTICLE 8 - HARDSHIP DISTRIBUTIONS
Notwithstanding the terms of an Initial Election or Subsequent
Election, if, at the Participant's request, the Board determines that the
Participant has incurred a Hardship, the Board may, in its discretion, authorize
the immediate distribution of all or any portion of the Participant's Account.
ARTICLE 9 - INTERPRETATION
9.1. Authority of Committee. The Committee shall have full and
exclusive authority to construe, interpret and administer this Plan and the
Committee's construction and interpretation thereof shall be binding and
conclusive on all persons for all purposes.
9.2. Claims Procedure. An individual (hereinafter referred to as the
"Applicant," which reference shall include the legal representative, if any, of
the individual) does not receive timely payment of benefits to which the
Applicant believes he is entitled under the Plan, the Applicant may make a claim
for benefits in the manner hereinafter provided.
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An Applicant may file a claim for benefits with the
Administrator on a form supplied by the Administrator. If the Administrator
wholly or partially denies a claim, the Administrator shall provide the
Applicant with a written notice stating:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information
necessary for the Applicant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) Appropriate information as to the steps to be taken in order
to submit a claim for review.
Written notice of a denial of a claim shall be provided within 90 days of the
receipt of the claim, provided that if special circumstances require an
extension of time for processing the claim, the Administrator may notify the
Applicant in writing that an additional period of up to 90 days will be required
to process the claim.
If the Applicant's claim is denied, the Applicant shall have
60 days from the date of receipt of written notice of the denial of the claim to
request a review of the denial of the claim by the Administrator. Request for
review of the denial of a claim must be submitted in writing. The Applicant
shall have the right to review pertinent documents and submit issues and
comments to the Administrator in writing. The Administrator shall provide a
written decision within 60 days of its receipt of the Applicant's request for
review, provided that if special circumstances require an extension of time for
processing the review of the Applicant's claim, the Administrator may notify the
Applicant in writing that an additional period of up to 60 days shall be
required to process the Applicant's request for review.
It is intended that the claims procedures of this Plan be
administered in accordance with the claims procedure regulations of the
Department of Labor set forth in 29 CFR ss. 2560.503-1.
Claims for benefits under the Plan must be filed with the
Administrator at the following address:
Comcast Corporation
1500 Market Street
Philadelphia, PA 19102
Attention: General Counsel
ARTICLE 10 - AMENDMENT OR TERMINATION
10.1. Amendment or Termination. Except as otherwise provided by Section
10.2, the Company, by action of the Board or by action of the Committee,
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reserves the right at any time, or from time to time, to amend or modify this
Plan. The Company, by action of the Board, reserves the right at any time, to
terminate this Plan.
10.2. Amendment of Rate of Credited Earnings. No amendment shall change
the Applicable Interest Rate with respect to the portion of a Participant's
Account that is attributable to an Initial Election or Subsequent Election made
with respect to Compensation earned in a calendar year and filed with the
Administrator before the date of adoption of such amendment by the Board. For
purposes of this Section 10.2, a Subsequent Election to defer the payment of
part or all of an Account for an additional period after a previously-elected
payment date (as described in Section 3.6) shall be treated as a separate
Subsequent Election from any previous Initial Election or Subsequent Election
with respect to such Account.
ARTICLE 11 - WITHHOLDING OF TAXES
Whenever the Participating Company is required to credit
deferred Compensation to the Account of a Participant, the Participating Company
shall have the right to require the Participant to remit to the Participating
Company an amount sufficient to satisfy any federal, state and local withholding
tax requirements prior to the date on which the deferred Compensation shall be
deemed credited to the Account of the Participant, or take any action whatever
that it deems necessary to protect its interests with respect to tax
liabilities. The Participating Company's obligation to credit deferred
Compensation to an Account shall be conditioned on the Participant's compliance,
to the Participating Company's satisfaction, with any withholding requirement.
To the maximum extent possible, the Participating Company shall satisfy all
applicable withholding tax requirements by withholding tax from other
Compensation payable by the Participating Company to the Participant, or by the
Participant's delivery of cash to the Participating Company in an amount equal
to the applicable withholding tax.
ARTICLE 12 - MISCELLANEOUS PROVISIONS
12.1. No Right to Continued Employment. Nothing contained herein shall
be construed as conferring upon any Participant the right to remain in service
as an Outside Director or in the employment of a Participating Company as an
executive or in any other capacity.
12.2. Expenses of Plan. All expenses of the Plan shall be paid by the
Participating Companies.
12.3. Gender and Number. Whenever any words are used herein in any
specific gender, they shall be construed as though they were also used in any
other applicable gender. The singular form, whenever used herein, shall mean or
include the plural form, and vice versa, as the context may require.
12.4. Law Governing Construction. The construction and administration
of the Plan and all questions pertaining thereto, shall be governed by the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and other
applicable federal law and, to the extent not governed by federal law, by the
laws of the Commonwealth of Pennsylvania.
12.5. Headings Not a Part Hereof. Any headings preceding the text of
the several Articles, Sections, subsections, or paragraphs hereof are inserted
solely for convenience of reference and shall not constitute a part of the Plan,
nor shall they affect its meaning, construction, or effect.
12.6. Severability of Provisions. If any provision of this Plan is
determined to be void by any court of competent jurisdiction, the Plan shall
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continue to operate and, for the purposes of the jurisdiction of that court
only, shall be deemed not to include the provision determined to be void.
ARTICLE 13 - EFFECTIVE DATE
The effective date of this amendment and restatement of the
Plan shall be July 9, 2002.
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IN WITNESS WHEREOF, COMCAST CORPORATION has caused this Plan
to be executed by its officers thereunto duly authorized, and its corporate seal
to be affixed hereto, as of the 9th day of July, 2002.
COMCAST CORPORATION
BY:/s/ Stanley Wang
-------------------------------------
ATTEST:
/s/ Arthur Block
----------------------------------------
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Certifications of Chief Executive Officer and Co-Chief Financial Officers of
Comcast Corporation pursuant to Section 1350 of Chapter 63 of
Title 18 of the United States Code
Brian L. Roberts, Chief Executive Officer, Lawrence S. Smith, Co-Chief
Financial Officer and John R. Alchin, Co-Chief Financial Officer, of Comcast
Corporation, each certifies that, to the best of his knowledge:
1. the Comcast Corporation Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002 (the "Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of Comcast Corporation.
/s/ Brian L. Roberts
------------------------------------
Name: Brian L. Roberts
Chief Executive Officer
/s/ Lawrence S. Smith
------------------------------------
Name: Lawrence S. Smith
Co-Chief Financial Officer
/s/ John R. Alchin
------------------------------------
Name: John R. Alchin
Co-Chief Financial Officer