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:
SEPTEMBER 30, 1997
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
COMCAST CORPORATION
[GRAPHIC OMITTED - LOGO]
(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 September 30, 1997, there were 308,407,111 shares of Class A Special
Common Stock, 31,793,767 shares of Class A Common Stock and 8,786,250 shares of
Class B Common Stock outstanding.
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheet as of September 30, 1997 and December 31,
1996 (Unaudited)...........................................2
Condensed Consolidated Statement of
Operations and Accumulated Deficit for
the Nine and Three Months Ended September 30,
1997 and 1996 (Unaudited)..................................3
Condensed Consolidated Statement of Cash
Flows for the Nine Months Ended September 30,
1997 and 1996 (Unaudited)..................................4
Notes to Condensed Consolidated
Financial Statements (Unaudited)......................5 - 17
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations...........................................18 - 31
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.........................................32
Item 6. Exhibits and Reports on Form 8-K..........................32
SIGNATURE...........................................................33
-----------------------------------
This Quarterly Report on Form 10-Q contains forward looking statements made
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Readers are cautioned that such forward looking statements
involve risks and uncertainties which could significantly affect expected
results in the future from those expressed in any such forward looking
statements made by, or on behalf, of the Company. Certain factors that could
cause actual results to differ materially include, without limitation, the
effects of legislative and regulatory changes; the potential for increased
competition; technological changes; the need to generate substantial growth in
the subscriber base by successfully launching, marketing and providing services
in identified markets; pricing pressures which could affect demand for the
Company's services; the Company's ability to expand its distribution; changes in
labor, programming, equipment and capital costs; the Company's continued ability
to create or acquire programming and products that customers will find
attractive; future acquisitions, strategic partnerships and divestitures;
general business and economic conditions; and other risks detailed from time to
time in the Company's periodic reports filed with the Securities and Exchange
Commission.
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions, except share data)
September 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................... $573.6 $331.3
Short-term investments....................................................... 207.1 208.3
Accounts receivable, less allowance for doubtful
accounts of $101.7 and $97.1............................................... 405.6 439.3
Inventories, net............................................................. 339.2 258.4
Other current assets......................................................... 156.9 168.5
--------- ---------
Total current assets..................................................... 1,682.4 1,405.8
--------- ---------
INVESTMENTS, principally in affiliates.......................................... 1,246.8 1,177.7
--------- ---------
PROPERTY AND EQUIPMENT.......................................................... 4,088.8 3,600.1
Accumulated depreciation..................................................... (1,317.4) (1,061.3)
--------- ---------
Property and equipment, net.................................................. 2,771.4 2,538.8
--------- ---------
DEFERRED CHARGES................................................................ 9,041.5 8,578.8
Accumulated amortization..................................................... (1,952.2) (1,612.5)
--------- ---------
Deferred charges, net........................................................ 7,089.3 6,966.3
--------- ---------
$12,789.9 $12,088.6
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses........................................ $1,115.6 $1,044.3
Accrued interest............................................................. 167.8 91.1
Current portion of long-term debt, including optional
debt repayments of $53.6 and $70.0......................................... 162.4 229.5
--------- ---------
Total current liabilities................................................ 1,445.8 1,364.9
--------- ---------
LONG-TERM DEBT, less current portion............................................ 6,699.5 7,102.7
--------- ---------
DEFERRED INCOME TAXES........................................................... 2,117.2 2,140.5
--------- ---------
MINORITY INTEREST AND OTHER..................................................... 1,018.6 859.3
--------- ---------
COMMITMENTS AND CONTINGENCIES
COMMON EQUITY PUT OPTIONS....................................................... 31.4 69.6
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 20,000,000 shares
5% series A convertible, no par value, issued, 6,370 at redemption value... 31.9 31.9
5.25% series B mandatorily redeemable convertible, $1,000 par value,
issued, 506,563 at redemption value...................................... 506.6
Class A special common stock, $1 par value - authorized,
500,000,000 shares; issued, 308,407,111 and 283,281,675.................... 308.4 283.3
Class A common stock, $1 par value - authorized,
200,000,000 shares; issued, 31,793,767 and 33,959,368 ..................... 31.8 34.0
Class B common stock, $1 par value - authorized,
50,000,000 shares; issued, 8,786,250 ...................................... 8.8 8.8
Additional capital........................................................... 2,826.0 2,326.6
Accumulated deficit.......................................................... (2,326.1) (2,127.1)
Unrealized gains on marketable securities.................................... 103.4 0.1
Cumulative translation adjustments........................................... (13.4) (6.0)
--------- ---------
Total stockholders' equity............................................... 1,477.4 551.6
--------- ---------
$12,789.9 $12,088.6
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in millions, except per share data)
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES
Service income............................................. $2,081.5 $1,584.0 $713.6 $543.5
Net sales from electronic retailing........................ 1,438.0 1,286.9 490.6 431.1
--------- --------- --------- ---------
3,519.5 2,870.9 1,204.2 974.6
--------- --------- --------- ---------
COSTS AND EXPENSES
Operating.................................................. 919.8 679.6 308.5 226.1
Cost of goods sold from electronic retailing............... 867.2 774.7 297.2 262.3
Selling, general and administrative........................ 666.4 554.6 233.5 190.4
Depreciation............................................... 341.7 219.7 120.2 77.0
Amortization............................................... 362.0 271.3 121.1 89.7
--------- --------- --------- ---------
3,157.1 2,499.9 1,080.5 845.5
--------- --------- --------- ---------
OPERATING INCOME.............................................. 362.4 371.0 123.7 129.1
OTHER (INCOME) EXPENSE
Interest expense........................................... 422.8 403.7 143.9 135.7
Investment income.......................................... (133.1) (63.7) (44.5) (16.2)
Equity in net losses of affiliates......................... 212.1 89.2 85.9 28.9
Gain from equity offering of affiliate..................... (40.6)
Other...................................................... 13.4 22.6 9.0 (0.3)
--------- --------- --------- ---------
515.2 411.2 194.3 148.1
--------- --------- --------- ---------
LOSS BEFORE INCOME TAX EXPENSE, MINORITY
INTEREST AND EXTRAORDINARY ITEMS........................... (152.8) (40.2) (70.6) (19.0)
INCOME TAX EXPENSE............................................ 45.4 33.9 8.5 9.3
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEMS........................................ (198.2) (74.1) (79.1) (28.3)
MINORITY INTEREST............................................. (66.8) (47.4) (27.0) (18.4)
--------- --------- --------- ---------
LOSS BEFORE EXTRAORDINARY ITEMS............................... (131.4) (26.7) (52.1) (9.9)
EXTRAORDINARY ITEMS........................................... (25.9) (1.0) (3.1)
--------- --------- --------- ---------
NET LOSS...................................................... (157.3) (27.7) (55.2) (9.9)
PREFERRED DIVIDENDS........................................... (7.8) (0.3) (7.0) (0.3)
--------- --------- --------- ---------
NET LOSS FOR COMMON STOCKHOLDERS.............................. ($165.1) ($28.0) ($62.2) ($10.2)
========= ========= ========= =========
ACCUMULATED DEFICIT
Beginning of period ....................................... ($2,127.1) ($1,914.3) ($2,262.6) ($2,030.6)
Net loss................................................... (157.3) (27.7) (55.2) (9.9)
Common dividends - $.070, $.070, $.0233 and $.0233
per share................................................ (24.0) (18.6) (8.3) (7.6)
Retirement of common stock................................. (17.7) (128.4) (40.9)
--------- --------- --------- ---------
End of period.............................................. ($2,326.1) ($2,089.0) ($2,326.1) ($2,089.0)
========= ========= ========= =========
LOSS FOR COMMON STOCKHOLDERS PER COMMON SHARE
Loss before extraordinary items............................ ($.42) ($.11) ($.17) ($.04)
Extraordinary items........................................ (.08) (.01)
--------- --------- --------- ---------
Net loss.............................................. ($.50) ($.11) ($.18) ($.04)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD.............................. 333.2 236.2 348.9 233.3
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions)
Nine Months Ended September 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net loss..................................................................... ($157.3) ($27.7)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation............................................................... 341.7 219.7
Amortization............................................................... 362.0 271.3
Non-cash interest expense, net............................................. 39.4 48.1
Equity in net losses of affiliates......................................... 212.1 89.2
Gains on long-term investments, net of losses.............................. (93.1) (22.1)
Gain from equity offering of affiliate..................................... (40.6)
Minority interest.......................................................... (66.8) (47.4)
Extraordinary items........................................................ 25.9 1.0
Deferred income taxes and other............................................ (22.4) 4.3
-------- --------
641.5 495.8
Decrease in accounts receivable, net....................................... 54.4 45.3
Increase in inventories, net............................................... (80.8) (11.8)
Decrease (increase) in other current assets................................ 2.4 (2.7)
Increase (decrease) in accounts payable and accrued expenses............... 47.9 (26.0)
Increase in accrued interest............................................... 76.7 26.7
-------- --------
Net cash provided by operating activities............................ 742.1 527.3
-------- --------
FINANCING ACTIVITIES
Proceeds from borrowings..................................................... 2,968.3 660.4
Retirement and repayment of debt............................................. (3,518.4) (486.7)
Issuance of preferred stock.................................................. 500.0
Issuances of common stock, net............................................... 499.5 1.5
Repurchases of common stock, net............................................. (33.6) (171.2)
Dividends.................................................................... (25.2) (18.9)
Deferred financing costs..................................................... (43.8) (3.2)
Other........................................................................ (1.5) (1.1)
-------- --------
Net cash provided by (used in) financing activities.................. 345.3 (19.2)
-------- --------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired........................................... (136.1) (58.0)
Proceeds from sales of short-term investments, net........................... 2.4 270.5
Investments, principally in affiliates....................................... (180.3) (447.6)
Proceeds from sales of and distributions from investments,
principally in affiliates ................................................. 169.1 111.3
Proceeds from investee's repayment of loan................................... 25.2
Capital expenditures......................................................... (682.0) (450.2)
Additions to deferred charges................................................ (37.5) (37.6)
Other........................................................................ (5.9) (9.4)
-------- --------
Net cash used in investing activities................................ (845.1) (621.0)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................ 242.3 (112.9)
CASH AND CASH EQUIVALENTS, beginning of period.................................. 331.3 539.1
-------- --------
CASH AND CASH EQUIVALENTS, end of period........................................ $573.6 $426.2
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 1996 has been
condensed from the audited consolidated balance sheet as of that date. The
condensed consolidated balance sheet as of September 30, 1997, the
condensed consolidated statement of operations and accumulated deficit for
the nine and three months ended September 30, 1997 and 1996 and the
condensed consolidated statement of cash flows for the nine months ended
September 30, 1997 and 1996 have been prepared by Comcast Corporation (the
"Company") and have not been audited by the Company's independent auditors.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows as of September 30, 1997 and for all
periods presented have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 1996 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the periods ended September 30,
1997 are not necessarily indicative of operating results for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncements
Effective January 1, 1997, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which was issued by the Financial Accounting Standards Board
("FASB") in June 1996. Under this statement, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls
and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered and derecognizes liabilities when
extinguished. Adoption of this statement did not have a significant impact
on the Company's consolidated financial position or results of operations.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." This
statement, which clarifies and supersedes the current authoritative
accounting literature regarding the computation and disclosure of earnings
per share, is effective for interim and annual periods ending after
December 15, 1997 and may not be applied earlier. The Company does not
expect adoption of this statement to result in significant changes to the
Company's calculation or presentation of loss for common stockholders per
common share.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement, which establishes standards for reporting and
disclosure of comprehensive income, is effective for interim and annual
periods beginning after December 15, 1997, although earlier adoption is
permitted. Reclassification of financial information for earlier periods
presented for comparative purposes is required under SFAS No. 130. As this
statement only requires additional disclosures in the Company's
consolidated financial statements, its adoption will not have any impact on
the Company's consolidated financial position or results of operations. The
Company expects to adopt SFAS No. 130 effective January 1, 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement, which establishes
standards for the reporting of information about operating segments and
requires the reporting of selected information about operating segments in
interim financial statements, is effective for fiscal years beginning after
December 15, 1997, although earlier application is permitted.
Reclassification of segment information for earlier periods presented for
comparative purposes is required under SFAS No. 131. The Company does not
expect adoption of this statement to result in significant changes to its
presentation of financial data by business segment. The Company expects to
adopt SFAS No. 131 effective January 1, 1998.
5
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Loss for Common Stockholders Per Common Share
Loss for common stockholders per common share amounts were computed by
dividing net loss and loss before extraordinary items, after deduction of
preferred stock dividends, by the weighted average number of common shares
outstanding during the period. For the nine and three months ended
September 30, 1997 and 1996, the Company's common stock equivalents have an
antidilutive effect on net loss per share and, therefore, have not been
used in determining the total weighted average number of common shares
outstanding.
Reclassifications
Certain reclassifications have been made to the prior year condensed
consolidated financial statements to conform to those classifications used
in 1997.
3. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
Cable TV Fund 14 A/B Venture
In October 1997, the Company and Jones Intercable, Inc. ("Jones
Intercable") entered into an agreement whereby the Company, through an
indirect majority owned subsidiary, will acquire Cable TV Fund 14 A/B
Venture, a cable television system serving approximately 65,000 subscribers
in and around Broward County, Florida for $140 million in cash, subject to
certain adjustments. The acquisition is expected to be funded with the
proceeds from borrowings under one of the Company's subsidiary's existing
credit facilities. The acquisition is subject to a number of conditions,
including the receipt of necessary regulatory approvals and the approval of
the limited partners of Cable TV Fund 14 A/B Venture. The acquisition is
expected to close in the first quarter of 1998.
Microsoft Investment
On June 30, 1997 (the "Issuance Date"), the Company and Microsoft
Corporation ("Microsoft") completed a Stock Purchase Agreement (the
"Agreement") under which Microsoft purchased and the Company issued 24.6
million shares of the Company's Class A Special Common Stock, par value
$1.00 per share (the "Class A Special Stock"), at $20.29 per share, for
$500.0 million and 500,000 shares of the Company's newly issued 5.25%
Series B Mandatorily Redeemable Convertible Preferred Stock, par value
$1,000 per share (the "Series B Preferred Stock"), for $500.0 million.
The Series B Preferred Stock has a 5.25% pay-in-kind annual dividend.
Dividends will be paid quarterly through the issuance of additional shares
of Series B Preferred Stock (the "Additional Shares") and will be
cumulative from the Issuance Date (except that dividends on the Additional
Shares will accrue from the date such Additional Shares are issued). The
Series B Preferred Stock, including the Additional Shares, is convertible,
at the option of Microsoft, into 21.2 million shares of Class A Special
Stock, subject to adjustment in certain limited circumstances, which equals
an initial conversion price of $23.54 per share, increasing as a result of
the Additional Shares to $33.91 per share on June 30, 2004. The Series B
Preferred Stock is mandatorily redeemable on June 30, 2017, or, at the
option of the Company beginning on June 30, 2004 or at the option of
Microsoft on June 30, 2004 or on June 30, 2012. Upon redemption, the
Company, at its option, may redeem the Series B Preferred Stock with cash,
Class A Special Stock or a combination thereof. As the Company currently
intends to redeem the Series B Preferred Stock with Class A Special Stock
upon redemption, the Series B Preferred Stock has been classified as a
component of stockholders' equity as of September 30, 1997. The Series B
Preferred Stock is generally non-voting.
Offerings of Subsidiary Debt
In May 1997, Comcast Cellular Holdings, Inc. ("Comcast Cellular"), a wholly
owned subsidiary of the Company, completed the sale of $1.0 billion
principal amount of 9 1/2% Senior Notes due 2007 (the "Cellular Notes")
through a private offering with registration rights. The Cellular Notes are
obligations of Comcast Cellular and are not obligations of, nor guaranteed
by, the Company. Comcast Cellular used the net proceeds from the offering
to repay existing borrowings by its subsidiaries, including its senior
participating redeemable zero coupon notes. Collectively, these
transactions are referred to herein as the "Cellular Refinancing."
In May 1997, Comcast Cable Communications, Inc. ("Comcast Cable"), a wholly
owned subsidiary of the Company, completed the sale of $1.7 billion
principal amount of notes (the "Cable Notes") through a private
6
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
offering with registration rights. The Cable Notes were issued in four
tranches: $300.0 million principal amount of 8 1/8% Notes due 2004, $600.0
million principal amount of 8 3/8% Notes due 2007, $550.0 million principal
amount of 8 7/8% Notes due 2017 and $250.0 million principal amount of 8
1/2% Notes due 2027. The Notes due 2027 are subject to repurchase at the
option of the holder in 2009. The Cable Notes are obligations of Comcast
Cable and are not obligations of, nor guaranteed by, the Company. Comcast
Cable used substantially all of the net proceeds from the offering to repay
existing borrowings by its subsidiaries. Collectively, these transactions
are referred to herein as the "Cable Refinancing."
In October 1997, the Company completed an exchange of 100% of the Cellular
Notes and the Cable Notes for new notes (having the terms described above)
which were registered under the Securities Act of 1933, as amended.
E! Entertainment
On March 31, 1997, the Company, through Comcast Entertainment Holdings LLC
(the "LLC"), which is owned 50.1% by the Company and 49.9% by The Walt
Disney Company ("Disney"), purchased a 58.4% interest in E! Entertainment
Television, Inc. ("E! Entertainment"), an entertainment programming service
distributed to more than 42 million subscribers, from Time Warner, Inc.
("Time Warner") for $321.9 million (the "E! Acquisition"). The E!
Acquisition was funded by cash contributions to the LLC by the Company and
Disney of $132.8 million and $189.1 million, respectively. In connection
with the E! Acquisition, the Company contributed its 10.4% interest in E!
Entertainment to the LLC. Following these transactions, the LLC owns a
68.8% interest in E! Entertainment. To fund the cash contribution to the
LLC, the Company borrowed $132.8 million from Disney in the form of two 10-
year, 7% notes (the "Disney Notes").
The Company accounted for the E! Acquisition under the purchase method and
E! Entertainment was consolidated with the Company effective March 31,
1997. The allocation of the purchase price relating to the assets and
liabilities of E! Entertainment is preliminary pending a final appraisal.
After September 1998, Disney, in certain circumstances, is entitled to
request that the LLC purchase Disney's entire interest in the LLC at its
then fair market value (as determined by an appraisal process). If the LLC
elects not to purchase Disney's interest, Disney has the right, at its
option, to purchase either the Company's entire interest in the LLC or all
of the shares of stock of E! Entertainment held by the LLC, in each case at
fair market value. In the event that Disney exercises its rights, as
described above, a portion or all of the Disney Notes may be replaced with
a three year note due to Disney.
Scripps Cable
In November 1996, the Company acquired the cable television operations
("Scripps Cable") of The E.W. Scripps Company ("E.W. Scripps") in exchange
for 93.048 million shares of Class A Special Stock valued at $1.552 billion
(the "Scripps Acquisition"). The Company accounted for the Scripps
Acquisition under the purchase method and Scripps Cable was consolidated
with the Company effective November 1, 1996. During the second quarter of
1997, the Company recorded the final purchase price allocation relating to
the Scripps Acquisition. The terms of the Scripps Acquisition provide for,
among other things, the indemnification of the Company by E. W. Scripps for
certain liabilities, including tax liabilities, relating to Scripps Cable
prior to the acquisition date.
Comcast-Spectacor
In July 1996, the Company completed its acquisition (the "Sports Venture
Acquisition") of a 66% interest in the Philadelphia Flyers Limited
Partnership, a Pennsylvania limited partnership ("PFLP"), the assets of
which, after giving effect to the Sports Venture Acquisition, consist of
(i) the National Basketball Association ("NBA") franchise to own and
operate the Philadelphia 76ers basketball team and related assets (the
"Sixers"), (ii) the National Hockey League ("NHL") franchise to own and
operate the Philadelphia Flyers hockey team and related assets, and (iii)
two adjacent arenas, leasehold interests in and development rights related
to the land underlying the arenas and other adjacent parcels of land
located in Philadelphia, Pennsylvania (collectively, the "Arenas").
Concurrent with the completion of the Sports Venture Acquisition, PFLP was
renamed Comcast Spectacor, L.P. ("Comcast-Spectacor").
7
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The Sports Venture Acquisition was completed in two steps. In April 1996,
the Company purchased the Sixers for $125.0 million in cash plus assumed
net liabilities of approximately $11.0 million through a partnership
controlled by the Company. To complete the Sports Venture Acquisition, in
July 1996, the Company contributed its interest in the Sixers, exchanged
approximately 3.5 million shares of the Company's Class A Special Stock and
6,370 shares of the Company's newly issued 5% Series A Convertible
Preferred Stock and paid $15.0 million in cash for its current interest in
Comcast-Spectacor. The remaining 34% interest in Comcast-Spectacor is owned
by a group, including the former majority owner of PFLP, who also manages
Comcast-Spectacor. In connection with the Sports Venture Acquisition,
Comcast-Spectacor assumed the outstanding liabilities relating to the
Sixers and the Arenas, including a mortgage obligation of $155.0 million.
The Company accounts for its interest in Comcast-Spectacor under the equity
method (see Note 4).
Unaudited Pro Forma Information
The following unaudited pro forma information for the nine months ended
September 30, 1996 has been presented as if the Scripps Acquisition
occurred on January 1, 1996. This unaudited pro forma information is based
on historical results of operations, adjusted for acquisition costs, and,
in the opinion of management, is not necessarily indicative of what the
results would have been had the Company operated Scripps Cable since
January 1, 1996 (dollars in millions, except per common share data).
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1996
<S> <C>
Revenues..................................................... $3,097.0
Loss before extraordinary items.............................. (66.9)
Net loss for common stockholders............................. (68.2)
Net loss for common stockholders per common share............ (.21)
</TABLE>
4. INVESTMENTS, PRINCIPALLY IN AFFILIATES
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Dollars in millions)
<S> <C> <C>
Equity method.......................................... $918.9 $966.1
Fair value method...................................... 289.1 165.5
Cost method............................................ 38.8 46.1
-------- --------
$1,246.8 $1,177.7
======== ========
</TABLE>
8
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Equity Method
The Company records its proportionate interests in the net income (loss) of
substantially all of its investees, other than the UK Investees (see
below), three months in arrears. The Company's recorded investments exceed
its proportionate interests in the book value of the investees' net assets
by $193.4 million as of September 30, 1997 (primarily related to the
investments in Comcast-Spectacor and Sprint PCS (see below)). Such excess
is being amortized to equity in net income or loss, primarily over a period
of twenty years, which is consistent with the estimated lives of the
underlying assets. The original cost of investments accounted for under the
equity method totaled $1.445 billion and $1.271 billion as of September 30,
1997 and December 31, 1996, respectively. Summarized financial information
for the Company's equity method investees is presented below (dollars in
millions).
<TABLE>
<CAPTION>
Sprint UK
PCS TCGI Investees Other Combined
<S> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1997:
Combined Results of Operations
Revenues, net............................................ $39.0 $300.0 $143.3 $672.1 $1,154.4
Operating, selling, general and
administrative expenses................................ 588.2 278.9 125.4 708.4 1,700.9
Depreciation and amortization............................ 110.1 93.4 52.5 81.7 337.7
Operating loss........................................... (659.3) (72.3) (34.6) (118.0) (884.2)
Net loss (a)............................................. (730.2) (139.1) (66.2) (159.7) (1,095.2)
Company's Equity in Net Loss
Equity in current period net loss (b).................... ($109.5) ($22.1) ($25.1) ($49.0) ($205.7)
Amortization expense..................................... (0.8) (0.3) (0.4) (4.9) (6.4)
------- ------- ------- ------- --------
Total equity in net loss............................... ($110.3) ($22.4) ($25.5) ($53.9) ($212.1)
======= ======= ======= ======= ========
Three Months Ended September 30, 1997:
Combined Results of Operations
Revenues, net............................................ $25.4 $115.8 $50.4 $229.8 $421.4
Operating, selling, general and
administrative expenses................................ 236.7 107.0 43.2 255.4 642.3
Depreciation and amortization............................ 66.3 37.2 16.5 27.6 147.6
Operating loss........................................... (277.6) (28.4) (9.3) (53.2) (368.5)
Net loss (a)............................................. (331.4) (51.4) (21.4) (70.1) (474.3)
Company's Equity in Net Loss
Equity in current period net loss........................ ($49.7) ($7.9) ($8.4) ($17.7) ($83.7)
Amortization (expense) income............................ (0.7) 0.1 (0.1) (1.5) (2.2)
------- ------- ------- ------- --------
Total equity in net loss............................... ($50.4) ($7.8) ($8.5) ($19.2) ($85.9)
======= ======= ======= ======= ========
Combined Financial Position
As of September 30, 1997:
Current assets........................................... $335.7 $572.2 $40.9 $320.3 $1,269.1
Noncurrent assets........................................ 5,050.8 1,588.0 697.3 1,197.7 8,533.8
Current liabilities...................................... 300.0 260.9 75.1 825.4 1,461.4
Noncurrent liabilities................................... 3,003.9 1,095.1 521.2 557.2 5,177.4
<FN>
- ------------
(a) See footnote (1) on page 10.
(b) See footnote (2) on page 10.
</FN>
</TABLE>
9
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
Sprint UK
PCS TCGI (3) Investees Other Combined
<S> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1996:
Combined Results of Operations
Revenues, net............................................ $ $120.1 $113.7 $390.8 $624.6
Operating, selling, general and
administrative expenses................................ 122.0 111.3 104.4 393.3 731.0
Depreciation and amortization............................ 0.7 32.1 41.6 46.6 121.0
Operating loss........................................... (122.7) (23.3) (32.3) (49.1) (227.4)
Net loss (1)............................................. (243.5) (51.1) (52.9) (68.8) (416.3)
Company's Equity in Net Loss
Equity in current period net loss........................ ($36.5) ($9.7) ($21.3) ($18.3) ($85.8)
Amortization income (expense)............................ 0.6 (0.8) (3.2) (3.4)
------- ------- ------- ------- --------
Total equity in net loss............................... ($35.9) ($10.5) ($21.3) ($21.5) ($89.2)
======= ======= ======= ======= ========
Three Months Ended September 30, 1996:
Combined Results of Operations
Revenues, net............................................ $ $ $36.6 $142.2 $178.8
Operating, selling, general and
administrative expenses................................ 46.5 33.3 147.9 227.7
Depreciation and amortization............................ 0.4 13.4 15.8 29.6
Operating loss........................................... (46.9) (10.1) (21.5) (78.5)
Net loss (1)............................................. (90.8) (16.7) (29.0) (136.5)
Company's Equity in Net Loss
Equity in current period net loss........................ ($13.6) ($6.5) ($7.6) ($27.7)
Amortization expense..................................... (1.2) (1.2)
------- ------- ------- ------- --------
Total equity in net loss............................... ($13.6) $ ($6.5) ($8.8) ($28.9)
======= ======= ======= ======= ========
<FN>
--------
(1) Net loss also represents loss from continuing operations before
extraordinary items and cumulative effect of changes in accounting
principle.
(2) As a result of the E! Acquisition, the Company recorded a charge
representing the cumulative amount that would have been recorded had
the Company accounted for its investment in E! Entertainment under the
equity method since the date of initial investment (the "Cumulative
Charge"). Since the Company's proportionate share of E! Entertainment's
cumulative losses was in excess of the Company's historical cost basis
in E! Entertainment and as the Company was under no contractual
obligation to fund the losses of E! Entertainment, the Cumulative
Charge was limited to the Company's historical cost basis of $12.1
million. Such amount is included in equity in net losses of affiliates
in the Company's condensed consolidated statement of operations and
accumulated deficit for the nine months ended September 30, 1997 as it
is not significant for restatement of the Company's prior year
financial statements.
(3) As the result of the TCGI IPO and Reorganization, which is described in
more detail below, in June 1996, the Company began to account for its
proportionate interest in TCGI three months in arrears resulting in no
equity in current period net loss being recorded for the three months
ended September 30, 1996.
</FN>
</TABLE>
Sprint PCS. The Company, Tele-Communications, Inc. ("TCI"), Cox
Communications, Inc. ("Cox") and Sprint Corporation ("Sprint," and together
with the Company, TCI and Cox, the "Parents"), and certain subsidiaries of
the Parents, engage in the wireless communications business through a
limited partnership known as "Sprint Spectrum" or "Sprint PCS," a
development stage enterprise through June 30, 1997. The Company made its
initial investment in 1994 and, as of September 30, 1997, holds a general
and limited partnership interest of 15% in Sprint PCS. The Company's
investment in Sprint PCS is accounted for under the equity method based on
the Company's general partnership interest and its representation on the
partnership's board of directors.
10
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
TCGI. Through June 1996, the Company held investments in Teleport
Communications Group, Inc. ("TCGI"), TCG Partners and certain local joint
ventures (the "Teleport Joint Ventures") managed by TCGI and TCG Partners.
TCGI is one of the largest competitive alternative access providers in the
United States in terms of route miles. The Company had a 20.0% investment
in TCGI and interests in the Teleport Joint Ventures ranging from 12.4% to
20.3%. In June 1996, TCGI sold approximately 27 million shares of its Class
A Common Stock (the "TCGI Class A Stock"), for $16 per share, in an initial
public offering (the "TCGI IPO"). In connection with the TCGI IPO, TCGI,
the Company and subsidiaries of Cox, TCI and Continental Cablevision
("Continental" and collectively with Cox, TCI and the Company, the "Cable
Stockholders") entered into an agreement pursuant to which TCGI was
reorganized (the "Reorganization"). The Reorganization consisted of, among
other things: (i) the acquisition by TCGI of TCG Partners; (ii) the
acquisition by TCGI of additional interests in the Teleport Joint Ventures
(including 100% of those interests held by the Company); and (iii) the
contribution to TCGI of $269.0 million aggregate principal amount of
indebtedness, plus accrued interest thereon, owed by TCGI to the Cable
Stockholders (except that TCI retained a $26 million subordinated note of
TCGI), including $53.8 million principal amount and $4.1 million of accrued
interest owed to the Company. In connection with the Reorganization, the
Company received 25.6 million shares of TCGI's Class B Common Stock (the
"TCGI Class B Stock"). Each share of TCGI Class B Stock is entitled to
voting power equivalent to ten shares of TCGI Class A Stock and is
convertible, at the option of the holder, into one share of TCGI Class A
Stock. As a result of the TCGI IPO, the Company recorded a $40.6 million
increase in its proportionate share of TCGI's net assets as a gain from
equity offering of affiliate in its condensed consolidated statement of
operations and accumulated deficit for the nine months ended September 30,
1996.
During the three months ended March 31, 1997, the Company received 2.76
million shares of TCGI Class A Stock from TCGI in exchange for the
Company's shares of an alternate access provider. In May 1997, the Company
sold all of its shares of TCGI Class A Stock for $68.9 million and
recognized a $68.9 million pre-tax gain, which is included in investment
income in its condensed consolidated statement of operations and
accumulated deficit for the nine months ended September 30, 1997.
As of September 30, 1997, the Company owns TCGI Class B Stock representing
a 19.8% voting interest and a 15.5% equity interest. The Company continues
to account for its interest in TCGI under the equity method based on its
voting interest maintained through the TCGI Class B Stock, its
representation on TCGI's board of directors and its participation in a TCGI
stockholder agreement granting certain rights to a control group. Assuming
conversion of the TCGI Class B Stock held by the Company into TCGI Class A
Stock, the Company's investment in TCGI, which had a carrying value of
$123.3 million as of September 30, 1997, would have a fair value of
approximately $1.239 billion, based on the quoted market price of the TCGI
Class A Stock as of October 31, 1997.
UK Investees. As of September 30, 1997, Comcast UK Cable Partners Limited
("Comcast UK Cable"), a consolidated subsidiary of the Company, holds a
27.5% interest in Birmingham Cable Corporation Limited and a 50.0% interest
in Cable London PLC. In addition, Comcast UK Cable historically held an
investment in Cambridge Holding Company Limited ("Cambridge Cable"). In
March 1996, Comcast UK Cable purchased the 50.0% interest in Cambridge
Cable that it had not previously owned for cash and approximately 8.9
million of its Class A Common Shares (the "Cambridge Acquisition").
Following the Cambridge Acquisition, Comcast UK Cable owns 100.0% of
Cambridge Cable and consolidated the financial position and results of
operations of Cambridge Cable effective March 31, 1996.
Other. The Company's 10 other equity method investees include investments
in wired telecommunications (including Garden State Cablevision, L.P., a
cable communications company serving 206,000 subscribers as of September
30, 1997 in the State of New Jersey), wireless telecommunications
(including Primestar - see below) and content providers (including
Comcast-Spectacor - see Note 3). The Company holds interests representing
less than 20% of the total outstanding ownership interest in certain of its
other equity method investees. The equity method of accounting is utilized
for these investments based on the type of investment (i.e. general
partnership interest), board representation, participation in a controlling
investor group, significant shareholder rights or a combination of these
and other factors. In addition, the Company's 66% interest in
Comcast-Spectacor is accounted for under the equity method since the
Company does not have control over Comcast-Spectacor's operations. The
Company
11
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
does not consider these other equity method investments to be individually
significant to its consolidated financial position, results of operations
or liquidity.
Roll-up of Primestar's Operations. In June 1997, the Company entered into a
binding letter agreement (the "Roll-up Agreement") with PRIMESTAR Partners
L.P. ("Primestar") and the affiliates of each of the other partners of
Primestar, including TCI Satellite Entertainment, Inc. ("TSAT"), a
publicly-traded company. Primestar, in which the Company holds a 10.4%
general and limited partnership interest, is principally engaged in the
business of acquiring, originating and/or providing television programming
services delivered by satellite through a network of distributors,
including the Company, throughout the United States. The Roll-up Agreement
sets forth the principal terms and conditions of a proposed transaction
(the "Roll-up Transaction"), through which the Company's direct broadcast
satellite ("DBS") operations, Primestar and the Primestar-related
distribution businesses of the other partners of Primestar will be
consolidated into a newly-formed publicly-traded company ("New Primestar").
In connection with the Roll-up Transaction, TSAT will become a wholly owned
subsidiary of New Primestar. The Company provided DBS services, through a
distributorship arrangement with Primestar, to 169,000 subscribers as of
September 30, 1997.
New Primestar will acquire the Primestar partnership interests, subscribers
and related assets, as applicable, of the parties to the Roll-up
Transaction, in exchange for (i) cash, (ii) shares of Series A Common Stock
of New Primestar and (iii) shares of Series C Common Stock of New
Primestar, in each case in an amount determined pursuant to the Roll-up
Agreement. The Company will have the right to continue to market and
support the Primestar programming services on an agency basis after
consummation of the Roll-up Transaction; however, the terms of such
arrangement have not yet been determined. Under the terms of the Roll-up
Agreement, upon closing of the Roll-up Transaction, the Company is expected
to receive approximately $75 million in cash and to own approximately 10%
of New Primestar common equity, both subject to adjustment based on the
number of subscribers, inventory amounts and other factors. As of September
30, 1997, assets of the Company's DBS operations totaled $149.4 million.
In June 1997, Primestar entered into an agreement with The News Corporation
Limited, MCI Telecommunications Corporation and American Sky Broadcasting
LLC ("ASkyB"), pursuant to which New Primestar (or, under certain
circumstances, Primestar) will acquire certain assets relating to a
high-power, DBS business. In exchange for such assets, ASkyB will receive
non-voting securities of New Primestar that will be convertible into
non-voting common stock of New Primestar and, accordingly, will reduce the
Company's common equity interest in New Primestar to approximately 7% on a
fully diluted basis, subject to adjustment.
These transactions are not conditioned on each other and may close
independently. They are expected to close in 1998, subject to receipt of
all necessary governmental and regulatory approvals, including the approval
of the Federal Communications Commission. There can be no assurance that
such approvals will be obtained.
Fair Value Method
The Company holds unrestricted equity investments in certain publicly
traded companies, with an historical cost of $130.0 million and $212.7
million as of September 30, 1997 and December 31, 1996, respectively. The
Company has recorded these investments, which are classified as available
for sale, at their estimated fair values of $289.1 million and $212.9
million as of September 30, 1997 and December 31, 1996, respectively. The
unrealized pre-tax gains as of September 30, 1997 (which includes the @Home
Unrestricted Shares - see below) and December 31, 1996 of $159.1 million
and $0.2 million, respectively, have been reported in the Company's
condensed consolidated balance sheet as a component of stockholders'
equity, net of related deferred income tax expense of $55.7 million and
$0.1 million, respectively.
@Home. In July 1997, At Home Corporation ("@Home"), an investee of the
Company previously accounted for under the equity method, completed an
initial public offering of its Series A Common Stock (the "@Home IPO").
@Home provides Internet services to customers and businesses over the cable
television infrastructure in a limited number of cities in the United
States. Effective July 1, 1997, due to the dilution of the Company's equity
and voting interests and other factors subsequent to the @Home IPO, the
Company has discontinued the equity method of accounting for its investment
in @Home. As of September 30, 1997, the Company holds 8.0 million
contractually
12
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
restricted shares (the "Restricted Shares") and 6.6 million unrestricted
shares (the "Unrestricted Shares") of @Home Series A Common Stock (the
"@Home Series A Stock"), representing a 12.4% and a 5.7% equity and voting
interest, respectively. The Company has recorded the Restricted Shares at
their historical cost of $1.1 million and the Unrestricted Shares, which
are classified as available for sale, at their estimated fair market value
of $151.5 million, based on the quoted market price of the @Home Series A
Stock as of September 30, 1997. The unrealized pre-tax gain as of September
30, 1997 of $150.6 million has been reported in the Company's condensed
consolidated balance sheet as a component of stockholders' equity, net of
related deferred income tax expense of $52.7 million.
Nextel. At December 31, 1996, the Company held 3.3 million shares of Nextel
Communications, Inc. ("Nextel") common stock and options to acquire an
additional 25.0 million shares of Nextel common stock at $16 per share. As
of December 31, 1996, these options, which had an historical cost of $20.0
million, were included in investments in publicly traded companies at their
fair value of $32.6 million. In February 1997, the Company sold these
options to Nextel for $25.0 million and recognized a pre-tax gain of $5.0
million, which is included in investment income in the Company's condensed
consolidated statement of operations and accumulated deficit for the nine
months ended September 30, 1997. In July 1997, the Company sold its 3.3
million shares of Nextel common stock for $73.4 million, resulting in a
pre-tax gain of $32.2 million, which is included in investment income in
the Company's condensed consolidated statement of operations and
accumulated deficit for the nine and three months ended September 30, 1997.
In February 1996, in connection with certain preemptive rights of the
Company under previously existing agreements with Nextel, the Company
purchased 8.16 million shares of Nextel common stock at $12.25 per share,
for $99.9 million. During the nine and three months ended September 30,
1996, the Company sold 5.6 million shares and 1.2 million shares,
respectively, of Nextel common stock for $105.4 million and $19.9 million,
respectively, and recognized pre-tax gains of $35.4 million and $5.8
million, respectively, which are included in investment income in its
condensed consolidated statement of operations and accumulated deficit.
Time Warner/TBS. The Company received 1.36 million shares of Time Warner
common stock (the "Time Warner Stock") in exchange (the "Exchange") for all
of the shares of Turner Broadcasting System, Inc. ("TBS") stock (the "TBS
Stock") held by the Company as a result of the merger of Time Warner and
TBS in October 1996. As a result of the Exchange, the Company recognized a
pre-tax gain of $47.3 million in the fourth quarter of 1996, representing
the difference between the Company's historical cost basis in the TBS Stock
of $8.9 million and the new basis for the Company's investment in Time
Warner Stock of $56.2 million, which was based on the closing price of the
Time Warner Stock on the merger date of $41.375 per share. In December 1996
and January 1997, the Company sold 92,500 shares and 1.27 million shares,
respectively, of the Time Warner Stock, representing the Company's entire
interest in Time Warner, for $3.7 million and $48.6 million, respectively.
In connection with the January 1997 sales, the Company recognized a pre-tax
loss of $3.8 million, which is included in investment income in its
condensed consolidated statement of operations and accumulated deficit for
the nine months ended September 30, 1997. As of December 31, 1996, the 1.27
million shares of Time Warner Stock held by the Company were recorded at
their fair value of $47.4 million and were included in short-term
investments in the Company's condensed consolidated balance sheet.
13
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. LONG-TERM DEBT
The Cable Refinancing and the Cellular Refinancing had a significant impact
on the maturities of the Company's long-term debt. Maturities of long-term
debt outstanding as of September 30, 1997 and December 31, 1996 through
2001 are as follows (dollars in millions):
<TABLE>
<CAPTION>
As of As of
September 30, 1997 December 31, 1996
<S> <C> <C>
1997................................................. $ 71.9 (1) $229.5
1998................................................. 110.0 671.5
1999................................................. 206.3 462.5
2000................................................. 305.3 668.1
2001................................................. 578.0 1,282.4
<FN>
---------------
(1) Represents maturities of long-term debt for the remaining three months
of 1997, which includes $43.6 million of debt redeemed in October 1997
(see below) and a $10.0 million optional debt repayment made in October
1997.
</FN>
</TABLE>
As of September 30, 1997 and December 31, 1996, the Company's effective
weighted average interest rate on its long-term debt outstanding was 8.26%
and 7.68%, respectively.
Debt Repayments
In June 1997, the Company redeemed all of its outstanding 10% Subordinated
Debentures, due 2003 (the "10% Debentures"). An aggregate principal amount
of $139.3 million of the 10% Debentures was redeemed at a redemption price
of 100% of the principal amount thereof, together with accrued interest
thereon. On the date of redemption, the 10% Debentures had an accreted
value of $127.7 million.
In July 1997, the Company made optional debt repayments aggregating $527.0
with existing cash, cash equivalents and short-term investments.
In October 1997, the Company completed the redemption of its $250.0 million
principal amount 3 3/8% / 5 1/2% step up convertible subordinated
debentures due 2005 (the "Step Up Debentures"). The Company issued 8.4
million shares of its Class A Special Stock upon conversion of $206.4
million principal amount of Step Up Debentures while $43.6 million
principal amount of Step Up Debentures was redeemed for cash at a
redemption price of 105.58% of the principal amount, together with accrued
interest thereon. Stockholders' equity will be increased by the full amount
of Step Up Debentures converted plus accrued interest, less unamortized
debt acquisition costs. In connection with the redemption of the Step Up
Debentures, the Company will expense unamortized debt acquisition costs and
incur debt extinguishment costs of approximately $3.0 million, resulting in
an extraordinary loss, net of tax, of approximately $1.9 million during the
fourth quarter of 1997.
In October 1997, a subsidiary of the Company refinanced one of its existing
revolving credit facilities with the proceeds from borrowings under a new
$400.0 million credit agreement (the "New Bank Facility") with certain
banks. Initial borrowings under the New Bank Facility of $215.0 million
were used principally to repay existing debt. As a result of the
refinancing, the Company will expense unamortized debt acquisition costs of
approximately $5.2 million, resulting in an extraordinary loss, net of tax,
of approximately $3.4 million during the fourth quarter of 1997.
Extraordinary Items
Extraordinary items, for the nine and three months ended September 30,
1997, of $25.9 million or $.08 per common share and $3.1 million or $.01
per common share consist of unamortized debt acquisition costs and debt
extinguishment costs of $39.8 million and $4.7 million, respectively, net
of the related tax benefit of $13.9 million and $1.6 million, respectively,
incurred principally in connection with the Cable Refinancing, the Cellular
14
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Refinancing and the redemption of the 10% Debentures in the second quarter
of 1997 and the optional debt repayments made in the third quarter of 1997.
Lines of Credit
As of October 31, 1997, certain subsidiaries of the Company had unused
lines of credit of $1.060 billion. The availability and use of the unused
lines of credit is restricted by the covenants of the related debt
agreements and to subsidiary general purposes and dividend declaration. The
Company continually evaluates its debt structure with the intention of
reducing its debt service requirements when desirable.
Interest Rate Risk Management
The following table summarizes the terms of the Company's existing interest
rate exchange agreements ("Swaps), interest rate cap agreements ("Caps")
and interest rate collar agreements ("Collars") as of September 30, 1997
and December 31, 1996 (dollars in millions):
<TABLE>
<CAPTION>
Notional Average Estimated
Amount Maturities Interest Rate Fair Value
<S> <C> <C> <C> <C>
As of September 30, 1997
Variable to Fixed Swaps $600.0 1998-2000 5.56% $6.6
Caps 150.0 1998 6.67%
Collars 100.0 1997-1998 6.64% / 4.95%
As of December 31, 1996
Variable to Fixed Swaps $1,080.0 1997-2000 5.85% $7.4
Caps 250.0 1997 8.55%
Collars 620.0 1997-1998 6.98% / 5.16% 0.1
</TABLE>
The notional amounts of interest rate agreements, as presented in the above
table, are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss. The estimated fair value
approximates the proceeds (costs) to settle the outstanding contracts.
While Swaps, Caps and Collars represent an integral part of the Company's
interest rate risk management program, their incremental effect on interest
expense for the nine and three months ended September 30, 1997 and 1996 was
not significant.
6. STOCKHOLDERS' EQUITY
Concurrent with the announcement of the Scripps Acquisition in October
1995, the Company announced that its Board of Directors authorized a market
repurchase program (the "Repurchase Program") pursuant to which the Company
could purchase, at such times and on such terms as it deemed appropriate,
up to $500.0 million of its outstanding common equity securities, subject
to certain restrictions and market conditions. Based on the trade date for
stock repurchases, during the nine months ended September 30, 1997 and 1996
and the three months ended September 30, 1996, the Company repurchased 2.3
million shares, 10.1 million shares and 3.6 million shares, respectively,
of its common stock for aggregate consideration of $36.2 million, $173.4
million and $56.8 million, respectively, pursuant to the Repurchase
Program. During the term of the Repurchase Program, which terminated on May
13, 1997, the Company repurchased a total of 13.5 million shares of its
common stock for aggregate consideration of $228.6 million.
As part of the Repurchase Program, the Company sold put options on shares
of its Class A Special Stock. Put options on 4.0 million shares, sold by
the Company during 1996 and 1995 and outstanding at December 31, 1996,
expired unexercised during the first quarter of 1997. Upon expiration, the
Company reclassified $69.6 million, the amount it would have been obligated
to pay to repurchase such shares had the put options been exercised, from
common equity put options to additional capital in the Company's condensed
consolidated balance sheet.
As part of the Repurchase Program, in April 1997, the Company sold put
options on 2.0 million shares of its Class A Special Stock. The put options
give the holder the right to require the Company to repurchase such shares
at
15
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
$15.68 per share on specific dates in April and May 1998. The amount the
Company would be obligated to pay to repurchase such shares upon exercise
of the put options, totaling $31.4 million, has been reclassified from
additional capital to common equity put options in the Company's September
30, 1997 condensed consolidated balance sheet.
7. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of $303.4 million, $329.0
million, $69.6 million and $99.2 million during the nine and three months
ended September 30, 1997 and 1996, respectively.
The Company made cash payments for income taxes of $89.7 million, $77.7
million, $14.7 million and $15.5 million during the nine and three months
ended September 30, 1997 and 1996, respectively.
8. CONTINGENCIES
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 these actions will not materially
affect the financial position, results of operations or liquidity of the
Company.
16
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
9. FINANCIAL DATA BY BUSINESS SEGMENT
(Dollars in millions)
<TABLE>
<CAPTION>
Domestic
Cable Electronic Cellular
Communications Retailing Communications Other (1) Total
<S> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1997
Revenues, net............................... $1,537.0 $1,438.0 $335.4 $209.1 $3,519.5
Depreciation and amortization............... 462.7 79.2 94.4 67.4 703.7
Operating income (loss)..................... 261.9 151.7 45.6 (96.8) 362.4
Interest expense............................ 174.2 42.1 78.7 127.8 422.8
Capital expenditures........................ 367.1 69.6 87.2 158.1 682.0
Equity in net losses of affiliates.......... 212.1 212.1
Three Months Ended September 30, 1997
Revenues, net............................... $515.1 $490.6 $115.1 $83.4 $1,204.2
Depreciation and amortization............... 155.9 27.6 32.9 24.9 241.3
Operating income (loss)..................... 92.0 48.7 18.5 (35.5) 123.7
Interest expense............................ 54.3 14.2 26.6 48.8 143.9
Capital expenditures........................ 115.6 28.5 29.3 61.5 234.9
Equity in net losses of affiliates.......... 85.9 85.9
As of September 30, 1997
Assets...................................... $6,043.6 $2,194.0 $1,456.6 $3,095.7 $12,789.9
Long-term debt, less current portion........ 2,574.8 787.5 1,139.6 2,197.6 6,699.5
Nine Months Ended September 30, 1996
Revenues, net............................... $1,170.9 $1,286.9 $317.1 $96.0 $2,870.9
Depreciation and amortization............... 289.3 78.9 84.8 38.0 491.0
Operating income (loss)..................... 286.0 129.7 34.0 (78.7) 371.0
Interest expense............................ 168.1 50.5 68.4 116.7 403.7
Capital expenditures........................ 207.3 38.9 69.0 135.0 450.2
Equity in net losses (income) of affiliates. 0.1 (0.1) 89.2 89.2
Three Months Ended September 30, 1996
Revenues, net............................... $392.6 $431.1 $110.0 $40.9 $974.6
Depreciation and amortization............... 96.7 27.0 28.0 15.0 166.7
Operating income (loss)..................... 95.4 42.2 19.7 (28.2) 129.1
Interest expense............................ 57.3 15.4 24.4 38.6 135.7
Capital expenditures........................ 69.4 19.4 32.4 50.1 171.3
Equity in net losses of affiliates.......... 28.9 28.9
<FN>
- ---------------
(1) Other includes certain operating businesses, including E! Entertainment
(beginning on March 31, 1997), the Company's consolidated United Kingdom
cable and telecommunications operations, the Company's DBS operations and
elimination entries related to the segments presented.
</FN>
</TABLE>
17
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company has experienced significant growth in recent years both through
strategic acquisitions and growth in its existing businesses. The Company has
historically met its cash needs for operations through its cash flows from
operating activities. Cash requirements for acquisitions and capital
expenditures have been provided through the Company's financing activities and
sales of long-term investments, as well as its existing cash, cash equivalents
and short-term investments.
General Developments of Business
Cable TV Fund 14 A/B Venture In October 1997, the Company and Jones Intercable,
Inc. ("Jones Intercable") entered into an agreement whereby the Company, through
an indirect majority owned subsidiary, will acquire Cable TV Fund 14 A/B
Venture, a cable television system serving approximately 65,000 subscribers in
and around Broward County, Florida for $140 million in cash, subject to certain
adjustments. The acquisition is expected to be funded with the proceeds from
borrowings under one of the Company's subsidiary's existing credit facilities.
The acquisition is subject to a number of conditions, including the receipt of
necessary regulatory approvals and the approval of the limited partners of Cable
TV Fund 14 A/B Venture. The acquisition is expected to close in the first
quarter of 1998.
Microsoft Investment
On June 30, 1997 (the "Issuance Date"), the Company and Microsoft Corporation
("Microsoft") completed a Stock Purchase Agreement (the "Agreement") under which
Microsoft purchased and the Company issued 24.6 million shares of the Company's
Class A Special Common Stock, par value $1.00 per share (the "Class A Special
Stock"), at $20.29 per share, for $500.0 million and 500,000 shares of the
Company's newly issued 5.25% Series B Mandatorily Redeemable Convertible
Preferred Stock, par value $1,000 per share (the "Series B Preferred Stock"),
for $500.0 million.
The Series B Preferred Stock has a 5.25% pay-in-kind annual dividend. Dividends
will be paid quarterly through the issuance of additional shares of Series B
Preferred Stock (the "Additional Shares") and will be cumulative from the
Issuance Date (except that dividends on the Additional Shares will accrue from
the date such Additional Shares are issued). The Series B Preferred Stock,
including the Additional Shares, is convertible, at the option of Microsoft,
into 21.2 million shares of Class A Special Stock, subject to adjustment in
certain limited circumstances, which equals an initial conversion price of
$23.54 per share, increasing as a result of the Additional Shares to $33.91 per
share on June 30, 2004. The Series B Preferred Stock is mandatorily redeemable
on June 30, 2017, or, at the option of the Company beginning on June 30, 2004 or
at the option of Microsoft on June 30, 2004 or on June 30, 2012. Upon
redemption, the Company, at its option, may redeem the Series B Preferred Stock
with cash, Class A Special Stock or a combination thereof. As the Company
currently intends to redeem the Series B Preferred Stock with Class A Special
Stock upon redemption, the Series B Preferred Stock has been classified as a
component of stockholders' equity as of September 30, 1997. The Series B
Preferred Stock is generally non-voting.
Offerings of Subsidiary Debt
In May 1997, Comcast Cellular Holdings, Inc. ("Comcast Cellular"), a wholly
owned subsidiary of the Company, completed the sale of $1.0 billion principal
amount of 9 1/2% Senior Notes due 2007 (the "Cellular Notes") through a private
offering with registration rights. The Cellular Notes are obligations of Comcast
Cellular and are not obligations of, nor guaranteed by, the Company. Comcast
Cellular used the net proceeds from the offering to repay existing borrowings by
its subsidiaries, including its senior participating redeemable zero coupon
notes. Collectively, these transactions are referred to herein as the "Cellular
Refinancing."
In May 1997, Comcast Cable Communications, Inc. ("Comcast Cable"), a wholly
owned subsidiary of the Company, completed the sale of $1.7 billion principal
amount of notes (the "Cable Notes") through a private offering with registration
rights. The Cable Notes were issued in four tranches: $300.0 million principal
amount of 8 1/8% Notes due 2004, $600.0 million principal amount of 8 3/8% Notes
due 2007, $550.0 million principal amount of 8 7/8% Notes due
18
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
2017 and $250.0 million principal amount of 8 1/2% Notes due 2027. The Notes due
2027 are subject to repurchase at the option of the holder in 2009. The Cable
Notes are obligations of Comcast Cable and are not obligations of, nor
guaranteed by, the Company. Comcast Cable used substantially all of the net
proceeds from the offering to repay existing borrowings by its subsidiaries.
Collectively, these transactions are referred to herein as the "Cable
Refinancing."
In October 1997, the Company completed an exchange of 100% of the Cellular Notes
and the Cable Notes for new notes (having the terms described above) which were
registered under the Securities Act of 1933, as amended.
E! Entertainment
On March 31, 1997, the Company, through Comcast Entertainment Holdings LLC (the
"LLC"), which is owned 50.1% by the Company and 49.9% by The Walt Disney Company
("Disney"), purchased a 58.4% interest in E! Entertainment Television, Inc. ("E!
Entertainment"), an entertainment programming service distributed to more than
42 million subscribers, from Time Warner, Inc. ("Time Warner") for $321.9
million (the "E! Acquisition"). The E! Acquisition was funded by cash
contributions to the LLC by the Company and Disney of $132.8 million and $189.1
million, respectively. In connection with the E! Acquisition, the Company
contributed its 10.4% interest in E! Entertainment to the LLC. Following these
transactions, the LLC owns a 68.8% interest in E! Entertainment. To fund the
cash contribution to the LLC, the Company borrowed $132.8 million from Disney in
the form of two 10-year, 7% notes (the "Disney Notes").
The Company accounted for the E! Acquisition under the purchase method and E!
Entertainment was consolidated with the Company effective March 31, 1997. The
allocation of the purchase price relating to the assets and liabilities of E!
Entertainment is preliminary pending a final appraisal.
After September 1998, Disney, in certain circumstances, is entitled to request
that the LLC purchase Disney's entire interest in the LLC at its then fair
market value (as determined by an appraisal process). If the LLC elects not to
purchase Disney's interest, Disney has the right, at its option, to purchase
either the Company's entire interest in the LLC or all of the shares of stock of
E! Entertainment held by the LLC, in each case at fair market value. In the
event that Disney exercises its rights, as described above, a portion or all of
the Disney Notes may be replaced with a three year note due to Disney.
Scripps Cable
In November 1996, the Company acquired the cable television operations ("Scripps
Cable") of The E.W. Scripps Company ("E.W. Scripps") in exchange for 93.048
million shares of Class A Special Stock valued at $1.552 billion (the "Scripps
Acquisition"). The Company accounted for the Scripps Acquisition under the
purchase method and Scripps Cable was consolidated with the Company effective
November 1, 1996. During the second quarter of 1997, the Company recorded the
final purchase price allocation relating to the Scripps Acquisition. The terms
of the Scripps Acquisition provide for, among other things, the indemnification
of the Company by E. W. Scripps for certain liabilities, including tax
liabilities, relating to Scripps Cable prior to the acquisition date.
Comcast-Spectacor
In July 1996, the Company completed its acquisition (the "Sports Venture
Acquisition") of a 66% interest in the Philadelphia Flyers Limited Partnership,
a Pennsylvania limited partnership ("PFLP"), the assets of which, after giving
effect to the Sports Venture Acquisition, consist of (i) the National Basketball
Association ("NBA") franchise to own and operate the Philadelphia 76ers
basketball team and related assets (the "Sixers"), (ii) the National Hockey
League ("NHL") franchise to own and operate the Philadelphia Flyers hockey team
and related assets, and (iii) two adjacent arenas, leasehold interests in and
development rights related to the land underlying the arenas and other adjacent
parcels of land located in Philadelphia, Pennsylvania (collectively, the
"Arenas"). Concurrent with the completion of the Sports Venture Acquisition,
PFLP was renamed Comcast Spectacor, L.P. ("Comcast-Spectacor").
The Sports Venture Acquisition was completed in two steps. In April 1996, the
Company purchased the Sixers for $125.0 million in cash plus assumed net
liabilities of approximately $11.0 million through a partnership controlled by
the Company. To complete the Sports Venture Acquisition, in July 1996, the
Company contributed its interest in the Sixers, exchanged approximately 3.5
million shares of the Company's Class A Special Stock and 6,370 shares of the
Company's newly issued 5% Series A Convertible Preferred Stock and paid $15.0
million in cash for its current interest in Comcast- Spectacor. The remaining
34% interest in Comcast-Spectacor is owned by a group, including the former
majority owner
19
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
of PFLP, who also manages Comcast-Spectacor. In connection with the Sports
Venture Acquisition, Comcast-Spectacor assumed the outstanding liabilities
relating to the Sixers and the Arenas, including a mortgage obligation of $155.0
million. The Company accounts for its interest in Comcast-Spectacor under the
equity method.
Liquidity and Capital Resources
Cash, Cash Equivalents and Short-term Investments
The Company has traditionally maintained significant levels of cash, cash
equivalents and short-term investments to meet its short-term liquidity
requirements. Cash, cash equivalents and short-term investments as of September
30, 1997 were $780.7 million. As of September 30, 1997, $260.7 million of the
Company's cash, cash equivalents and short-term investments was restricted to
use by subsidiaries of the Company under contractual or other arrangements,
including $100.5 million which is restricted to use by Comcast UK Cable Partners
Limited ("Comcast UK Cable").
The Company's cash equivalents and short-term investments are recorded at cost
which approximates their fair value. As of September 30, 1997, short-term
investments have a weighted average maturity of approximately 7 months.
Investments
Sprint PCS. The Company, Tele-Communications, Inc. ("TCI"), Cox Communications,
Inc. ("Cox") and Sprint Corporation ("Sprint," and together with the Company,
TCI and Cox, the "Parents"), and certain subsidiaries of the Parents (the
"Partner Subsidiaries"), engage in the wireless communications business through
a limited partnership known as "Sprint Spectrum" or "Sprint PCS," a development
stage enterprise through June 30, 1997. The Company owns 15% of Sprint PCS and
accounts for its investment in Sprint PCS under the equity method.
Under the provisions of the Sprint PCS partnership agreement, the Partner
Subsidiaries have committed to contribute $4.2 billion in cash to Sprint PCS
through 1999, of which the Company's share is $630.0 million. Of this funding
requirement, the Company has made total cash contributions to Sprint PCS of
$559.3 million through October 31, 1997. The Company anticipates that Sprint
PCS' capital requirements over the next several years will be significant.
Requirements in excess of committed capital are planned to be funded by Sprint
PCS through external financing, including, but not limited to, vendor financing,
bank financing and securities offered to the public. In August 1996, Sprint PCS
sold $750.0 million principal amount at maturity of Senior Notes and Senior
Discount Notes due 2006 in a public offering. In October 1996, Sprint PCS closed
three credit agreements providing a total of $5.1 billion in available
financing, including $2.0 billion in bank financing and $3.1 billion in vendor
financing. The timing of the Company's remaining capital contributions to Sprint
PCS is dependent upon a number of factors, including Sprint PCS' working capital
requirements. The Company anticipates funding its remaining capital commitments
to Sprint PCS through its cash flows from operating activities, its existing
cash, cash equivalents, short-term investments and lines of credit or other
external financing, or by a combination of these sources.
TCGI. Through June 1996, the Company held investments in Teleport Communications
Group, Inc. ("TCGI"), TCG Partners and certain local joint ventures (the
"Teleport Joint Ventures") managed by TCGI and TCG Partners. TCGI is one of the
largest competitive alternative access providers in the United States in terms
of route miles. The Company had a 20.0% investment in TCGI and interests in the
Teleport Joint Ventures ranging from 12.4% to 20.3%. In June 1996, TCGI sold
approximately 27 million shares of its Class A Common Stock (the "TCGI Class A
Stock"), for $16 per share, in an initial public offering (the "TCGI IPO"). In
connection with the TCGI IPO, TCGI, the Company and subsidiaries of Cox, TCI and
Continental Cablevision ("Continental" and collectively with Cox, TCI and the
Company, the "Cable Stockholders") entered into an agreement pursuant to which
TCGI was reorganized (the "Reorganization"). The Reorganization consisted of,
among other things: (i) the acquisition by TCGI of TCG Partners; (ii) the
acquisition by TCGI of additional interests in the Teleport Joint Ventures
(including 100% of those interests held by the Company); and (iii) the
contribution to TCGI of $269.0 million aggregate principal amount of
indebtedness, plus accrued interest thereon, owed by TCGI to the Cable
Stockholders (except that TCI retained a $26 million subordinated note of TCGI),
including $53.8 million principal amount and $4.1 million of accrued interest
owed to the Company. In connection with the Reorganization, the Company received
25.6 million shares of TCGI's Class B Common Stock (the "TCGI Class B Stock").
Each share of TCGI Class B Stock is entitled to voting power equivalent to ten
shares of TCGI Class A Stock and is convertible, at the option of the holder,
into one share of TCGI Class A Stock. As a result of the TCGI IPO, the Company
recorded a $40.6 million increase in its proportionate share of TCGI's net
assets as a gain from equity offering
20
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
of affiliate (the "TCGI IPO Gain") in its condensed consolidated statement of
operations and accumulated deficit for the nine months ended September 30, 1996.
During the three months ended March 31, 1997, the Company received 2.76 million
shares of TCGI Class A Stock from TCGI in exchange for the Company's shares of
an alternate access provider. In May 1997, the Company sold all of its shares of
TCGI Class A Stock for $68.9 million and recognized a $68.9 million pre-tax gain
(the "TCGI Class A Gain"), which is included in investment income in its
condensed consolidated statement of operations and accumulated deficit for the
nine months ended September 30, 1997.
As of September 30, 1997, the Company owns TCGI Class B Stock representing a
19.8% voting interest and a 15.5% equity interest. The Company continues to
account for its interest in TCGI under the equity method based on its voting
interest maintained through the TCGI Class B Stock, its representation on TCGI's
board of directors and its participation in a TCGI stockholder agreement
granting certain rights to a control group. Assuming conversion of the TCGI
Class B Stock held by the Company into TCGI Class A Stock, the Company's
investment in TCGI, which had a carrying value of $123.3 million as of September
30, 1997, would have a fair value of approximately $1.239 billion, based on the
quoted market price of the TCGI Class A Stock as of October 31, 1997.
Roll-up of Primestar's Operations. In June 1997, the Company entered into a
binding letter agreement (the "Roll-up Agreement") with PRIMESTAR Partners L.P.
("Primestar") and the affiliates of each of the other partners of Primestar,
including TCI Satellite Entertainment, Inc. ("TSAT"), a publicly-traded company.
Primestar, in which the Company holds a 10.4% general and limited partnership
interest, is principally engaged in the business of acquiring, originating
and/or providing television programming services delivered by satellite through
a network of distributors, including the Company, throughout the United States.
The Roll-up Agreement sets forth the principal terms and conditions of a
proposed transaction (the "Roll-up Transaction"), through which the Company's
direct broadcast satellite ("DBS") operations, Primestar and the
Primestar-related distribution businesses of the other partners of Primestar
will be consolidated into a newly-formed publicly-traded company ("New
Primestar"). In connection with the Roll-up Transaction, TSAT will become a
wholly owned subsidiary of New Primestar. The Company provided DBS services,
through a distributorship arrangement with Primestar, to 169,000 subscribers as
of September 30, 1997.
New Primestar will acquire the Primestar partnership interests, subscribers and
related assets, as applicable, of the parties to the Roll-up Transaction, in
exchange for (i) cash, (ii) shares of Series A Common Stock of New Primestar and
(iii) shares of Series C Common Stock of New Primestar, in each case in an
amount determined pursuant to the Roll-up Agreement. The Company will have the
right to continue to market and support the Primestar programming services on an
agency basis after consummation of the Roll-up Transaction; however, the terms
of such arrangement have not yet been determined. Under the terms of the Roll-up
Agreement, upon closing of the Roll-up Transaction, the Company is expected to
receive approximately $75 million in cash and to own approximately 10% of New
Primestar common equity, both subject to adjustment based on the number of
subscribers, inventory amounts and other factors. As of September 30, 1997,
assets of the Company's DBS operations totaled $149.4 million.
In June 1997, Primestar entered into an agreement with The News Corporation
Limited, MCI Telecommunications Corporation and American Sky Broadcasting LLC
("ASkyB"), pursuant to which New Primestar (or, under certain circumstances,
Primestar) will acquire certain assets relating to a high-power, DBS business.
In exchange for such assets, ASkyB will receive non-voting securities of New
Primestar that will be convertible into non-voting common stock of New Primestar
and, accordingly, will reduce the Company's common equity interest in New
Primestar to approximately 7% on a fully diluted basis, subject to adjustment.
These transactions are not conditioned on each other and may close
independently. They are expected to close in 1998, subject to receipt of all
necessary governmental and regulatory approvals, including the approval of the
Federal Communications Commission. There can be no assurance that such approvals
will be obtained.
@Home. In July 1997, At Home Corporation ("@Home"), an investee of the Company
previously accounted for under the equity method, completed an initial public
offering of its Series A Common Stock (the "@Home IPO"). @Home provides Internet
services to customers and businesses over the cable television infrastructure in
a limited number of cities in the United States. Effective July 1, 1997, due to
the dilution of the Company's equity and voting interests and
21
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
other factors subsequent to the @Home IPO, the Company has discontinued the
equity method of accounting for its investment in @Home. As of September 30,
1997, the Company holds 8.0 million contractually restricted shares (the
"Restricted Shares") and 6.6 million unrestricted shares (the "Unrestricted
Shares") of @Home Series A Common Stock (the "@Home Series A Stock"),
representing a 12.4% and a 5.7% equity and voting interest, respectively. The
Company has recorded the Restricted Shares at their historical cost of $1.1
million and the Unrestricted Shares, which are classified as available for sale,
at their estimated fair market value of $151.5 million, based on the quoted
market price of the @Home Series A Stock as of September 30, 1997. The
unrealized pre-tax gain as of September 30, 1997 of $150.6 million has been
reported in the Company's condensed consolidated balance sheet as a component of
stockholders' equity, net of related deferred income tax expense of $52.7
million.
Nextel. At December 31, 1996, the Company held 3.3 million shares of Nextel
Communications, Inc. ("Nextel") common stock and options to acquire an
additional 25.0 million shares of Nextel common stock at $16 per share. As of
December 31, 1996, these options, which had an historical cost of $20.0 million,
were included in investments in publicly traded companies at their fair value of
$32.6 million. In February 1997, the Company sold these options to Nextel for
$25.0 million and recognized a pre-tax gain of $5.0 million, which is included
in investment income in the Company's condensed consolidated statement of
operations and accumulated deficit for the nine months ended September 30, 1997.
In July 1997, the Company sold its 3.3 million shares of Nextel common stock for
$73.4 million, resulting in a pre-tax gain of $32.2 million, which is included
in investment income in the Company's condensed consolidated statement of
operations and accumulated deficit for the nine and three months ended September
30, 1997.
In February 1996, in connection with certain preemptive rights of the Company
under previously existing agreements with Nextel, the Company purchased 8.16
million shares of Nextel common stock at $12.25 per share, for $99.9 million.
During the nine and three months ended September 30, 1996, the Company sold 5.6
million shares and 1.2 million shares, respectively, of Nextel common stock for
$105.4 million and $19.9 million, respectively, and recognized pre-tax gains of
$35.4 million and $5.8 million, respectively, which are included in investment
income in its condensed consolidated statement of operations and accumulated
deficit.
Time Warner/TBS. The Company received 1.36 million shares of Time Warner common
stock (the "Time Warner Stock") in exchange (the "Exchange") for all of the
shares of Turner Broadcasting System, Inc. ("TBS") stock (the "TBS Stock") held
by the Company as a result of the merger of Time Warner and TBS in October 1996.
As a result of the Exchange, the Company recognized a pre-tax gain of $47.3
million in the fourth quarter of 1996, representing the difference between the
Company's historical cost basis in the TBS Stock of $8.9 million and the new
basis for the Company's investment in Time Warner Stock of $56.2 million, which
was based on the closing price of the Time Warner Stock on the merger date of
$41.375 per share. In December 1996 and January 1997, the Company sold 92,500
shares and 1.27 million shares, respectively, of the Time Warner Stock,
representing the Company's entire interest in Time Warner, for $3.7 million and
$48.6 million, respectively. In connection with the January 1997 sales, the
Company recognized a pre-tax loss of $3.8 million, which is included in
investment income in its condensed consolidated statement of operations and
accumulated deficit for the nine months ended September 30, 1997. As of December
31, 1996, the 1.27 million shares of Time Warner Stock held by the Company were
recorded at their fair value of $47.4 million and were included in short-term
investments in the Company's condensed consolidated balance sheet.
The Company does not have any additional significant contractual commitments
with respect to any of its investments. However, to the extent the Company does
not fund its investees' capital calls, it exposes itself to dilution of its
ownership interests. The Company continually evaluates its existing investments
as well as new investment opportunities.
Financing
Other than the Scripps Acquisition, the Company has historically utilized a
strategy of financing its acquisitions through senior debt at the acquired
operating subsidiary level. Additional financing has also been obtained by the
Company through the issuance of subordinated debt at the intermediate holding
company and parent company levels and, to some extent, through public offerings
of a subsidiary company's stock and debt instruments.
22
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
The Cable Refinancing and the Cellular Refinancing had a significant impact on
the maturities of the Company's long-term debt. Maturities of long-term debt
outstanding as of September 30, 1997 and December 31, 1996 through 2001 are as
follows (dollars in millions):
<TABLE>
<CAPTION>
As of As of
September 30, 1997 December 31, 1996
<S> <C> <C>
1997................................................. $ 71.9 (1) $229.5
1998................................................. 110.0 671.5
1999................................................. 206.3 462.5
2000................................................. 305.3 668.1
2001................................................. 578.0 1,282.4
<FN>
- ---------------
(1) Represents maturities of long-term debt for the remaining three months of
1997, which includes $43.6 million of debt redeemed in October 1997 (see
below) and a $10.0 million optional debt repayment made in October 1997.
</FN>
</TABLE>
As of September 30, 1997 and December 31, 1996, the Company's effective weighted
average interest rate on its long-term debt outstanding was 8.26% and 7.68%,
respectively.
In June 1997, the Company redeemed all of its outstanding 10% Subordinated
Debentures, due 2003 (the "10% Debentures"). An aggregate principal amount of
$139.3 million of the 10% Debentures was redeemed at a redemption price of 100%
of the principal amount thereof, together with accrued interest thereon. On the
date of redemption, the 10% Debentures had an accreted value of $127.7 million.
In July 1997, the Company made optional debt repayments aggregating $527.0
million with existing cash, cash equivalents and short-term investments.
In October 1997, the Company completed the redemption of its $250.0 million
principal amount 3 3/8% / 5 1/2% step up convertible subordinated debentures due
2005 (the "Step Up Debentures"). The Company issued 8.4 million shares of its
Class A Special Stock upon conversion of $206.4 million principal amount of Step
Up Debentures while $43.6 million principal amount of Step Up Debentures was
redeemed for cash at a redemption price of 105.58% of the principal amount,
together with accrued interest thereon. Stockholders' equity will be increased
by the full amount of Step Up Debentures converted plus accrued interest, less
unamortized debt acquisition costs. In connection with the redemption of the
Step Up Debentures, the Company will expense unamortized debt acquisition costs
and incur debt extinguishment costs of approximately $3.0 million, resulting in
an extraordinary loss, net of tax, of approximately $1.9 million during the
fourth quarter of 1997.
In October 1997, a subsidiary of the Company refinanced one of its existing
revolving credit facilities with the proceeds from borrowings under a new $400.0
million credit agreement (the "New Bank Facility") with certain banks. Initial
borrowings under the New Bank Facility of $215.0 million were used principally
to repay existing debt. As a result of the refinancing, the Company will expense
unamortized debt acquisition costs of approximately $5.2 million, resulting in
an extraordinary loss, net of tax, of approximately $3.4 million during the
fourth quarter of 1997.
As of October 31, 1997, certain subsidiaries of the Company had unused lines of
credit of $1.060 billion. The availability and use of the unused lines of credit
is restricted by the covenants of the related debt agreements and to subsidiary
general purposes and dividend declaration. The Company continually evaluates its
debt structure with the intention of reducing its debt service requirements when
desirable.
23
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
The following table summarizes the terms of the Company's existing interest rate
exchange agreements ("Swaps"), interest rate cap agreements ("Caps") and
interest rate collar agreements ("Collars") as of September 30, 1997 and
December 31, 1996 (dollars in millions):
<TABLE>
<CAPTION>
Notional Average Estimated
Amount Maturities Interest Rate Fair Value
<S> <C> <C> <C> <C>
As of September 30, 1997
Variable to Fixed Swaps $600.0 1998-2000 5.56% $6.6
Caps 150.0 1998 6.67%
Collars 100.0 1997-1998 6.64% / 4.95%
As of December 31, 1996
Variable to Fixed Swaps $1,080.0 1997-2000 5.85% $7.4
Caps 250.0 1997 8.55%
Collars 620.0 1997-1998 6.98% / 5.16% 0.1
</TABLE>
The notional amounts of interest rate agreements, as presented in the above
table, are used to measure interest to be paid or received and do not represent
the amount of exposure to credit loss. The estimated fair value approximates the
proceeds (costs) to settle the outstanding contracts. While Swaps, Caps and
Collars represent an integral part of the Company's interest rate risk
management program, their incremental effect on interest expense for the nine
and three months ended September 30, 1997 and 1996 was not significant.
Concurrent with the announcement of the Scripps Acquisition in October 1995, the
Company announced that its Board of Directors authorized a market repurchase
program (the "Repurchase Program") pursuant to which the Company could purchase,
at such times and on such terms as it deemed appropriate, up to $500.0 million
of its outstanding common equity securities, subject to certain restrictions and
market conditions. Based on the trade date for stock repurchases, during the
nine months ended September 30, 1997 and 1996 and the three months ended
September 30, 1996, the Company repurchased 2.3 million shares, 10.1 million
shares and 3.6 million shares, respectively, of its common stock for aggregate
consideration of $36.2 million, $173.4 million and $56.8 million, respectively,
pursuant to the Repurchase Program. During the term of the Repurchase Program,
which terminated on May 13, 1997, the Company repurchased a total of 13.5
million shares of its common stock for aggregate consideration of $228.6
million.
As part of the Repurchase Program, the Company sold put options on shares of its
Class A Special Stock. Put options on 4.0 million shares, sold by the Company
during 1996 and 1995 and outstanding at December 31, 1996, expired unexercised
during the first quarter of 1997. Upon expiration, the Company reclassified
$69.6 million, the amount it would have been obligated to pay to repurchase such
shares had the put options been exercised, from common equity put options to
additional capital in the Company's condensed consolidated balance sheet.
As part of the Repurchase Program, in April 1997, the Company sold put options
on 2.0 million shares of its Class A Special Stock. The put options give the
holder the right to require the Company to repurchase such shares at $15.68 per
share on specific dates in April and May 1998. The amount the Company would be
obligated to pay to repurchase such shares upon exercise of the put options,
totaling $31.4 million, has been reclassified from additional capital to common
equity put options in the Company's September 30, 1997 condensed consolidated
balance sheet.
Following the Scripps Acquisition, the Company no longer had a stockholders'
deficiency. However, the Company expects to continue to recognize significant
losses for the foreseeable future, resulting in decreases in stockholders'
equity. The telecommunications industry, including cable and cellular
communications, and the electronic retailing industry are experiencing
increasing competition and rapid technological changes. The Company's future
results of operations will be affected by its ability to react to changes in the
competitive environment and by its ability to implement new technologies.
However, the Company believes that competition, technological changes and its
significant losses will not significantly affect its ability to obtain
financing.
24
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
The Company believes that it will be able to meet its current and long-term
liquidity and capital requirements, including fixed charges, through its cash
flows from operating activities, existing cash, cash equivalents, short-term
investments and lines of credit and other external financing.
Statement of Cash Flows
Cash and cash equivalents increased $242.3 million as of September 30, 1997 from
December 31, 1996 and decreased $112.9 million as of September 30, 1996 from
December 31, 1995. Changes 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 $742.1 million and $527.3
million for the nine months ended September 30, 1997 and 1996, respectively. The
increase of $214.8 million is principally due to the increase in the Company's
operating income before depreciation and amortization (see "Results of
Operations"), including the effects of the Scripps Acquisition, and changes in
working capital as a result of the timing of receipts and disbursements.
Net cash provided by (used in) financing activities was $345.3 million and
($19.2) million for the nine months ended September 30, 1997 and 1996,
respectively. During the nine months ended September 30, 1997, the Company
borrowed $2.968 billion, including the Cable Notes of $1.691 billion, the
Cellular Notes of $998.4 million, the Disney Notes of $132.8 million and
borrowings under its existing lines of credit, and repaid $3.518 billion of its
long-term debt, including $1.665 billion relating to the Cable Refinancing,
$981.8 million relating to the Cellular Refinancing, $139.3 million relating to
the redemption of the 10% Debentures and $527.0 million of optional debt
repayments made in July 1997. Deferred financing costs of $43.8 million were
incurred during the nine months ended September 30, 1997 related to the issuance
of the Cable Notes and the Cellular Notes. In addition, during the nine months
ended September 30, 1997, the Company received $1.0 billion from Microsoft for
the issuance of its Class A Special Stock and Series B Preferred Stock and
repurchased $33.6 million of its common stock. During the nine months ended
September 30, 1996, the Company borrowed $660.4 million under its existing lines
of credit and repaid $486.7 million, including the effects of refinancings and
$88.9 million of repayments under a vendor financing arrangement. In addition,
the Company repurchased $171.2 million of its common stock during the nine
months ended September 30, 1996.
Net cash used in investing activities was $845.1 million and $621.0 million for
the nine months ended September 30, 1997 and 1996, respectively. During the nine
months ended September 30, 1997, net cash used in investing activities includes
acquisitions, net of cash acquired, of $136.1 million, including the E!
Acquisition of $118.7 million, investments in affiliates of $180.3 million and
capital expenditures of $682.0 million, offset by the proceeds from the sales of
short-term and long-term investments and a distribution from an investee of
$171.5 million and Sprint PCS' repayment of a $25.2 million loan. During the
nine months ended September 30, 1996, net cash used in investing activities
includes investments in affiliates of $447.6 million, including $159.5 million
in connection with the Sports Venture Acquisition, capital contributions to
Sprint PCS of $100.7 million and the purchase of Nextel shares of $99.9 million,
and capital expenditures of $450.2 million, offset by proceeds from the sale of
short-term and long-term investments of $381.8 million, including $105.4 million
from the sale of Nextel shares.
Results of Operations
The effects of the Company's recent acquisitions, as well as increased levels of
capital expenditures, were to increase significantly the Company's revenues and
expenses resulting in substantial increases in its operating income before
depreciation and amortization, depreciation expense, amortization expense and
interest expense. In addition, the Company's equity in net losses of affiliates
has increased principally as a result of the start-up nature of certain of the
Company's equity investees (see "Operating Results by Business Segment" and
"Consolidated Analysis"). As a result of the increases in depreciation expense,
amortization expense, interest expense and equity in net losses of affiliates,
it is expected that the Company will continue to recognize significant losses
for the foreseeable future.
25
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
Summarized consolidated financial information for the Company for the nine and
three months ended September 30, 1997 and 1996 is as follows (dollars in
millions, "NM" denotes percentage is not meaningful):
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Increase / (Decrease)
1997 1996 $ %
<S> <C> <C> <C> <C>
Revenues.................................................. $3,519.5 $2,870.9 $648.6 22.6%
Cost of goods sold from electronic retailing.............. 867.2 774.7 92.5 11.9
Operating, selling, general and administrative expenses... 1,586.2 1,234.2 352.0 28.5
-------- --------
Operating income before depreciation and
amortization (1)....................................... 1,066.1 862.0 204.1 23.7
Depreciation.............................................. 341.7 219.7 122.0 55.5
Amortization.............................................. 362.0 271.3 90.7 33.4
-------- --------
Operating income.......................................... 362.4 371.0 (8.6) (2.3)
-------- --------
Interest expense.......................................... 422.8 403.7 19.1 4.7
Investment income......................................... (133.1) (63.7) 69.4 NM
Equity in net losses of affiliates........................ 212.1 89.2 122.9 NM
Gain from equity offering of affiliate.................... (40.6) (40.6) NM
Other..................................................... 13.4 22.6 (9.2) (40.7)
Income tax expense........................................ 45.4 33.9 11.5 33.9
Minority interest......................................... (66.8) (47.4) 19.4 40.9
Extraordinary items....................................... (25.9) (1.0) 24.9 NM
-------- --------
Net loss.................................................. ($157.3) ($27.7) $129.6 NM
======== ========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
September 30, Increase / (Decrease)
1997 1996 $ %
<S> <C> <C> <C> <C>
Revenues.................................................. $1,204.2 $974.6 $229.6 23.6%
Cost of goods sold from electronic retailing.............. 297.2 262.3 34.9 13.3
Operating, selling, general and administrative expenses... 542.0 416.5 125.5 30.1
-------- ------
Operating income before depreciation and
amortization (1) ...................................... 365.0 295.8 69.2 23.4
Depreciation.............................................. 120.2 77.0 43.2 56.1
Amortization.............................................. 121.1 89.7 31.4 35.0
-------- ------
Operating income.......................................... 123.7 129.1 (5.4) (4.2)
-------- ------
Interest expense.......................................... 143.9 135.7 8.2 6.0
Investment income......................................... (44.5) (16.2) 28.3 NM
Equity in net losses of affiliates........................ 85.9 28.9 57.0 NM
Other..................................................... 9.0 (0.3) 9.3 NM
Income tax expense........................................ 8.5 9.3 (0.8) (8.6)
Minority interest......................................... (27.0) (18.4) 8.6 46.7
Extraordinary items....................................... (3.1) 3.1 NM
-------- ------
Net loss.................................................. ($55.2) ($9.9) $45.3 NM
======== ======
<FN>
- ------------
(1) Operating income before depreciation and amortization is commonly referred
to in the Company's businesses as "operating cash flow." Operating cash
flow is a measure of a company's ability to generate cash to service its
obligations, including debt service obligations, and to finance capital and
other expenditures. In part due to the capital intensive nature of the
Company's 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 the
Company's industries. Operating cash flow does not purport to represent net
income or net cash
26
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
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. See "Statement of Cash Flows" above for a discussion of net
cash provided by operating activities.
</FN>
</TABLE>
Operating Results by Business Segment
Domestic Cable Communications
As a result of the Scripps Acquisition, the Company commenced consolidating the
financial results of Scripps Cable effective November 1, 1996. The following
table presents actual financial information for the nine and three months ended
September 30, 1997 and pro forma financial information for the nine and three
months ended September 30, 1996 as if the Scripps Acquisition occurred on
January 1, 1996. Pro forma financial information is presented herein for
purposes of analysis and may not reflect what actual operating results would
have been had the Company owned Scripps Cable since January 1, 1996 (dollars in
millions):
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Increase
1997 1996 $ %
<S> <C> <C> <C> <C>
Service income................................... $1,537.0 $1,398.3 $138.7 9.9%
Operating, selling, general and
administrative expenses..................... 812.4 722.3 90.1 12.5
-------- -------- ------
Operating income before depreciation
and amortization (a)........................ $724.6 $676.0 $48.6 7.2%
======== ======== ======
Three Months Ended
September 30, Increase
1997 1996 $ %
Service income................................... $515.1 $469.2 $45.9 9.8%
Operating, selling, general and
administrative expenses..................... 267.2 242.9 24.3 10.0
-------- -------- ------
Operating income before depreciation
and amortization (a)........................ $247.9 $226.3 $21.6 9.5%
======== ======== ======
<FN>
- ---------------
(a) See footnote (1) on page 26.
</FN>
</TABLE>
Of the respective $138.7 million and $45.9 million increases in service income
for the nine and three month periods from 1996 to 1997, $28.7 million and $9.1
million are attributable to subscriber growth, $94.2 million and $32.9 million
relate to changes in rates and $15.8 million and $3.9 million relate to other
product offerings.
Of the respective $90.1 million and $24.3 million increases in operating,
selling, general and administrative expenses for the nine and three month
periods from 1996 to 1997, $20.9 million and $3.8 million are attributable to
increases in the costs of cable programming as a result of subscriber growth,
additional channel offerings and changes in rates, $16.1 million and $5.0
million are attributable to increases in costs associated with customer service
and $53.1 million and $15.5 million result from increases in the cost of labor,
other volume related expenses and costs associated with new product offerings.
It is anticipated that the Company's cost of cable programming will increase in
the future as cable programming rates increase and additional sources of cable
programming become available.
27
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
Electronic Retailing
The following table sets forth operating results for the Company's electronic
retailing segment, consisting of the operations of QVC, Inc. and its
subsidiaries ("QVC"), a majority owned and controlled subsidiary of the Company
(dollars in millions):
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Increase
1997 1996 $ %
<S> <C> <C> <C> <C>
Net sales from electronic retailing.............. $1,438.0 $1,286.9 $151.1 11.7%
Cost of goods sold from electronic retailing..... 867.2 774.7 92.5 11.9
Operating, selling, general and administrative
expenses.................................... 339.9 303.6 36.3 12.0
-------- -------- ------
Operating income before depreciation
and amortization (a)........................ $230.9 $208.6 $22.3 10.7%
======== ======== ======
Gross margin..................................... 39.7% 39.8%
Three Months Ended
September 30, Increase
1997 1996 $ %
Net sales from electronic retailing.............. $490.6 $431.1 $59.5 13.8%
Cost of goods sold from electronic retailing..... 297.2 262.3 34.9 13.3
Operating, selling, general and administrative
expenses.................................... 117.1 99.6 17.5 17.6
-------- -------- ------
Operating income before depreciation
and amortization (a)........................ $76.3 $69.2 $7.1 10.3%
======== ======== ======
Gross margin..................................... 39.4% 39.2%
<FN>
- ---------------
(a) See footnote (1) on page 26.
</FN>
</TABLE>
The respective increases in net sales from electronic retailing of $151.1
million and $59.5 million for the nine and three month periods from 1996 to 1997
are primarily attributable to the effects of 7.2% and 7.5% increases,
respectively, in the average number of homes receiving QVC services in the
United States and 14.1% and 14.7% increases, respectively, in the average number
of homes receiving QVC services in the United Kingdom.
The increases in cost of goods sold from electronic retailing are primarily
related to the growth in net sales. The changes in gross margin from 1996 to the
same periods in 1997 are a result of changes in product mix.
Of the respective increases in operating, selling, general and administrative
expenses of $36.3 million and $17.5 million for the nine and three month periods
from 1996 to 1997, $21.0 million and $7.4 million are primarily attributable to
start-up costs incurred by QVC in Germany, which began operations in the fourth
quarter of 1996. The remaining increases of $15.3 million and $10.1 million are
primarily attributable to higher sales volume offset, in part, by the reduction
in expenses realized upon consolidation of QVC's multichannel operations and an
increase in net finance fee income from credit card operations for the nine
month period from 1996 to 1997.
28
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
Cellular Communications
The following table sets forth the operating results for the Company's cellular
communications segment (dollars in millions):
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Increase/(Decrease)
1997 1996 $ %
<S> <C> <C> <C> <C>
Service income................................... $335.4 $317.1 $18.3 5.8%
Operating, selling, general and administrative
expenses.................................... 195.4 198.3 (2.9) (1.5)
-------- -------- ------
Operating income before depreciation
and amortization (a)........................ $140.0 $118.8 $21.2 17.8%
======== ======== ======
Three Months Ended
September 30, Increase
1997 1996 $ %
Service income................................... $115.1 $110.0 $5.1 4.6%
Operating, selling, general and administrative
expenses.................................... 63.7 62.3 1.4 2.2
-------- -------- ------
Operating income before depreciation
and amortization (a)........................ $51.4 $47.7 $3.7 7.8%
======== ======== ======
<FN>
- ---------------
(a) See footnote (1) on page 26.
</FN>
</TABLE>
Of the respective $18.3 million and $5.1 million increases in service income for
the nine and three month periods from 1996 to 1997, $16.9 million and $2.3
million are attributable to the Company's subscriber growth and $11.9 million
and $4.6 million are attributable to roamer growth. Offsetting these increases
are decreases of $10.5 million and $1.8 million resulting primarily from a
reduction in the average rate per minute of use as a result of promotional
and/or free minutes.
The $2.9 million decrease in operating, selling, general and administrative
expenses for the nine month period from 1996 to 1997 is primarily attributable
to expense reductions achieved through implementation of fraud management
programs, improved bad debt experience as a result of stronger credit procedures
and a reduction in commission costs resulting from fewer gross sales in 1997 as
compared to the same period in 1996. The $1.4 million increase in operating,
selling, general and administrative expenses for the three month period from
1996 to 1997 is primarily attributable to an increase in the number of cellular
retail stores in 1997 as compared to the same period in 1996, partially offset
by expense reductions achieved through implementation of fraud management
programs and improved bad debt experience as a result of stronger credit
procedures.
Consolidated Analysis
The respective $122.0 million and $43.2 million increases in depreciation
expense for the nine and three month periods from 1996 to 1997 are primarily
attributable to the effects of the Scripps Acquisition and the effects of
capital expenditures. Depreciation expense for the nine months ended September
30, 1997 includes the effects of the final purchase price allocation relating to
the Scripps Acquisition.
The respective $90.7 million and $31.4 million increases in amortization expense
for the nine and three month periods from 1996 to 1997 are primarily
attributable to the effects of the Scripps Acquisition. Amortization expense for
the nine months ended September 30, 1997 includes the effects of the final
purchase price allocation relating to the Scripps Acquisition.
The respective $19.1 million and $8.2 million increases in interest expense for
the nine and three month periods from 1996 to 1997 are attributable to increased
levels of debt and changes in the Company's weighted average interest rate. The
Company anticipates that, for the foreseeable future, interest expense will be a
significant cost to the Company and
29
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
will have a significant adverse effect on the Company's ability to realize net
earnings. The Company believes it will continue to be able to meet its
obligations through its ability both to generate operating income before
depreciation and amortization and to obtain external financing.
The respective $69.4 million and $28.3 million increases in investment income
for the nine and three month periods from 1996 to 1997 are primarily
attributable to the gains recognized in 1997 on the sales of Nextel common stock
and TCGI Class A stock, offset by the gains recognized in 1996 on the sales of
Nextel common stock.
The respective $122.9 million and $57.0 million increases in equity in net
losses of affiliates for the nine and three month periods from 1996 to 1997 are
primarily due to the effects of increased losses incurred by Sprint PCS, TCGI,
the UK Investees and certain of the Company's other equity investees, and the
effects of the E! Acquisition (see below) and the Sports Venture Acquisition.
Based on Sprint PCS' current operations and business plan, the Company
anticipates that its proportionate share of Sprint PCS' losses will be
significant in future periods. In addition, as a result of the E! Acquisition,
the Company recorded a charge representing the cumulative amount that would have
been recorded had the Company accounted for its investment in E! Entertainment
under the equity method since the date of initial investment (the "Cumulative
Charge"). Since the Company's proportionate share of E! Entertainment's
cumulative losses was in excess of the Company's historical cost basis in E!
Entertainment and as the Company was under no contractual obligation to fund the
losses of E! Entertainment, the Cumulative Charge was limited to the Company's
historical cost basis of $12.1 million. Such amount is included in equity in net
losses of affiliates in the Company's condensed consolidated statement of
operations and accumulated deficit for the nine months ended September 30, 1997
as it is not significant for restatement of the Company's prior year financial
statements.
Gain from equity offering of affiliate for the nine months ended September 30,
1996 represents the TCGI IPO Gain.
The respective $9.2 million decrease and $9.3 million increase in other expenses
for the nine and three month periods from 1996 to 1997 are primarily
attributable to the settlement of certain litigation during the nine months
ended September 30, 1996 and the effects of fluctuations in the foreign currency
exchange rate.
The $11.5 million increase in income tax expense for the nine month period from
1996 to 1997 is primarily a result of an increase in state income tax expense
due to increases in the net income of certain of the Company's subsidiaries,
increases in non-deductible foreign losses and equity in net losses of
affiliates and increased goodwill amortization resulting from the Scripps
Acquisition, offset by the effect of the increase in the Company's loss before
income tax expense, minority interest and extraordinary items.
The $19.4 million and $8.6 million increases in minority interest for the nine
and three month periods from 1996 to 1997 are primarily attributable to the
effects of changes in the net income (loss) of QVC and Comcast UK Cable.
Extraordinary items, for the nine and three months ended September 30, 1997, of
$25.9 million or $.08 per common share and $3.1 million or $.01 per common share
consist of unamortized debt acquisition costs and debt extinguishment costs of
$39.8 million and $4.7 million, respectively, net of the related tax benefit of
$13.9 million and $1.6 million, respectively, incurred principally in connection
with the Cable Refinancing, the Cellular Refinancing and the redemption of the
10% Debentures in the second quarter of 1997 and the optional debt repayments
made in the third quarter of 1997.
For the nine and three months ended September 30, 1997 and 1996, the Company's
distributions from investees and earnings before extraordinary items, income tax
expense, equity in net losses of affiliates and fixed charges (interest expense)
were $550.7 million, $502.6 million, $186.2 million and $166.5 million,
respectively. Such earnings were adequate to cover the Company's fixed charges,
including interest capitalized of $18.0 million, $23.3 million, zero and $8.6
million, of $440.8 million, $427.0 million, $143.9 million and $144.3 million
for the nine and three months ended September 30, 1997 and 1996, respectively.
Fixed charges include non-cash interest expense, net of interest capitalized, of
$42.7 million, $48.1 million, $13.8 million and $15.9 million for the nine and
three months ended September 30, 1997 and 1996, respectively.
30
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
The Company believes that its losses will not significantly affect the
performance of its normal business activities because of its existing cash, cash
equivalents and short-term investments, its ability to generate operating income
before depreciation and amortization and its ability to obtain external
financing.
The Company believes that its operations are not materially affected by
inflation.
31
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not party to litigation which, in the opinion of the
Company's management, will have a material adverse effect on the Company's
financial position, results of operations or liquidity.
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 September 16,
1997.
10.2* Comcast Corporation 1996 Deferred Compensation
Plan, as amended and restated, effective September
16, 1997.
10.3* Comcast Corporation 1990 Restricted Stock Plan, as
amended and restated, effective September 16,
1997.
10.4* Comcast Corporation 1996 Cash Bonus Plan, as
amended and restated, effective May 30, 1997.
10.5* Comcast Corporation 1997 Deferred Stock Option
Plan, effective September 16, 1997.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
(i) Comcast Corporation filed a Current Report on Form
8-K under Item 5 on July 3, 1997 relating to the
completion of the $1 billion investment by
Microsoft Corporation in Comcast Corporation.
- ----------
* Constitutes a management contract or compensatory plan or arrangement.
32
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
SIGNATURE
Pursuant to the requirements of the Securities and 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 S. SMITH
-----------------------------------
Lawrence S. Smith
Executive Vice President
(Principal Accounting Officer)
Date: November 14, 1997
33
COMCAST CORPORATION
1996 STOCK OPTION PLAN
(As Amended and Restated, Effective May 1, 1997)
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
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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 the Sponsor's Class A
Special 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.
(o) "Grant Date" means each February 1st after the
date of adoption of the Plan by the Board.
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(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.
(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 either Paragraph 3(a)(i) or Paragraph 3(a)(ii).
(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:
(x) the number of Shares owned by such
Optionee for less than six months;
plus
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(y) 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
(z) 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.
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, and for the Sponsor's Class A 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) Ralph J. Roberts;
(ii) a lineal descendant of Ralph J. Roberts; or
(iii) a trust established for the benefit of any
of Ralph J. Roberts and/or a lineal descendant or descendants of Ralph J.
Roberts.
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(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.
(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.
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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.
(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 Section 11, shall be 1,000,000 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 20,000,000 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.
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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;
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,
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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 the
Optionee is not an employee of a Company on the Date of Grant.
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.
(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
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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.
(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 serve as an active employee of a Company, as
determined by the Committee in its sole discretion, or, if the Optionee is a
party to an employment agreement with a Company, on the effective date of the
Optionee's termination of employment as determined under such agreement.
(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
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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 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
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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.
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:
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(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
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
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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; provided further, that:
(i) In the event that an Optionee terminates
service as a Non-Employee Director 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 service as a Non-Employee Director; 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 the date the Optionee terminates service as a
Non-Employee Director; provided, however, that in no event shall an
Option be exercisable after five years from the Grant Date.
(ii) In the event that an Optionee terminates
service as a Non-Employee Director 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 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 Option be exercisable after five years from the Grant
Date.
(iii) In the event that an Optionee's service as
a Non- Employee Director is terminated for Cause, each unexercised
Option shall
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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.
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
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.
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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 are 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. Upon the close of the period described in this Paragraph 12(a)
during which an Option may be exercised in connection with a Terminating Event,
such Option (including such portion thereof that is not exercisable) shall
terminate to the extent that such Option have not theretofore been exercised.
(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.
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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
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:
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(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 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.
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(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
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. In addition, with respect to persons
subject to reporting requirements under section 16(a) of the 1934 Act, such
election must be made at least six months prior to the date the amount of tax to
be withheld or paid is determined (which election will remain in effect with
regard to the exercise of an Option and all future exercises of Options unless
revoked upon six months prior notice). 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.
17. Effective Date and Term of Plan
This amendment and restatement of the Plan is effective as of
May 1, 1997. The Plan shall expire no later than the tenth anniversary of the
date the Plan was initially adopted by the Board, unless sooner terminated by
the Board. Any Option granted before the approval of the Plan by the Sponsor's
shareholders shall be expressly conditioned upon, and shall not be exercisable
until, such approval. If such shareholder approval is not received within 12
months before or after the date of the initial adoption of the Plan by the
Board, all Options granted under the Plan shall expire.
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
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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 1st day of May, 1997.
COMCAST CORPORATION
By: /s/ Stanley Wang
Attest: /s/ Arthur R. Block
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COMCAST CORPORATION
1996 DEFERRED COMPENSATION PLAN
(As Amended and Restated, Effective September 16, 1997)
<PAGE>
TABLE OF CONTENTS
Page
1. ESTABLISHMENT OF PLAN........................... 1
2. DEFINITIONS..................................... 1
3. ELECTION TO DEFER COMPENSATION.................. 8
4. FORMS OF DISTRIBUTION........................... 12
5. BOOK ACCOUNTS................................... 12
6. NON-ASSIGNABILITY, ETC.......................... 14
7. DEATH OR DISABILITY OF PARTICIPANT.............. 15
8. INTERPRETATION.................................. 15
9. AMENDMENT OR TERMINATION........................ 16
10. MISCELLANEOUS PROVISIONS........................ 16
11. EFFECTIVE DATE.................................. 16
<PAGE>
COMCAST CORPORATION
1996 DEFERRED COMPENSATION PLAN
(As Amended and Restated, Effective September 16, 1997)
1. ESTABLISHMENT OF PLAN
COMCAST CORPORATION, a Pennsylvania corporation, hereby amends and
restates the Comcast Corporation 1996 Deferred Compensation Plan (the "Plan"),
effective as of September 16, 1997. The Plan was adopted effective as of August
15, 1996, to permit outside directors and eligible employees to defer the
receipt of compensation otherwise payable to such outside directors and eligible
employees in accordance with the terms of the Plan. The Plan is a continuation
of the Prior Plan, which was initially effective as of February 12, 1974. The
Plan is unfunded and is maintained primarily for the purpose of providing
deferred compensation to outside directors and to a select group of management
or highly compensated employees.
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 under
the Plan shall be debited.
2.2 "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.
2.3 "Active Participant" means:
2.3.1 Each Participant who is in active service as an
Outside Director; and
2.3.2 Each Participant who is actively employed by a
Participating Company as an Eligible Employee.
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2.4 "Administrator" means the Committee.
2.5 "Annual Rate of Pay" means, as of any date, the sum of:
2.5.1 An employee's annualized base pay rate, plus
2.5.2 The amount of bonus, if any, paid to such
employee pursuant to a Bonus Program during the
365-day period ending on such date.
An employee's Annual Rate of Pay shall not include sales commissions or other
similar payments or awards.
2.6 "Applicable Interest Rate" means:
2.6.1 Except as otherwise provided in Section 2.6.2,
the Applicable Interest Rate means 12% per
annum, compounded annually as of the last day of
the Plan Year.
2.6.2 Except to the extent otherwise required by
Section 9.2, 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 (1)
the rate in effect under Section 2.6.1 or (2)
the Prime Rate plus one percent, compounded
annually as of the last day of the Plan Year.
2.7 "Board" means the Board of Directors of the Company, or the
Executive Committee of the Board of Directors of the Company.
2.8 "Bonus Program" means a plan or arrangement maintained by a
Participating Company for the benefit of a class or category of employees, which
provides for the payment of a cash bonus to eligible members of such class or
category upon the satisfaction of such conditions as may be provided under such
plan or arrangement, provided that the term "Bonus Program" shall not include
any arrangement for the payment of sales commissions or other similar payments
or awards.
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.
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2.10 "Committee" means the Subcommittee on Performance Based
Compensation of the Compensation Committee of the Board of Directors of the
Company.
2.11 "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.
2.12 "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 the 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 "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 2.12.
The Committee's adjustment shall be effective and binding for all purposes of
the Plan.
2.13 "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 for such December 31.
2.14 "Compensation" means:
2.14.1 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
2.14.2 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.
2.15 "Deceased Participant" means:
2.15.1 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; or
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2.15.2 An Inactive Participant who dies following
termination of active service.
2.16 "Disabled Participant" means:
2.16.1 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;
2.16.2 An Inactive Participant who becomes disabled (as
determined by the Committee) following termination of active service; or
2.16.3 The duly-appointed legal guardian of an
individual described in Section 2.16.1 or 2.16.2 acting on behalf of such
individual.
2.17 "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:
2.17.1 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;
2.17.2 Designate the time that part or all of the
Account shall be distributed; and
2.17.3 Designate the manner in which income, gains and
losses will be credited to the Account.
2.18 "Eligible Employee" means:
2.18.1 Each employee of a Participating Company who, as
of December 31, 1989, was eligible to
participate in the Prior Plan;
2.18.2 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 (1) the date on which an Election with
respect to the deferral of Compensation is filed
with the Administrator and (2) the first day of
each calendar year beginning after December 31,
1994.
2.18.3 Each employee of a Participating Company whose
Annual Rate of Pay is $125,000 or more as of
both (1) the date on which an
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Election is filed with the Administrator and (2)
the first day of the Plan Year in which such
Election is filed.
2.18.4 Each New Key Employee.
2.19 "Fair Market Value."
2.19.1 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
2.19.2 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.
2.19.3 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.
2.20 "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.
2.21 "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.
2.22 "Hardship" means a Participant's serious financial
hardship, as determined by the Board on a uniform and nondiscriminatory basis
pursuant to the Participant's request under Section 7.3.
2.23 "Inactive Participant" means each Participant who is not
in active service as an Outside Director and is not actively employed by a
Participating Company.
2.24 "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.
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2.25 "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.
2.26 "New Key Employee" means each employee of a Participating
Company hired on or after August 15, 1996 whose annual rate of pay on his date
of hire is $125,000 or more.
2.27 "Normal Retirement" means:
2.27.1 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
2.27.2 For a Participant who is an Outside Director
immediately preceding his termination of
service, his normal retirement from the Board.
2.28 "Outside Director" means a member of the Board who is not
an employee of a Participating Company.
2.29 "Parent Company" means all corporations that, at the time
in question, are parent corporations of the Company within the meaning of
section 424(e) of the Code.
2.30 "Participant" means each individual who has made an
Election, and who has an undistributed amount credited to an Account under the
Plan, including an Active Participant, a Deceased Participant, a Disabled
Participant, a Grandfathered Participant and an Inactive Participant.
2.31 "Participating Company" means the Company and each of the
Parent Companies and Subsidiary Companies.
2.32 "Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization.
2.33 "Plan" means the Comcast Corporation 1996 Deferred
Compensation Plan, as set forth herein, and as may be amended from time to time.
2.34 "Plan Year" means the calendar year.
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2.35 "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.
2.36 "Prior Plan" means the Comcast Corporation Deferred
Compensation Plan.
2.37 "Retired Participant" means a Participant who has
terminated service pursuant to a Normal Retirement.
2.38 "Roberts Family." Each of the following is a member of the
Roberts Family:
2.38.1 Ralph J. Roberts;
2.38.2 A lineal descendant of Ralph J. Roberts; or
2.38.3 A trust established for the benefit of any of
Ralph J. Roberts and/or a lineal descendant or
descendants of Ralph J. Roberts.
2.39 "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.
2.40 "Subsidiary Companies" means all corporations that, at the
time in question, are subsidiary corporations of the Company within the meaning
of section 424(f) of the Code.
2.41 "Terminating Event" means any of the following events:
2.41.1 The liquidation of the Company; or
2.41.2 A Change of Control.
2.42 "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.
3. ELECTION TO DEFER COMPENSATION
3.1 Elections. Each Outside Director and Eligible Employee
shall have the right to defer all or any portion of the Compensation (including
bonuses, if any) which he or she
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shall receive in the following Plan Year by filing an 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 amount of
Compensation deferred by a Participant for a Plan Year pursuant to an Election
shall be withheld on a pro-rata basis from each periodic installment payment of
the Participant's Compensation for the Plan Year (in accordance with the general
pay practices of the Participating Companies), and credited to the Participant's
Account in accordance with Section 5.1. Except to the extent permitted by the
Administrator in its sole discretion, no Election filed by a Former Eligible
Employee shall be valid or effective.
3.2 Filing of Elections. An Election to defer all or any
portion of the Compensation payable for the performance of services as an
Outside Director or as an Eligible Employee shall be made on the form provided
by the Administrator for this purpose. Except as provided in Section 3.3, no
such Election shall be effective unless it is filed with the Administrator on or
before the close of business on December 31 of the Plan Year preceding the Plan
Year to which the Election applies.
3.3 Filing of Elections 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 or her compensation to be earned in the Plan Year in which the
New Key Employee was hired, beginning with the payroll period next following the
filing of an Election with the Administrator and before the close of such Plan
Year by making and filing the Election with the Administrator within 30 days of
such New Key Employee's date of hire. Elections by such New Key Employee for
succeeding Plan Years shall be made in accordance with Section 3.1 and Section
3.2.
3.4 Plan Years to which Elections May Apply. A separate
Election may be made for each Plan Year as to which an Outside Director or
Eligible Employee desires to defer all or any portion of his or her
Compensation, but the failure of an Outside Director or Eligible Employee to
make an Election for any Plan Year shall not affect such Employee's right to
make an Election for any other Plan Year.
3.5 Election of Distribution Date. Each Participant who elects
to defer all or any portion of his or her Compensation for any Plan Year shall,
on the Election, also elect the time of payment and form of distribution of the
amount of the deferred Compensation to which the particular Election relates;
provided, however, that, subject to acceleration pursuant to Section 3.6.3,
Section 3.6.4, Section 7.1, Section 7.2 or Section 7.3, no distribution may be
made earlier than January 2nd of the second calendar year beginning after the
date the Election is filed with the Administrator, nor later than January 2nd of
the eleventh calendar year beginning after the date the Election is filed with
the Administrator. Each Participant may select a form of distribution in
accordance with Article 4.
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3.6 Designation of Payment Date.
3.6.1 The designation of the time for distribution of
benefits to begin under the Plan may vary with
each separate Election, provided that except as
otherwise provided in Section 3.6.3 or 3.6.4, no
portion of a Participant's Account subject to
distribution in installments pursuant to Section
4.1.2 or Section 4.1.3 may be deferred to a
later date after such distribution has begun.
3.6.2 Each Active Participant who has previously
elected to receive a distribution of part or all
of his or her Account, or who, pursuant to this
Section 3.6.2, has elected to defer payment for
an additional period from the originally-elected
payment date, may elect to change the form of
distribution or defer the time of payment of
such amount to begin for a minimum of one and a
maximum of ten additional years from the
previously-elected payment date, by filing an
Election with the Administrator on or before the
close of business on June 30 of the Plan Year
preceding the Plan Year in which the
distribution would otherwise be made, provided
that an Election applicable to the 1997 Plan
Year shall not be effective unless it is filed
with the Administrator on or before the close of
business on October 15, 1996.
3.6.3 A Deceased Participant's estate or beneficiary
to whom the right to payment under the Plan
shall have passed may elect to change the form
of distribution from the form of distribution
that payment of the Deceased Participant's
Account would otherwise be made, and
3.6.3.1 Defer the time of payment of the
Deceased Participant's Account to begin
for a minimum of one additional year
from the date payment would otherwise
begin (provided that if an Election is
made pursuant to this Section 3.6.3.1,
the Deceased Participant's Account shall
be distributed in full on or before the
fifth anniversary of the Deceased
Participant's death); or
3.6.3.2 Accelerate the time of payment of such
amount to begin from the date payment
would otherwise be made to January 2nd
of the calendar year beginning after the
Deceased Participant's death.
An Election pursuant to this Section 3.6.3 must
be filed with the Administrator on or before
the close of business on (i) the June 30
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following the Participant's death on or before
May 1 of a calendar year, (ii) the 60th day
following the Participant's death after May 1
and before November 2 of a calendar year or
(iii) the December 31 following the
Participant's death after November 1 of a
calendar year. Such estate or beneficiary, as
applicable, shall be entitled to one and only
one Election pursuant to this Section 3.6.3
with respect to a Participant's Account, but
shall otherwise be treated as the Participant
for all other purposes of the Plan.
3.6.4 A Disabled Participant may elect to:
3.6.4.1 Change the form of distribution from the
form of distribution that payment of the
Disabled Participant's Account would
otherwise be made; and
3.6.4.2 Accelerate the time of payment of the
Disabled Participant's Account to begin
from the date payment would otherwise be
made to January 2nd of the calendar year
beginning after the Participant became
disabled.
An Election pursuant to this Section 3.6.4
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 2 of a calendar
year.
3.6.5 A Retired Participant may elect to:
3.6.5.1 Change the form of distribution from the
form of distribution that payment of the
Retired Participant's Account would
otherwise be made, and
3.6.5.2 Defer the time of payment of the Retired
Participant's Account to begin for a
minimum of one additional year from the
date payment would otherwise begin
(provided that if an Election is made
pursuant to this Section 3.6.5.1, the
Retired Participant's Account shall be
distributed in full
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on or before the fifth anniversary of the
Retired Participant's Normal Retirement).
An Election pursuant to this Section 3.6.5 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 a Participant's
Normal Retirement after November 1 of a
calendar year.
3.6.6 Except as provided in Section 3.6.4, Section 3.6.5
or Section 3.6.7, or if permitted by the
Administrator in its sole discretion pursuant to
this Section 3.6.6, no Inactive Participant who
has previously elected to receive a distribution
of part or all of his her Account, or who,
pursuant to this Section 3.6.6, has elected to
defer payment for an additional period from the
originally elected payment date, may elect to
defer the payment of such amount to any subsequent
date. An Inactive Participant, if permitted by the
Administrator in its sole discretion, may elect to
defer the payment of such amount for a minimum of
one and a maximum of ten additional years from the
previously-elected payment date, but not later
than the date permitted by the Administrator, by
filing an Election with the Administrator on or
before the close of business on June 30 of the
Plan Year preceding the Plan Year in which the
distribution would otherwise be made.
3.6.7 Except as provided in Section 3.6.4 or Section
3.6.6, no Grandfathered Participant who has
previously elected to receive a distribution of
part or all of his or her Account, or who,
pursuant to this Section 3.6, has elected to defer
payment for an additional period from the
originally-elected payment date, may elect to
defer the payment of such amount to any subsequent
date.
3.6.8 Subject to acceleration pursuant to Section 3.6.3,
Section 3.6.4, Section 7.1, Section 7.2 or Section
7.3, no distribution of the amounts deferred by a
Participant for any Plan Year shall be made before
the payment date designated by the Participant on
the most recently filed Election with respect to
such deferred amounts. Distribution of the amounts
deferred for any Plan Year by a Participant (other
than a Grandfathered Participant and an Inactive
Participant who makes an Election under Section
3.6.5) who ceases
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to be an Active Participant shall be made on the
payment date designated by the Participant on the
last Election filed with respect to such deferred
amounts before the Participant ceased to be an
Active Participant.
3.7 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 Election, upon the consummation of a
Terminating Event, the Account balance of each Participant shall be distributed
in full.
4. FORMS OF DISTRIBUTION
4.1 Forms of Distribution. Amounts credited to an Account shall
be distributed, pursuant to an Election, from among the following forms of
distribution:
4.1.1 A lump sum payment.
4.1.2 Substantially equal annual installments over
a five (5), ten (10) or fifteen (15) year
period.
4.1.3 Substantially equal monthly installments
over a period not exceeding fifteen (15)
years.
Notwithstanding any Election to the contrary, distributions pursuant to
Elections made after December 10, 1996 shall be made in the form of a lump sum
payment unless the portion of a Participant's Account subject to distribution
pursuant to Section 4.1.2 or Section 4.1.3, as of both the date of the Election
and the benefit commencement date, is more than $10,000.
4.2 Valuation of Account For Purposes of Distribution. The
amount of any distribution made pursuant to Section 4.1 shall be based on the
value of the Participant's Account on the date of distribution and the
applicable distribution period. For this purpose, the value of a Participant's
Account shall be calculated by crediting income, gains and losses under the
Company Stock Fund and the Income Fund, as applicable, through the date
immediately preceding the date of distribution.
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. The balance of each
Participant's Account as of January 1, 1997 shall include the balance of such
Participant's account under the Prior Plan as of
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December 31, 1996. 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. Income, gains and losses on the balance of the Account shall
be credited to the Account as provided in Section 5.2.
5.2 Crediting of Income, Gains and Losses on Accounts.
5.2.1 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.
5.2.2 Investment Fund Elections. Effective
January 1, 1997:
5.2.2.1 Each Participant, other than a
Participant who is an Insider, may
elect to have all or any portion of
his Account (to the extent credited
through the December 31 preceding
the effective date of such Election)
credited with income, gains and
losses as if it were invested in the
Company Stock Fund or the Income
Fund.
5.2.2.2 An investment fund Election shall
continue in effect until revoked or
superseded, provided that
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
4.1.2 or 4.1.2, 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.
5.2.2.3 In the absence of an effective
Election, the 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.
5.2.2.4 Investment fund Elections under this
Section 5.2.2 shall be effective as
of the first day of each Plan Year
beginning on and after January 1,
1997, provided that the election is
filed with the Committee on or
before the close of business on
December 31 of the Plan Year
preceding such Plan Year.
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<PAGE>
A 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
Plan Year.
5.2.2.5 If a Participant who was not an
Insider becomes an Insider, then,
notwithstanding the foregoing, such
Participant may elect to transfer
the portion of his Account, if any,
deemed invested in the Company Stock
Fund to be deemed invested in the
Income Fund, effective as of the
first day of any calendar month
beginning after such Participant
becomes an Insider.
5.2.3 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 5.2.2 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 the 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 his or her 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.
6. NON-ASSIGNABILITY, ETC.
The right of each Participant in or to any account, benefit or payment
hereunder shall not be subject in any manner to attachment or other legal
process for the debts of such Participant; and no Account, benefit or payment
shall be subject to anticipation, alienation, sale, transfer, assignment or
encumbrance.
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7. DEATH OR DISABILITY OF PARTICIPANT
7.1 Death of Participant. A Deceased Participant's Account
shall be distributed in accordance with the last Election made by the Deceased
Participant before the Deceased Participant's death, unless the Deceased
Participant's estate or beneficiary to whom the right to payment under the Plan
shall have passed timely elects to accelerate or defer the time or change the
form of payment pursuant to Section 3.6.3.
7.2 Disability of Participant. A Disabled Participant's Account
shall be distributed in accordance with the last Election made by the Disabled
Participant before the Disabled Participant's termination of service or date of
disability, as applicable, unless the Disabled Participant timely elects to
accelerate the time or change the form of payment pursuant to Section 3.6.4.
7.3 Hardship Distributions. Notwithstanding the terms of an
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.
7.4 Designation of Beneficiaries. Each Participant shall have
the right to designate one or more beneficiaries to receive distributions in the
event of the Participant's death by filing with the Administrator a beneficiary
designation on the form provided by the Administrator for such purpose. The
designation of beneficiary or beneficiaries may be changed by a Participant at
any time prior to his or her death by the delivery to the Administrator of a new
beneficiary designation form. If no beneficiary shall have been designated, or
if no designated beneficiary shall survive the Participant, the Participant's
estate shall be deemed to be the beneficiary.
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. The Committee shall administer a
reasonable claims procedure with respect to the Plan in accordance with
Department of Labor Regulation section 2560.503-1, or any successor provision.
9. AMENDMENT OR TERMINATION
9.1 Amendment or Termination. Except as otherwise provided by
Section 9.2, the Company, by action of the Board or by action of the Committee,
reserves the right at any
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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, or from time to time terminate
this Plan.
9.2 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 Election made with respect to
Compensation earned in a Plan Year and filed with the Administrator before the
date of adoption of such amendment by the Board. For purposes of this Section
9.2, an 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 Election from any previous Election
with respect to such Account.
10. MISCELLANEOUS PROVISIONS
10.1 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.
10.2 Governing Law. This Plan shall be interpreted under the
laws of the Commonwealth of Pennsylvania.
11. EFFECTIVE DATE
The effective date of the Plan this amendment and restatement of the
Plan shall be September 16, 1997.
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 16th day of September, 1997.
COMCAST CORPORATION
BY: /s/ Stanley Wang
ATTEST: /s/ Arthur R. Block
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COMCAST CORPORATION
1990 RESTRICTED STOCK PLAN
(As Amended and Restated, Effective September 16, 1997)
1. PURPOSE
The purpose of the Plan is to promote the ability of Comcast
Corporation (the "Company") to retain certain key employees and enhance the
growth and profitability of the Company by providing the incentive of long-term
awards for continued employment and the attainment of performance objectives.
2. DEFINITIONS
(a) "Active Grantee" means each Grantee who is actively employed by a
Participating Company.
(b) "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.
(c) "Award" means an award of Restricted Stock granted under the Plan.
(d) "Board" means the Board of Directors of the Company.
(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 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.
(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 1996 Stock Option Plan and the Comcast Corporation 1987 Stock Option
Plan.
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(h) "Committee" means the Subcommittee on Performance Based
Compensation of the Compensation Committee of the Board.
(i) "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.
(j) "Date of Grant" means the date on which an Award is granted.
(k) "Deceased Grantee" means:
(i) A Grantee whose employment by a Participating Company is
terminated by death; or
(ii) A Grantee who dies following termination of employment by a
Participating Company.
(l) "Disabled Grantee" means:
(i) A Grantee whose employment by a Participating Company is
terminated by reason of disability;
(ii) A Grantee who becomes disabled (as determined by the
Committee) following termination of employment by a
Participating Company; or
(iii) The duly-appointed legal guardian of an individual
described in Paragraph 2(l)(i) or 2(l)(ii) acting on behalf
of such individual.
(m) "Election" means a written election on a form provided by the
Committee, filed with the Committee in accordance with Paragraph 8, pursuant to
which a Grantee:
(i) Elects, within the time or times specified in Paragraph 8,
to defer the distribution date of Restricted Stock; and
(ii) Designates the distribution date of Restricted Stock.
(n) "Eligible Employee" means a management employee of a Participating
Company, as determined by the Committee.
(o) "Grantee" means an Eligible Employee who is granted an Award.
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(p) "Normal Retirement" means a Grantee's 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.
(q) "Other Available Shares" means, as of any date, the excess, if any
of:
(i) the total number of Shares owned by a Grantee; over
(ii) the sum of:
(x) the number of Shares owned by such Grantee for
less than six months; plus
(y) the number of Shares owned by such Grantee that
has, within the preceding six months, been the
subject of a withholding certification pursuant
to Paragraph 9(c)(ii) or any similar withholding
certification under any other Comcast Plan; plus
(z) the number of Shares owned by such Grantee 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.
For purposes of this Paragraph 2(q), a Share that is subject to a deferral
election pursuant to Paragraph 8 or another Comcast Plan shall not be treated as
owned by a Grantee until all conditions to the delivery of such Share have
lapsed. For purposes of Paragraph 9(c), the number of Other Available Shares
shall be determined separately for the Company's Class A Special Common Stock,
par value, $1.00, and for the Company's Class A Common Stock, par value, $1.00.
(r) "Parent Company" means all corporations that, at the time in
question, are parent corporations of the Company within the meaning of section
424(e) of the Code.
(s) "Participating Company" means the Company and each of the Parent
Companies and Subsidiary Companies.
(t) "Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization.
(u) "Plan" means the Comcast Corporation 1990 Restricted Stock Plan, as
set forth herein, and as amended from time to time.
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(v) "Plan Year" means the 365-day period (or the 366-day period)
extending from January 3 to the next following January 2.
(w) "Restricted Stock" means Shares subject to restrictions as set
forth in an Award.
(x) "Retired Grantee" means a Grantee who has terminated employment
pursuant to a Normal Retirement.
(y) "Roberts Family." Each of the following is a member of the Roberts
Family:
(i) Ralph J. Roberts;
(ii) a lineal descendant of Ralph J. Roberts; or
(iii) a trust established for the benefit of any of Ralph J.
Roberts and/or a lineal descendant or descendants of Ralph J. Roberts.
(z) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as in
effect from time to time.
(aa) "Share" or "Shares" means:
(i) for all purposes of the Plan, a share or shares of Class A
Special Common Stock, $1.00 par value, of the Company.
(ii) solely for purposes of Paragraphs 2(q) and 9(c), the term
"Share" or "Shares" also means a share or shares of the Company's Class A Common
Stock, par value, $1.00.
(bb) "Subsidiary Companies" means all corporations that, at the time in
question, are subsidiary corporations of the Company within the meaning of
section 424(f) of the Code.
(cc) "Terminating Event" means any of the following events:
(i) the liquidation of the Company; or
(ii) a Change of Control.
(dd) "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.
(ee) "1933 Act" means the Securities Act of 1933, as amended.
(ff) "1934 Act" means the Securities Exchange Act of 1934, as amended.
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3. RIGHTS TO BE GRANTED
Rights that may be granted under the Plan are rights to Restricted
Stock, which gives the Grantee ownership rights in the Shares subject to the
Award, subject to a substantial risk of forfeiture, as set forth in Paragraph 7,
and to deferred payment, as set forth in Paragraph 8.
4. SHARES SUBJECT TO THE PLAN
(a) Not more than 4,875,000 Shares in the aggregate may be issued under
the Plan pursuant to the grant of Awards, subject to adjustment in accordance
with Paragraph 10. The Shares issued under the Plan may, at the Company's
option, be either Shares held in treasury or Shares originally issued for such
purpose.
(b) If Restricted Stock is forfeited pursuant to the times of an Award,
other Awards with respect to such Shares may be granted.
5. ADMINISTRATION OF THE PLAN
(a) Administration. The Plan shall be administered by the Committee.
(b) Grants. Subject to the express terms and conditions set forth in
the Plan, the Committee shall have the power, from time to time, to:
(i) select those Employees to whom Awards shall be granted under
the Plan, to determine the number of Shares to be granted
pursuant to each Award, and, pursuant to the provisions of
the Plan, to determine the terms and conditions of each
Award, including the restrictions applicable to such Shares;
and
(ii) interpret the Plan's provisions, prescribe, amend and
rescind rules and regulations for the Plan, and make all
other determinations necessary or advisable for the
administration of the Plan.
The determination of the Committee in all matters as stated above shall be
conclusive.
(c) 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.
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(d) 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 Awards
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; provided, however,
that the provisions of this Paragraph 5(d) shall not apply to the responsibility
or liability of a member of the Committee pursuant to any criminal statute.
(e) 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 Company to the fullest extent
provided by applicable law and the Company' s Articles of Incorporation and
By-laws in connection with or arising out of any action, suit or proceeding with
respect to the administration of the Plan or the granting of Awards thereunder
in which he may be involved by reason 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
Awards may be granted only to Eligible Employees, as determined by the
Committee. No Awards shall be granted to an individual who is not an employee of
a Participating Company.
7. RESTRICTED STOCK AWARDS
The Committee may grant Awards in accordance with the Plan. The terms
and conditions of Awards shall be set forth in writing as determined from time
to time by the Committee, consistent, however, with the following:
(a) Time of Grant. All Awards shall be granted within ten (10) years
from the date of adoption of the Plan by the Board.
(b) Shares Awarded. The provisions of Awards need not be the same with
respect to each Grantee. No cash or other consideration shall be required to be
paid by the Grantee in exchange for an Award.
(c) Awards and Agreements. A certificate shall be issued to each
Grantee in respect of Shares subject to an Award. Such certificate shall be
registered in the name of the Grantee and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such Award.
The Company may require that the certificate evidencing such Restricted Stock be
held by the Company until all restrictions on such Restricted Stock have lapsed.
(d) Restrictions. Subject to the provisions of the Plan and the Award,
during a period set by the Committee commencing with the Date of Grant, which,
for Grantees who are subject
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to the short-swing profit recapture rules of section 16(b) of the 1934 Act by
virtue of their position as either a director, officer or holder of more than 10
percent of any class of equity securities of the Company, shall extend for at
least six (6) months from the Date of Grant, the Grantee shall not be permitted
to sell, transfer, pledge or assign Restricted Stock awarded under the Plan.
(e) Lapse of Restrictions. Subject to the provisions of the Plan and
the Award, restrictions upon Shares subject to an Award shall lapse at such time
or times and on such terms and conditions as the Committee may determine and as
are set forth in the Award; provided, however, that the restrictions upon such
Shares shall lapse only if the Grantee on the date of such lapse is, and has
been an employee of a Participating Company continuously from the Date of Grant.
The Award may provide for the lapse of restrictions in installments, as
determined by the Committee. The Committee may, in its sole discretion, waive,
in whole or in part, any remaining restrictions with respect to such Grantee's
Restricted Stock.
(f) Rights of the Grantee. Grantees may have such rights with respect
to Shares subject to an Award as may be determined by the Committee and set
forth in the Award, including the right to vote such Shares, and the right to
receive dividends paid with respect to such Shares.
(g) Termination of Grantee's Employment. A transfer of an Eligible
Employee between two employers, each of which is a Participating Company, shall
not be deemed a termination of employment. In the event that a Grantee
terminates employment with all Participating Companies, all Shares remaining
subject to restrictions shall be forfeited by the Grantee and deemed canceled by
the Company.
(h) Delivery of Shares. Except as otherwise provided by Paragraph 8,
when the restrictions imposed on Restricted Stock lapse with respect to one or
more Shares, the Company shall notify the Grantee that such restrictions no
longer apply, and shall deliver to the Grantee (or the person to whom ownership
rights may have passed by will or the laws of descent and distribution) a
certificate for the number of Shares for which restrictions have lapsed without
any legend or restrictions (except those that may be imposed by the Committee,
in its sole judgment, under Paragraph 9(a)). The right to payment of any
fractional Shares that may have accrued shall be satisfied in cash, measured by
the product of the fractional amount times the fair market value of a Share at
the time the applicable restrictions lapse, as determined by the Committee.
8. DEFERRAL ELECTIONS
Effective for Awards granted after September 16, 1997, a Grantee may
elect to defer the receipt of Restricted Stock as to which restrictions have
lapsed as provided by the Committee in the Award, consistent, however, with the
following:
(a) Deferral Election.
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(i) Election. Each Grantee shall have the right to defer the
receipt of all or any portion of the Restricted Stock as to
which the Award provides for the potential lapse of
applicable restrictions by filing an Election to defer the
receipt of such Restricted Stock on a form provided by the
Committee for this purpose.
(ii) Deadline for Deferral Election. No Election to defer the
receipt of Restricted Stock as to which the Award provides
for the potential lapse of applicable restrictions shall be
effective unless it is filed with the Committee on or before
the last day of the calendar year ending before the first
day of the Plan Year in which the applicable restrictions
may lapse; provided that an Election to defer the receipt of
Restricted Stock as to which the Award provides for the
potential lapse of applicable restrictions within the same
Plan Year as the Plan Year in which the Award is granted
shall be effective if it is filed with the Committee on or
before the earlier of (A) the 30th day following the Date of
Grant or (B) the last day of the month that precedes the
month in which the applicable restrictions may lapse.
(b) Effect of Failure of Restrictions on Shares to Lapse. An Election
shall be null and void if the restrictions on Restricted Stock do not lapse
before the distribution date for such Restricted Stock identified in such
Election by reason of the failure to satisfy any condition precedent to the
lapse of the restrictions.
(c) Deferral Period. Except as otherwise provided in Paragraph 8(d),
all Restricted Stock that is subject to an Election shall be delivered to the
Grantee (or the person to whom ownership rights may have passed by will or the
laws of descent and distribution) without any legend or restrictions (except
those that may be imposed by the Committee, in its sole judgment, under
Paragraph 9(a)), on the distribution date for such Restricted Stock designated
by the Grantee on the most recently filed Election. Subject to acceleration or
deferral pursuant to Paragraph 8(d) or Paragraph 11, no distribution may be made
earlier than January 2nd of the third calendar year beginning after the date on
which the applicable restrictions may lapse, nor later than January 2nd of the
eleventh calendar year beginning after the date on which the applicable
restrictions may lapse. The distribution date may vary with each separate
Election.
(d) Additional Deferral Election.
(i) Each Active Grantee who has previously made an Election to
receive a distribution of part or all of his or her Account,
or who, pursuant to this Paragraph 8(d)(i) has made an
Election to defer the distribution date for Restricted Stock
for an additional period from the originally-elected
distribution date, may elect to defer the distribution date
for a minimum of two and a maximum of ten additional years
from the previously-elected
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distribution date, by filing an Election with the Committee
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.
(ii) A Deceased Grantee's estate or beneficiary to whom the right
to payment under the Plan shall have passed may elect to (A)
defer the distribution date for the Deceased Grantee's
Restricted Stock for a minimum of two additional years from
the date payment would otherwise be made (provided that if
an Election is made pursuant to this Paragraph 8(d)(ii)(A),
the Deceased Grantee's deferred Restricted Stock shall be
distributed in full on or before the fifth anniversary of
the Deceased Grantee's death); or (B) accelerate the
distribution date for the Deceased Grantee's Restricted
Stock from the date payment would otherwise be made to
January 2nd of the calendar year beginning after the
Deceased Grantee's death. An Election pursuant to this
Paragraph 8(d)(ii) must be filed with the Committee on or
before the close of business on (x) the June 30 following
the Grantee's death on or before May 1 of a calendar year,
(y) the 60th day following the Grantee's death after May 1
and before November 2 of a calendar year or (z) the December
31 following the Grantee's death after November 1 of a
calendar year. One and only one Election shall be permitted
pursuant to this Paragraph 8(d)(ii) with respect to a
Deceased Grantee.
(iii) A Disabled Grantee may elect to accelerate the distribution
date of the Disabled Grantee's Restricted Stock from the
date payment would otherwise be made to January 2nd of the
calendar year beginning after the Grantee became disabled.
An Election pursuant to this Paragraph 8(d)(iii) must be
filed with the Committee on or before the close of business
on the (x) the June 30 following the date the Grantee
becomes a Disabled Grantee if the Grantee becomes a Disabled
Grantee on or before May 1 of a calendar year, (y) the 60th
day following the date the Grantee becomes a Disabled
Grantee if the Grantee becomes a Disabled Grantee after May
1 and before November 2 of a calendar year or (z) the
December 31 following the date the Grantee becomes a
Disabled Grantee if the Grantee becomes a Disabled Grantee
after November 2 of a calendar year.
(iv) A Retired Grantee may elect to defer the distribution date
of the Retired Grantee's Restricted Stock for a minimum of
two additional years from the date payment would otherwise
be made (provided that if an Election is made pursuant to
this Paragraph 8(d)(iv), the Retired Grantee's Account shall
be distributed in full on or before the fifth anniversary of
the Retired Grantee's Normal Retirement). An Election
pursuant to this Paragraph 8(d)(iv) must be filed with the
Committee on or before the close of
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business on the later of (x) the June 30 following the
Grantee's Normal Retirement on or before May 1 of a calendar
year, (y) the 60th day following the Grantee's Normal
Retirement after May 1 and before November 2 of a calendar
year or (z) the December 31 following the Grantee's Normal
Retirement after November 1 of a calendar year.
(e) Status of Deferred Shares. A Grantee's right to delivery of Shares
subject to an Election under this Paragraph 8 shall at all times represent the
general obligation of the Company. The Grantee 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 such obligation. Nothing contained in the
Plan or an Award shall be deemed to create an escrow, trust, custodial account
or fiduciary relationship of any kind. Nothing contained in the Plan or an Award
shall be construed to eliminate any priority or preferred position of a Grantee
in a bankruptcy matter with respect to claims for wages.
(f) Non-Assignability, Etc. The right of a Grantee to receive Shares
subject to an Election under this Paragraph 8 shall not be subject in any manner
to attachment or other legal process for the debts of such Grantee; and no right
to receive Shares hereunder shall be subject to anticipation, alienation, sale,
transfer, assignment or encumbrance.
9. SECURITIES LAWS; TAXES
(a) Securities Laws. The Committee shall have the power to make each
grant of Awards under the Plan subject to such conditions as it deems necessary
or appropriate to comply with the then-existing requirements of the 1933 Act and
the 1934 Act, including Rule 16b-3. Such conditions may include the delivery by
the Grantee of an investment representation to the Company in connection with
the lapse of restrictions on Shares subject to an Award, or the execution of an
agreement by the Grantee to refrain from selling or otherwise disposing of the
Shares acquired for a specified period of time or on specified terms.
(b) Taxes. Subject to the rules of Paragraph 9(c), the Company shall be
entitled, if necessary or desirable, to withhold the amount of any tax, charge
or assessment attributable to the grant of any Award or lapse of restrictions
under any Award. The Company shall not be required to deliver Shares pursuant to
any Award until it has been indemnified to its satisfaction for any such tax,
charge or assessment.
(c) Payment of Tax Liabilities; Election to Withhold Shares or Pay Cash
to Satisfy Tax Liability.
(i) In connection with the grant of any Award or the lapse of
restrictions under any Award, the Company shall have the
right to (A) require the Grantee to remit to the Company an
amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the
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<PAGE>
delivery or transfer of any certificate or certificates for
Shares subject to such Award, or (B) take any action
whatever that it deems necessary to protect its interests
with respect to tax liabilities. The Company's obligation to
make any delivery or transfer of Shares shall be conditioned
on the Grantee's compliance, to the Company's satisfaction,
with any withholding requirement.
(ii) Except as otherwise provided in this Paragraph 9(c)(ii), any
tax liabilities incurred in connection with grant of any
Award or the lapse of restrictions under any Award under the
Plan shall be satisfied by the Company's withholding a
portion of the Shares subject to such Award having a fair
market value approximately equal to the minimum amount of
taxes required to be withheld by the Company under
applicable law, unless otherwise determined by the Committee
with respect to any Grantee. Notwithstanding the foregoing,
the Committee may permit a Grantee to elect one or both of
the following: (A) to have taxes withheld in excess of the
minimum amount required to be withheld by the Company under
applicable law; provided that the Grantee certifies in
writing to the Company at the time of such election that the
Grantee owns Other Available Shares having a fair market
value that is at least equal to the fair market value to be
withheld by the Company in payment of withholding taxes in
excess of such minimum amount; and (B) to pay to the Company
in cash all or a portion of the taxes to be withheld in
connection with such grant or lapse of restrictions. 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
Grantee. The fair market value of such Shares shall be
determined based on the last reported sale price of a Share
on the principal exchange on which Shares are listed or, if
not so listed, on the NASDAQ Stock Market on the last
trading day prior to the date of such grant or lapse of
restriction. Any election pursuant to this Paragraph
9(c)(ii) 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. In
addition, with respect to persons subject to reporting
requirements under Section 16(a) of the 1934 Act, such
election must be made at least six months prior to the date
the amount of tax to be withheld or paid is determined
(which election will remain in effect with regard to all
future grants of Awards or lapses of restrictions, as
applicable, unless revoked upon six months prior notice). An
election pursuant to this Paragraph 9(c)(ii) may be made
only by a Grantee or, in the event of the Grantee's death,
by the Grantee's legal representative. No Shares withheld
pursuant to this Paragraph 9(c)(ii) shall be available for
subsequent grants under the Plan. The Committee may add such
other requirements and limitations regarding elections
pursuant to this Paragraph 9(c)(ii) as it deems appropriate.
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10. CHANGES IN CAPITALIZATION
The aggregate number of Shares and class of Shares as to which Awards
may be granted and the number of Shares covered by each outstanding Award shall
be appropriately adjusted in the event of a stock dividend, stock split,
recapitalization or other change in the number or class of issued and
outstanding equity securities of the Company resulting from a subdivision or
consolidation of the Shares and/or other outstanding equity security or a
recapitalization or other capital adjustment (not including the issuance of
Shares and/or other outstanding equity securities on the conversion of other
securities of the Company which are convertible into Shares and/or other
outstanding equity securities) affecting the Shares which is effected without
receipt of consideration by the Company. The Committee shall have authority to
determine the adjustments to be made under this Paragraph 10 and any such
determination by the Committee shall be final, binding and conclusive.
11. TERMINATING EVENTS
The Committee shall give Grantees 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 upon the
consummation of such Terminating Event, any restrictions on Restricted Stock
(other than Restricted Stock that has previously been forfeited) shall be
eliminated, in full or in part. Further, the Committee may, in its discretion,
provide in such notice that notwithstanding any other provision of the Plan or
the terms of any Election made pursuant to Paragraph 8, upon the consummation of
a Terminating Event, all Restricted Stock subject to an Election made pursuant
to Paragraph 8 shall be transferred to the Grantee.
12. AMENDMENT AND TERMINATION
The Plan may be terminated by the Board at any time. The Plan may be
amended by the Board or the Committee at any time. No Award shall be affected by
any such termination or amendment without the written consent of the Grantee.
13. EFFECTIVE DATE
The effective date of this amendment and restatement of the Plan is the
date on which it is adopted by the Board. The adoption of this amendment and
restatement of the Plan and the grant of Awards pursuant to this amendment and
restatement of the Plan is subject to the approval of the shareholders of the
Company to the extent that the Committee determines that such approval (a) is
required pursuant to the By-laws of the National Association of Securities
Dealers, Inc., and the schedules thereto, in connection with issuers whose
securities are included in the NASDAQ National Market System, or (b) is required
to satisfy the conditions on Rule 16b-3. If the Committee determines that
shareholder approval is required to satisfy the foregoing conditions, the Board
shall submit the Plan to the shareholders the Company for their approval at the
first annual meeting of shareholders held after the adoption of the Plan by the
Board.
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<PAGE>
14. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant to the
Plan shall be governed in accordance with Pennsylvania law.
Executed as of the 16th day of September, 1997
COMCAST CORPORATION
BY:/s/ Stanley Wang
ATTEST: /s/ Arthur R. Block
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COMCAST CORPORATION
1996 CASH BONUS PLAN
(Amended and Restated, Effective May 30, 1997)
1. PURPOSE
The purpose of the Plan is to promote the ability of
Comcast Corporation (the "Company") and its Subsidiaries (as defined below) to
retain and recruit employees and enhance the growth and profitability of the
Company by providing the incentive of short-term and long-term cash bonus awards
for continued employment and the attainment of performance objectives.
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) "Applicable Percent" means the percentage that
corresponds to a Modified Target, as identified in Exhibit A.
(c) "Annual Amount at Risk" means the amount
designated by the Committee for each Plan Year as the maximum portion of the
Award payable for such Plan Year, provided that the "Annual Amount at Risk" for
the last Plan Year of an Award shall not include the Last Year Amount at Risk.
(d) "Award" or "Cash Bonus Award" means a cash bonus
award granted under the Plan.
(e) "Award Period" means the period extending from
January 1 of the first Plan Year for which there is an Annual Amount at Risk
through December 31 of the last Plan Year for which there is an Annual Amount at
Risk.
(f) "Base Year" means 1995, except as otherwise
provided by the Committee and provided in an Award.
(g) "Board" means the Board of Directors of the
Company.
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(h) "C" means the Consolidated Operating Cash Flow of
the Company, the Cable Division or the Cellular Division, as applicable, for the
Base Year.
(i) "Cable Division" means the Company's cable
television business, as determined by the Committee in its sole discretion.
(j) "Cellular Division" means the Company's cellular
telephone business, as determined by the Committee in its sole discretion.
(k) "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.
(l) "Committee" means the Subcommittee on Performance
Based Compensation of the Compensation Committee of the Board.
(m) "Company."
(i) Except as otherwise provided in Paragraph
2(m)(ii), "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.
(ii) For purposes of determining an Eligible
Employee's employer, "Company" means Comcast Corporation, a Pennsylvania
corporation.
(n) "Compounded Annual Growth Rate" means the value
determined under the following mathematical formula:
n
C[(1+r) ]
where C, r and n have the definitions provided in this Paragraph 2 of the Plan.
(o) "Consolidated Operating Cash Flow" means the
consolidated operating income plus depreciation and amortization, of the
Company, the Cable Division or the Cellular Division, as applicable, for a Plan
Year, as determined by the Committee in accordance with generally accepted
accounting principles. If the results of operations of a business acquired or
disposed of after December 31 of the Base Year would, under generally accepted
accounting principles, be included (in the case of an acquisition) or excluded
(in the case of a disposition) from the consolidated financial statements of the
Company, the Cable Division or the Cellular
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<PAGE>
Division, as applicable, from the date of acquisition or disposition, and, in
such event, the Committee decides in its sole discretion that such inclusion or
exclusion will materially affect the comparability of such amount for the Plan
Year in which the acquisition or disposition occurs and each Plan Year
thereafter to that for the Base Year, then for the purpose of determining
whether the Target has been met for the Plan Year in which the acquisition or
disposition occurs and each Plan Year thereafter only, the Consolidated
Operating Cash Flow for the Base Year shall be restated to account for such
acquisition or disposition as if it had occurred on January 1 of the Base Year,
using actual historical financial information for the acquired or disposed of
business. The Committee may also decide in its sole discretion that an event
(such as a non-recurring item or the results of a start-up or development stage
business) in a Plan Year will materially affect the comparability of the results
of operations for such Plan Year to that for the Base Year, in which case the
Committee may restate the results of operations for such Plan Year to make an
equitable adjustment thereto.
(p) "Cumulative Annual Amount at Risk" means, for any
Plan Year, the sum of the Annual Amount at Risk for such Plan Year and each
preceding Plan Year in the Award Period.
(q) "Date of Grant" means the date on which an Award
is granted.
(r) "Eligible Employee" means an employee of the
Company or a Subsidiary, as determined by the Committee.
(s) "Grantee" means an Eligible Employee who is
granted an Award.
(t) "Last Year Amount at Risk" means the amount
designated by the Committee as the portion of the Award at risk for the last
Plan Year in the Award Period, provided that the "Last Year Amount at Risk"
shall not include the portion of the Award designated by the Committee as the
Annual Amount at Risk for the such Plan Year.
(u) "Modified Target" means for any Plan Year
beginning after 1996, Consolidated Operating Cash Flow for the Company, the
Cable Division or the Cellular Division, as applicable, which equals or exceeds
a percentage of the Compounded Annual Growth Rate for such Plan Year as
established by the Committee for the Company, the Cable Division or the Cellular
Division, as applicable; provided that any fractional percentage shall be
rounded to the nearest identified percentage.
(v) "n" means a value applied for purposes of
determining the Compounded Annual Growth Rate for the Company, the Cable
Division or the Cellular Division, as applicable, as follows:
(i) for purposes of determining Compounded
Annual Growth Rate for the first Plan Year beginning after the Base Year, n = 1.
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(ii) for purposes of determining Compounded
Annual Growth Rate for the second Plan Year beginning after the Base Year, n =
2.
(iii) for purposes of determining Compounded
Annual Growth Rate for the third Plan Year beginning after the Base Year, n = 3.
(iv) for purposes of determining Compounded
Annual Growth Rate for the fourth Plan Year beginning after the Base Year, n =
4.
(v) for purposes of determining Compounded
Annual Growth Rate for the fifth Plan Year beginning after the Base Year, n = 5.
(w) "Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization.
(x) "Plan" means the Comcast Corporation 1996 Cash
Bonus Plan, as set forth herein, and as amended from time to time.
(y) "Plan Year" means the calendar year.
(z) "r" means the interest rate established by the
Committee for purposes of determining the Compounded Annual Growth Rate for the
Company, the Cable Division or the Cellular Division, as applicable.
(aa) "Roberts Family." Each of the following is a
member of the Roberts Family:
(i) Ralph J. Roberts;
(ii) a lineal descendant of Ralph J. Roberts; or
(iii) a trust established for the benefit of any
of Ralph J. Roberts and/or a lineal descendant or descendants of Ralph J.
Roberts.
(bb) "Subsidiary" means a corporation that, at the
time in question, is a subsidiary corporation of the Company, within the meaning
of section 424(f) of the Code.
(cc) "Target" means, for any Plan Year beginning
after the Base Year, Consolidated Operating Cash Flow for the Company, the Cable
Division or the Cellular Division, as applicable, which equals or exceeds the
Compounded Annual Growth Rate for such Plan Year, based on the annualized
interest rate, "r," established by the Committee for the Company, the Cable
Division or the Cellular Division, as applicable.
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(dd) "Terminating Event" means any of the following
events:
(i) the liquidation of the Sponsor; or
(ii) a Change of Control.
(ee) "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.
(ff) "Total Annual Amounts at Risk" means the sum of
the Annual Amounts at Risk for an Award.
3. RIGHTS TO BE GRANTED
Rights that may be granted under the Plan are rights
to cash payments, payable in accordance with the terms of the Plan and the Award
document.
4. ADMINISTRATION OF THE PLAN
(a) Administration. The Plan shall be administered by
the Committee.
(b) Grants. Subject to the express terms and
conditions set forth in the Plan, the Committee shall have the power, from time
to time, to:
(i) select those Eligible Employees to whom
Awards shall be granted under the Plan, to determine the amount of cash to be
paid pursuant to each Award, and, pursuant to the provisions of the Plan, to
determine the terms and conditions of each Award; and
(ii) interpret the Plan's provisions, prescribe,
amend and rescind rules and regulations for the Plan, and make all other
determinations necessary or advisable for the administration of the Plan.
The determination of the Committee in all matters as stated above shall be
conclusive.
(c) 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.
(d) 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 Awards thereunder unless (i) the member of
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<PAGE>
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; provided, however, that the provisions of this
Paragraph 4(d) shall not apply to the responsibility or liability of a member of
the Committee pursuant to any criminal statute.
(e) 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 Company to the
fullest extent provided by applicable law and the Company's Articles of
Incorporation and By-laws in connection with or arising out of any action, suit
or proceeding with respect to the administration of the Plan or the granting of
Awards thereunder in which he may be involved by reason 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.
5. ELIGIBILITY
Awards may be granted only to Eligible Employees of
the Company and its Subsidiaries, as determined by the Committee. No Awards
shall be granted to an individual who is not an Eligible Employee of the Company
or a Subsidiary.
6. CASH BONUS AWARDS
The Committee may grant Awards in accordance with the
Plan. The terms and conditions of Awards shall be set forth in writing as
determined from time to time by the Committee, consistent, however, with the
following:
(a) Time of Grant. All Awards shall be granted within
five years from the date of adoption of the Plan by the Board.
(b) Non-uniformity of Awards. The provisions of
Awards need not be the same with respect to each Grantee.
(c) Awards and Agreements. The terms of each Award
shall be reflected in an Award document in form and substance satisfactory to
the Committee.
(d) Conditions to Payment of Awards. The Committee
shall establish such conditions on the payment of a bonus pursuant to an Award
as it may, in its sole discretion, deem appropriate. The conditions shall be set
forth in the Award document. The Award may provide for the payment of Awards in
installments, or upon the satisfaction of divisional or Company-wide performance
targets, as determined by the Committee. The Committee may, in its sole
discretion, waive, in whole or in part, any remaining conditions to payment of a
Grantee's Award. The Grantee shall not be permitted to sell, transfer, pledge or
assign any amount payable
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pursuant to the Plan or an Award (provided that the right to payment under an
Award may pass by will or the laws of descent and distribution).
(e) Termination of Grantee's Employment. A transfer
of an Eligible Employee between two employers, each of which is the Company or a
Subsidiary, shall not be deemed a termination of employment. The Committee may
grant Awards pursuant to which the calculation of an Award is modified in
connection with a transfer of a Grantee between two employers, each of which is
the Company or a Subsidiary. In the event that a Grantee terminates employment
with the Company and its Subsidiaries, all Awards remaining subject to
conditions to payment shall be forfeited by the Grantee and deemed canceled by
the Company.
(f) Payment of Cash. Subject to Paragraph 11, and as
further provided in Paragraphs 7, 8, 9 and 10, following the satisfaction of the
conditions to payment of an Award, the Company shall pay the Grantee (or the
person to whom the right to payment may have passed by will or the laws of
descent and distribution) the amount payable in connection with the lapse of
such restrictions.
7. CONDITIONS TO PAYMENT OF CASH BONUS AWARDS
Except as otherwise determined by the Committee and
provided in the terms of an Award:
(a) The restrictions on the payment of Awards of
Grantees employed by the Company shall be determined pursuant to Paragraph 8.
(b) The conditions to the payment of Awards of
Grantees employed by the Cable Division shall be determined pursuant to
Paragraph 9.
(c) The conditions to the payment of Awards of
Grantees employed by the Cellular Division shall be determined pursuant to
Paragraph 10.
8. CORPORATE TARGET AND CASH BONUS
(a) Amount of Cash Bonus Award. The amount of an
Award to Eligible Employees of the Company shall be determined by the Committee.
(b) Target. The Target for Eligible Employees of the
Company shall be met for each Plan Year beginning after the Base Year if
Consolidated Operating Cash Flow for the Company equals or exceeds the
Compounded Annual Growth Rate for such Plan Year, where "r" equals 12 percent
(0.12); provided that the Modified Target and Applicable Percent for purposes of
this Paragraph 8 shall be determined in accordance with Exhibit A.
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<PAGE>
(c) Awards with Dates of Grant Before July 1, 1996.
Except as otherwise determined by the Committee and provided in the terms of an
Award, the following rules shall apply if the Date of Grant of the Award is
before July 1, 1996.
(i) Payment of Cash Bonus Award. The Cash Bonus
Award shall be paid to a Grantee at the following times if the following
conditions are satisfied:
(v) 15 percent of the Award shall
be paid on or before March 15,
1997 if the Target is met for
the 1996 Plan Year and the
Grantee is an active employee
of the Company or a Subsidiary
continuously from the Date of
Grant to December 31, 1996.
(w) 30 percent of the Award (less
any portion of the Award
previously paid to Grantee)
(the "1997 Basic Award") shall
be paid on or before March 15,
1998 if the Target is met for
the 1997 Plan Year and the
Grantee is an active employee
of the Company or a Subsidiary
continuously from the Date of
Grant to December 31, 1997;
provided, however, that if a
Modified Target is met for the
1997 Plan Year, the Applicable
Percent of the 1997 Award
shall be paid.
(x) 45 percent of the Award (less
any portion of the Award
previously paid to Grantee)
(the "1998 Basic Award") shall
be paid on or before March 15,
1999 if the Target is met for
the 1998 Plan Year and the
Grantee is an active employee
of the Company or a Subsidiary
continuously from the Date of
Grant to December 31, 1998;
provided, however, that if a
Modified Target is met for the
1998 Plan Year, the Applicable
Percent of the 1998 Award
shall be paid.
(y) 60 percent of the Award (less
any portion of the Award
previously paid to Grantee)
(the "1999 Basic Award") shall
be paid on or before March 15,
2000 if the Target is met for
the 1999 Plan Year and the
Grantee is an active employee
of the Company or a Subsidiary
continuously from the Date of
Grant to December 31, 1999;
provided, however, that if a
Modified Target is met for the
1999 Plan Year, the
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<PAGE>
Applicable Percent of the 1999
Award shall be paid.
(z) 75 percent of the Award (less
any portion of the Award
previously paid to Grantee)
(the "2000 Basic Award") shall
be paid on or before March 15,
2001 if the Target is met for
the 2000 Plan Year and the
Grantee is an active employee
of the Company or a Subsidiary
continuously from the Date of
Grant to December 31, 2000;
provided, however, that if a
Modified Target is met for the
2000 Plan Year, the Applicable
Percent of the 2000 Award
shall be paid.
(ii) Payment of Supplemental Cash Bonus Award.
If the Grantee is an active employee of the Company or a Subsidiary continuously
from the Date of Grant to December 31, 2000, the Grantee shall be paid an
additional portion of the Cash Bonus Award on or before March 15, 2001. Such
additional portion of the Cash Bonus Award shall be equal to the sum of the
following amounts, provided that the amount determined under any of (v), (w),
(x), (y) or (z) below shall not be less than zero.
(v) 5 percent of the Award if the
Target was met for the 1996
Plan Year or, if a Modified
Target was met for the 1996
Plan Year, the Applicable
Percent of 5 percent of the
Award.
(w) 10 percent of the Award (less
the amount described in
Paragraph 8(c)(ii)(v)) (the
"1997 Supplemental Award") if
the Target was met for the
1997 Plan Year or, if a
Modified Target was met for
the 1997 Plan Year, the
Applicable Percent of the 1997
Supplemental Award.
(x) 15 percent of the Award (less
the sum of the amounts
described in Paragraphs
8(c)(ii)(v) and (w)) (the
"1998 Supplemental Award") if
the Target was met for the
1998 Plan Year or, if a
Modified Target was met for
the 1998 Plan Year, the
Applicable Percent of the 1998
Supplemental Award.
(y) 20 percent of the Award (less
the sum of the amounts
described in Paragraphs
8(c)(ii)(v), (w) and
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<PAGE>
(x)) (the "1999 Supplemental
Award") if the Target was met
for the 1999 Plan Year or, if
a Modified Target was met for
the 1999 Plan Year, the
Applicable Percent of the 1999
Supplemental Award.
(z) 25 percent of the Award (less
the sum of the amounts
described in Paragraphs
8(c)(ii)(v), (w), (x) and (y))
(the "2000 Supplemental
Award") if the Target was met
for the 2000 Plan Year or, if
a Modified Target was met for
the 2000 Plan Year, the
Applicable Percent of the 2000
Supplemental Award.
(d) Awards With Dates of Grant After June 30, 1996.
Except as otherwise determined by the Committee and provided in the terms of an
Award, the following rules shall apply if the Date of Grant of an Award is after
June 30, 1996.
(i) For the first Plan Year in the Award Period,
the Annual Amount at Risk for such Plan Year shall be paid on or before March 15
next following such Plan Year if the Target is met for such Plan Year and the
Grantee is an active employee of the Company or a Subsidiary continuously from
the Date of Grant to December 31 of such Plan Year; provided, however, that if a
Modified Target is met for such Plan Year, the Applicable Percent of the Annual
Amount at Risk for such Plan Year shall be paid.
(ii) For each succeeding Plan Year in the Award
Period, the Cumulative Annual Amount at Risk (less any portion of the Award
previously paid to the Grantee) (the "Succeeding Plan Year Basic Award") shall
be paid on or before March 15 next following such Plan Year if the Target is met
for such Plan Year and the Grantee is an active employee of the Company or a
Subsidiary continuously from the Date of Grant to December 31 of such Plan Year;
provided, however, that if a Modified Target is met for such succeeding Plan
Year, the Applicable Percent of the Succeeding Plan Year Basic Award shall be
paid.
(iii) If the Grantee is an active employee of
the Company or a Subsidiary continuously from the Date of Grant to December 31
of the last Plan Year in the Award Period, the Grantee shall be paid an
additional portion of the Cash Bonus Award on or before March 15 of the next
succeeding calendar year, determined as the sum of the following amounts:
(x) A percentage of the Award if
the Target was met for the
first Plan Year in the Award
Period, or, if a Modified
Target was met for the first
Plan Year in
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<PAGE>
the Award Period, the
Applicable Percent of such
amount.
(y) A percentage of the Award
(less the sum of the amounts
described in Paragraph
8(d)(iii)(x) and this
Paragraph 8(d)(iii)(y) for all
preceding Plan Years) (the
"Supplemental Award") if the
Target was met for a
succeeding Plan Year in the
Award Period, or if a Modified
Target was met for such
succeeding Plan Year, the
Applicable Percent of the
Supplemental Award, provided
that the applicable amount for
any Plan Year shall not be
less than zero.
(z) The portion of the Award
assigned to each Plan Year
pursuant to this Paragraph
8(d)(iii) shall be equal to
the product of (i) the Last
Year Amount at Risk times (ii)
the quotient obtained by
dividing the Cumulative Annual
Amount at Risk for such Plan
Year by the Total Annual
Amounts at Risk.
9. CABLE DIVISION TARGET AND CASH BONUS
(a) Amount of Cash Bonus Award. The amount of an
Award to Eligible Employees of the Cable Division shall be determined by the
Committee.
(b) Target. The Target for Eligible Employees of the
Cable Division shall be met for each Plan Year beginning after the Base Year if
Consolidated Operating Cash Flow for the Cable Division equals or exceeds the
Compounded Annual Growth Rate for such Plan Year, where "r" equals 10 percent
(0.10); provided that the Modified Target and Applicable Percent for purposes of
this Paragraph 9 shall be determined in accordance with Exhibit A.
(c) Awards with Dates of Grant Before July 1, 1996.
Except as otherwise determined by the Committee and provided in the terms of an
Award, the following rules shall apply if the Date of Grant of the Award is
before July 1, 1996.
(i) Payment of Cash Bonus Award. The Cash Bonus
Award shall be paid to a Grantee at the following times if the following
conditions are satisfied:
(v) 15 percent of the Award shall
be paid on or before March 15,
1997 if the Target is met for
the 1996 Plan Year and the
Grantee is an active employee
of
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<PAGE>
the Company or a Subsidiary
continuously from the Date of
Grant to December 31, 1996.
(w) 30 percent of the Award (less
any portion of the Award
previously paid to Grantee)
(the "1997 Basic Award") shall
be paid on or before March 15,
1998 if the Target is met for
the 1997 Plan Year and the
Grantee is an active employee
of the Company or a Subsidiary
continuously from the Date of
Grant to December 31, 1997;
provided, however, that if a
Modified Target is met for the
1997 Plan Year, the Applicable
Percent of the 1997 Award
shall be paid.
(x) 45 percent of the Award (less
any portion of the Award
previously paid to Grantee)
(the "1998 Basic Award") shall
be paid on or before March 15,
1999 if the Target is met for
the 1998 Plan Year and the
Grantee is an active employee
of the Company or a Subsidiary
continuously from the Date of
Grant to December 31, 1998;
provided, however, that if a
Modified Target is met for the
1998 Plan Year, the Applicable
Percent of the 1998 Award
shall be paid.
(y) 60 percent of the Award (less
any portion of the Award
previously paid to Grantee)
(the "1999 Basic Award") shall
be paid on or before March 15,
2000 if the Target is met for
the 1999 Plan Year and the
Grantee is an active employee
of the Company or a Subsidiary
continuously from the Date of
Grant to December 31, 1999;
provided, however, that if a
Modified Target is met for the
1999 Plan Year, the Applicable
Percent of the 1999 Award
shall be paid.
(z) 75 percent of the Award (less
any portion of the Award
previously paid to Grantee)
(the "2000 Basic Award") shall
be paid on or before March 15,
2001 if the Target is met for
the 2000 Plan Year and the
Grantee is an active employee
of the Company or a Subsidiary
continuously from the Date of
Grant to December 31, 2000;
provided, however, that if a
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<PAGE>
Modified Target is met for the
2000 Plan Year, the Applicable
Percent of the 2000 Award
shall be paid.
(ii) Payment of Supplemental Cash Bonus Award.
If the Grantee is an active employee of the Company or a Subsidiary continuously
from the Date of Grant to December 31, 2000, the Grantee shall be paid an
additional portion of the Cash Bonus Award on or before March 15, 2001. Such
additional portion of the Cash Bonus Award shall be equal to the sum of the
following amounts, provided that the amount determined under any of (v), (w),
(x), (y) or (z) below shall not be less than zero.
(v) 5 percent of the Award if the
Target was met for the 1996
Plan Year or, if a Modified
Target was met for the 1996
Plan Year, the Applicable
Percent of 5 percent of the
Award.
(w) 10 percent of the Award (less
the amount described in
Paragraph 9(c)(ii)(v)) (the
"1997 Supplemental Award") if
the Target was met for the
1997 Plan Year or, if a
Modified Target was met for
the 1997 Plan Year, the
Applicable Percent of the 1997
Supplemental Award.
(x) 15 percent of the Award (less
the sum of the amounts
described in Paragraphs
9(c)(ii)(v) and (w)) (the
"1998 Supplemental Award") if
the Target was met for the
1998 Plan Year or, if a
Modified Target was met for
the 1998 Plan Year, the
Applicable Percent of the 1998
Supplemental Award.
(y) 20 percent of the Award (less
the sum of the amounts
described in Paragraphs
9(c)(ii)(v), (w) and (x)) (the
"1999 Supplemental Award") if
the Target was met for the
1999 Plan Year or, if a
Modified Target was met for
the 1999 Plan Year, the
Applicable Percent of the 1999
Supplemental Award.
(z) 25 percent of the Award (less
the sum of the amounts
described in Paragraphs
9(c)(ii)(v), (w), (x) and (y))
(the "2000 Supplemental
Award") if the Target was met
for the 2000 Plan Year or, if
a
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<PAGE>
Modified Target was met for
the 2000 Plan Year, the
Applicable Percent of the 2000
Supplemental Award.
(d) Awards With Dates of Grant After June 30, 1996.
Except as otherwise determined by the Committee and provided in the terms of an
Award, the following rules shall apply if the Date of Grant of an Award is after
June 30, 1996.
(i) For the first Plan Year in the Award Period,
the Annual Amount at Risk for such Plan Year shall be paid on or before March 15
next following such Plan Year if the Target is met for such Plan Year and the
Grantee is an active employee of the Company or a Subsidiary continuously from
the Date of Grant to December 31 of such Plan Year; provided, however, that if a
Modified Target is met for such Plan Year, the Applicable Percent of the Annual
Amount at Risk for such Plan Year shall be paid.
(ii) For each succeeding Plan Year in the Award
Period, the Cumulative Annual Amount at Risk (less any portion of the Award
previously paid to the Grantee) (the "Succeeding Plan Year Basic Award") shall
be paid on or before March 15 next following such Plan Year if the Target is met
for such Plan Year and the Grantee is an active employee of the Company or a
Subsidiary continuously from the Date of Grant to December 31 of such Plan Year;
provided, however, that if a Modified Target is met for such succeeding Plan
Year, the Applicable Percent of the Succeeding Plan Year Basic Award shall be
paid.
(iii) If the Grantee is an active employee of
the Company or a Subsidiary continuously from the Date of Grant to December 31
of the last Plan Year in the Award Period, the Grantee shall be paid an
additional portion of the Cash Bonus Award on or before March 15 of the next
succeeding calendar year, determined as the sum of the following amounts:
(x) A percentage of the Award if
the Target was met for the
first Plan Year in the Award
Period, or, if a Modified
Target was met for the first
Plan Year in the Award Period,
the Applicable Percent of such
amount.
(y) A percentage of the Award
(less the sum of the amounts
described in Paragraph
9(d)(iii)(x) and this
Paragraph 9(d)(iii)(y) for all
preceding Plan Years) (the
"Supplemental Award") if the
Target was met for a
succeeding Plan Year in the
Award Period, or if a Modified
Target was met for such
succeeding Plan Year, the
Applicable Percent of the
Supplemental Award, provided
that the applicable
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<PAGE>
amount for any Plan Year shall
not be less than zero.
(z) The portion of the Award
assigned to each Plan Year
pursuant to this Paragraph
9(d)(iii) shall be equal to
the product of (i) the Last
Year Amount at Risk times (ii)
the quotient obtained by
dividing the Cumulative Annual
Amount at Risk for such Plan
Year by the Total Annual
Amounts at Risk.
10. CELLULAR DIVISION TARGET AND CASH BONUS
(a) Amount of Cash Bonus Award. The amount of an
Award to Eligible Employees of the Cellular Division shall be determined by the
Committee.
(b) Target. The Target for Eligible Employees of the
Cellular Division shall be met for each Plan Year beginning after the Base Year
if Consolidated Operating Cash Flow for the Cellular Division equals or exceeds
the Compounded Annual Growth Rate for such Plan Year, where "r" equals 15
percent (0.15); provided that the Modified Target and Applicable Percent for
purposes of this Paragraph 10 shall be determined in accordance with Exhibit A.
(c) Awards with Dates of Grant Before July 1, 1996.
Except as otherwise determined by the Committee and provided in the terms of an
Award, the following rules shall apply if the Date of Grant of an Award is
before July 1, 1996.
(i) Payment of Cash Bonus Award - Performance
Target Condition. Half of the Cash Bonus Award (hereinafter, the "Cellular
Performance Award") shall be subject to service and performance conditions. If
the Grantee is an active employee of the Company or a Subsidiary continuously
from the Date of Grant to December 31, 2000, the Grantee shall be paid all or
part of the Cellular Performance Award on or before March 15, 2001. The Cellular
Performance Award shall be equal to the sum of the following amounts, provided
that the amount determined under any of (v), (w), (x), (y) or (z) below shall
not be less than zero.
(v) 20 percent of the Cellular
Performance Award if the
Target was met for the 1996
Plan Year or, if a Modified
Target was met for the 1996
Plan Year, the Applicable
Percent of 20 percent of the
Cellular Performance Award.
(w) 40 percent of the Cellular
Performance Award (less the
amount described in Paragraph
10(c)(i)(v)) (the "1997
Cellular Performance Award")
if the Target was met for the
1997 Plan Year or, if a
Modified
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<PAGE>
Target was met for the 1997
Plan Year, the Applicable
Percent of the 1997 Cellular
Performance Award.
(x) 60 percent of the Cellular
Performance Award (less the
sum of the amounts described
in Paragraphs 10(c)(i)(v) and
(w)) (the "1998 Cellular
Performance Award") if the
Target was met for the 1998
Plan Year or, if a Modified
Target was met for the 1998
Plan Year, the Applicable
Percent of the 1998 Cellular
Performance Award.
(y) 80 percent of the Cellular
Performance Award (less the
amounts described in
Paragraphs 10(c)(i)(v), (w)
and (x)) (the "1999 Cellular
Performance Award") if the
Target was met for the 1999
Plan Year or, if a Modified
Target was met for the 1999
Plan Year, the Applicable
Percent of the 1999 Cellular
Performance Award.
(z) 100 percent of the Cellular
Performance Award (less the
amounts described in
Paragraphs 10(c)(i)(v), (w),
(x) and (y)) (the "2000
Cellular Performance Award")
if the Target was met for the
2000 Plan Year or, if a
Modified Target was met for
the 2000 Plan Year, the
Applicable Percent of the 2000
Cellular Performance Award.
(ii) Payment of Cash Bonus Award - Service
Condition. Half of the Cash Bonus Award (hereinafter, the "Cellular Service
Award") shall be subject to service conditions, and shall be paid to a Grantee
at the following times if the following conditions are satisfied:
(v) 20 percent of the Cellular
Service Award shall be paid on
or before February 29, 1996.
(w) 20 percent of the Cellular
Service Award shall be paid on
or before February 28, 1998 if
the Grantee is an active
employee of the Company or a
Subsidiary continuously from
the Date of Grant to December
31, 1997.
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<PAGE>
(x) 20 percent of the Cellular
Service Award shall be paid on
or before February 28, 1999 if
the Grantee is an active
employee of the Company or a
Subsidiary continuously from
the Date of Grant to December
31, 1998.
(y) 20 percent of the Cellular
Service Award shall be paid on
or before February 29, 2000 if
the Grantee is an active
employee of the Company or a
Subsidiary continuously from
the Date of Grant to December
31, 1999.
(z) 20 percent of the Cellular
Service Award shall be paid on
or before February 28, 2001 if
the Grantee is an active
employee of the Company or a
Subsidiary continuously from
the Date of Grant to December
31, 2000.
(d) Awards With Dates of Grant After June 30, 1996.
Except as otherwise determined by the Committee and provided in the terms of an
Award, the following rules shall apply if the Date of Grant of an Award is after
June 30, 1996.
(i) Payment of Cash Bonus Award - Performance
Target. Half of the Cash Bonus Award (hereinafter, the "Cellular Performance
Award") shall be subject to service and performance conditions. If the Grantee
is an active employee of the Company or a Subsidiary continuously from the Date
of Grant to December 31 of the last Plan Year in the Award Period, the Grantee
shall be paid all or part of the Cellular Performance Award on or before March
15 of the next succeeding calendar year. The Cellular Performance Award shall be
equal to the sum of the following amounts:
(x) A percentage of the Award if
the Target was met for the
first Plan Year in the Award
Period, or, if a Modified
Target was met for the first
Plan Year in the Award Period,
the Applicable Percent of such
amount.
(y) A percentage of the Award
(less the sum of the amounts
described in Paragraph
10(d)(i)(x) and this Paragraph
10(d)(i)(y) for all preceding
Plan Years) (the "Performance
Award Amount") if the Target
was met for a succeeding Plan
Year in the Award Period, or
if a Modified Target was met
for such succeeding Plan Year,
the Applicable Percent of
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<PAGE>
such Performance Award Amount,
provided that the applicable
amount for any Plan Year shall
not be less than zero.
(z) The portion of the Award
assigned to each Plan Year
pursuant to this Paragraph
10(d)(i) shall be equal to the
"Cumulative Cellular
Performance Award." For
purposes of this Paragraph
10(d)(i), the term "Cumulative
Cellular Performance Award"
means the product of the
Cellular Performance Award
times a fraction, the
numerator of which is the
value "n" assigned to such
Plan Year pursuant to
Paragraph 2(v), and the
denominator of which is the
total number of Plan Years in
the Award Period.
(ii) Payment of Cash Bonus Award - Service
Condition. Half of the Cash Bonus Award (hereinafter, the "Cellular Service
Award") shall be subject to service conditions, and shall be paid to a Grantee
at the following times if the following conditions are satisfied, provided that
no payment of a Cellular Service Award shall be made unless the Grantee shall
have delivered to the Company a duly executed employment agreement in form and
substance satisfactory to the Company:
(w) A percentage of the Cellular
Service Award shall be paid as
soon as reasonably practicable
following the Date of Grant.
(x) A percentage of the Cellular
Service Award shall be paid on
or before the last day of
February of the third Plan
Year in the Award Period, if
any, if the Grantee is an
active employee of the Company
or a Subsidiary continuously
from the Date of Grant to
December 31 of the second Plan
Year in the Award Period.
(y) A percentage of the Cellular
Service Award shall be paid on
or before the last day of
February of each succeeding
Plan Year in the Award Period,
if any, if the Grantee is an
active employee of the Company
or a Subsidiary continuously
from the Date of Grant to
December 31 of the Plan Year
preceding such succeeding Plan
Year in the Award Period.
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<PAGE>
(z) The percentage of the Cellular
Service Award assigned to each
Plan Year pursuant to this
Paragraph 10(d)(ii) shall be
equal to the quotient obtained
by dividing the Cellular
Service Award by the number of
Plan Years in the Award
Period.
11. TAXES
The Company shall withhold the amount of any federal,
state, local or other tax, charge or assessment attributable to the grant of any
Award or lapse of restrictions under any Award as it may deem necessary or
appropriate, in its sole discretion.
12. TERMINATING EVENTS
The Committee shall give Grantees 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 upon the consummation of such Terminating Event, any remaining conditions
to payment of a Grantee's Award shall be waived, in whole or in part.
13. AMENDMENT AND TERMINATION
The Plan may be terminated by the Board or the
Committee at any time. The Plan may be amended by the Board or the Committee at
any time. No Award shall be affected by any such termination or amendment
without the written consent of the Grantee.
14. EFFECTIVE DATE
The effective date of this amendment and restatement
of the Plan is May 30, 1997, the date on which it was adopted by the Committee.
To the extent provided by the Committee, the rules of the Plan, as amended and
restated, shall apply to the determination of payments to be made pursuant to
the Plan on and after the effective date of this amendment and restatement of
the Plan.
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<PAGE>
15. GOVERNING LAW
The Plan and all determinations made and actions
taken pursuant to the Plan shall be governed in accordance with Pennsylvania
law.
Executed this 30th day of May, 1997
[CORPORATE SEAL] COMCAST CORPORATION
ATTEST:/s/ Arthur R. Block BY: /s/ Stanley Wang
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COMCAST CORPORATION
1997 DEFERRED STOCK OPTION PLAN
(Effective September 16, 1997)
<PAGE>
TABLE OF CONTENTS
Page
1. ESTABLISHMENT OF PLAN......................... 1
2. DEFINITIONS................................... 1
3. DEFERRAL ELECTIONS............................ 8
4. FORM OF DISTRIBUTION.......................... 11
5. BOOK ACCOUNTS................................. 11
6. NON-ASSIGNABILITY, ETC........................ 11
7. INTERPRETATION................................ 11
8. AMENDMENT OR TERMINATION...................... 12
9. MISCELLANEOUS PROVISIONS...................... 12
10. EFFECTIVE DATE................................ 12
<PAGE>
COMCAST CORPORATION
1997 DEFERRED STOCK OPTION PLAN
(Effective September 16, 1997)
1. ESTABLISHMENT OF PLAN
COMCAST CORPORATION, a Pennsylvania corporation, hereby establishes the
Comcast Corporation 1997 Deferred Stock Option Plan (the "Plan"), effective
September 16, 1997. The Plan is unfunded and is maintained primarily for the
purpose of providing a select group of management or highly compensated
employees the opportunity to defer the receipt of Shares and corresponding
recognition of compensation income upon the exercise of Options.
2. DEFINITIONS
2.1 " A Stock" means the Company's Class A Common Stock, par
value, $1.00, including a fractional share.
2.2 "Account" means the bookkeeping accounts established
pursuant to Paragraph 5.1 and maintained by the Administrator in the names of
the respective Participants, to which Deferred Stock Units, dividend equivalents
and earnings on dividend equivalents shall be credited, and from which all
amounts distributed under the Plan shall be debited.
2.3 "Active Participant"means:
2.3.1 Each Participant who is in active service as an
Outside Director;
2.3.2 Each Participant who is actively employed by a
Participating Company as an Eligible Employee; and
2.3.3 A Permitted Transferee of an individual described in
Paragraph 2.3.1 or 2.3.2, if applicable.
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
-1-
<PAGE>
and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise.
2.5 "Administrator" means the Committee.
2.6 "Annual Rate of Pay" means, as of any date, the sum of:
2.6.1 An employee's annualized base pay rate, plus
2.6.2 The amount of bonus, if any, paid to such
employee pursuant to a Bonus Program during
the 365-day period ending on such date.
An employee's Annual Rate of Pay shall not include sales commissions or other
similar payments or awards.
2.7 "Board" means the Board of Directors of the Company, or the
Executive Committee of the Board of Directors of the Company.
2.8 "Bonus Program" means a plan or arrangement maintained by a
Participating Company for the benefit of a class or category of employees, which
provides for the payment of a cash bonus to eligible members of such class or
category upon the satisfaction of such conditions as may be provided under such
plan or arrangement, provided that the term "Bonus Program" shall not include
any arrangement for the payment of sales commissions or other similar payments
or awards.
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 "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 an Affiliate.
2.11 "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.
2.12 "Committee" means the Subcommittee on Performance Based
Compensation of the Compensation Committee of the Board of Directors of the
Company.
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<PAGE>
2.13 "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.
2.14 "Date of Grant" means the date as of which an Option is
granted.
2.15 "Deferred Stock Units" mean the number of hypothetical
Shares determined as the excess of (1) the number of Option Shares over (2) 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, 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 Shares to pay the exercise price for such Option Shares;
provided, however, that if the Option is for A Stock, the Deferred Stock Units
shall be credited to the Participant's Account as Deferred A Stock Units, and if
the Option is for K Stock, the Deferred Stock Units shall be credited to the
Participant's Account as Deferred K Stock Units.
2.16 "Deceased Participant" means:
2.16.1 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;
2.16.2 A Participant who dies following termination of
active service; or
2.16.3 A Permitted Transferee of an individual described
in Paragraph 2.16.1 or 2.16.2, if applicable.
2.17 "Disabled Participant" means:
2.17.1 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;
2.17.2 A Participant who becomes disabled (as determined
by the Committee) following termination of active
service;
2.17.3 The duly-appointed legal guardian of an individual
described in Paragraph 2.17.1 or 2.17.2 acting on
behalf of such individual; or
2.17.4 A Permitted Transferee of an individual described
in Paragraph 2.17.1 or 2.17.2, if applicable.
-3-
<PAGE>
2.18 "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:
2.18.1 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
2.18.2 Designates the time that such Shares and any
dividend equivalents shall be distributed.
2.19 "Eligible Employee" means:
2.19.1 Each employee of a Participating Company whose
Annual Rate of Pay is $125,000 or more as of both
(1) the date on which an Election is filed with
the Administrator and (2) the first day of the
Plan Year in which such Election is filed; and
2.19.2 Each New Key Employee.
2.20 "Fair Market Value."
2.20.1 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.
2.20.2 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.
2.20.3 If Shares are not so listed nor trades of Shares
so reported, Fair Market Value shall be determined
by the Committee in good faith.
2.21 "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.
2.22 "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.
-4-
<PAGE>
2.23 "Immediate Family" means an Outside Director's, Former
Outside Director's, Eligible Employee's or Former Eligible Employee'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.
2.24 "K Stock" means the Company's Class A Special Common
Stock, par value, $1.00, including a fractional share.
2.25 "New Key Employee" means each employee of a Participating
Company hired on or after the effective date of the Plan whose Annual Rate of
Pay on his date of hire is $125,000 or more.
2.26 "Normal Retirement" means:
2.26.1 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
2.26.2 For a Participant who is an Outside Director
immediately preceding his termination of service,
his normal retirement from the Board.
2.27 "Other Available Shares" means, as of any date, the
excess, if any of:
2.27.1 The total number of Shares owned by a Person; over
2.27.2 The sum of:
2.27.2.1 The number of Shares owned by such
Person for less than six months; plus
2.27.2.2 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
2.27.2.3 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
-5-
<PAGE>
Affiliate under any Comcast Plan, but
only to the extent of the number of
Shares surrendered.
For purposes of this Paragraph 2.27, 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
Shares of A Stock and Shares of K Stock.
2.28 "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.
2.29 "Option Shares" mean the Shares that are subject to the
portion of an Option as to which an Election is in effect.
2.30 "Outside Director" means a member of the Board who is not
an employee of a Participating Company.
2.31 "Parent Company" means all corporations that, at the time
in question, are parent corporations of the Company within the meaning of
section 424(e) of the Code.
2.32 "Participant" means each Outside Director, Former Outside
Director, Eligible Employee, Former Eligible Employee, Successor-in-Interest or
Permitted Transferee that has made an Election and that has an undistributed
amount credited to an Account under the Plan.
2.33 "Participating Company" means the Company and each of the
Parent Companies and Subsidiary Companies.
2.34 "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.
2.35 "Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization.
2.36 "Plan" means the Comcast Corporation 1997 Deferred Stock
Option Plan, as set forth herein, and as may be amended from time to time.
2.37 "Plan Year" means the calendar year.
2.38 "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.
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<PAGE>
2.39 "Retired Participant" means a Participant who has
terminated employment pursuant to a Normal Retirement.
2.40 "Roberts Family." Each of the following is a member of the
Roberts Family:
2.40.1 Ralph J. Roberts;
2.40.2 A lineal descendant of Ralph J. Roberts; or
2.40.3 A trust established for the benefit of any of
Ralph J. Roberts and/or a lineal descendant or
descendants of Ralph J. Roberts.
2.41 "Share" or "Shares" means for all purposes of the Plan, a
share or shares of A Stock or K Stock, or such other securities issued by the
Company as may be subject to adjustment 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 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
Deferred Stock Units credited to Participants' Accounts. The Committee's
adjustment shall be effective and binding for all purposes of the Plan.
2.42 "Subsidiary Companies" means all corporations that, at the
time in question, are subsidiary corporations of the Company within the meaning
of section 424(f) of the Code.
2.43 "Successor-in-Interest" means the estate or 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.
2.44 "Terminating Event" means any of the following events:
2.44.1 The liquidation of the Company; or
2.44.2 A Change of Control.
2.45 "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.
-7-
<PAGE>
3. DEFERRAL ELECTIONS
3.1 Elections. Each Outside Director, Former Outside Director,
Eligible Employee, Former Eligible Employee, Successor-in-Interest and Permitted
Transferee who is the grantee or transferee of an Option, shall have the right
to make an Election to defer the receipt of Shares upon exercise of all or part
of such Option by filing an Election at the time and in the manner described in
this Article 3.
3.2 Filing of Elections. An Election to defer the receipt of
Shares upon exercise of all or part of an Option shall be made on the form
provided by the Administrator for this purpose. No such Election shall be
effective unless it is filed with the Administrator on or before the date that
is both (i) 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.
3.3 Options to which Elections May Apply. A separate 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, but the failure of
such a Person to make an Election with respect to an Option shall not affect
such Person's right to make an Election for any other Option.
3.4 Election of Distribution Date.
3.4.1 Each Participant who elects to defer the receipt
of Shares shall, on the Election, also elect the
distribution date for such Shares; provided,
however, that, subject to acceleration pursuant to
Paragraph 3.4.3, Paragraph 3.4.4 or Paragraph 3.5,
no distribution may be made earlier than January
2nd of the third calendar year beginning after the
date of the Election nor later than January 2nd of
the eleventh calendar year beginning after the
date of the Election. The designation of the time
for distribution of benefits under the Plan may
vary with each separate Election. Subject to
acceleration pursuant to Paragraph 3.4.3,
Paragraph 3.4.4 or Paragraph 3.5, no distribution
of the amounts deferred by a Participant for any
Plan Year shall be made before the distribution
date designated by the Participant on the most
recently filed Election with respect to such
deferred amounts.
3.4.2 Each Active Participant who has previously elected
to receive a distribution of part or all of his or
her Account, or who, pursuant to this Paragraph
3.4.2 has elected to defer the distribution date
for Shares for an additional period from the
originally-elected distribution date, may elect to
defer the time of payment of such
-8-
<PAGE>
amount for a minimum of two and a maximum of ten
additional years from the previously-elected
distribution date, by filing an Election with the
Administrator on or before the close of business
on June 30 of the Plan Year preceding the Plan
Year in which the distribution would otherwise be
made.
3.4.3 A Deceased Participant's Successor-in-Interest or
the Permitted Transferee of a Deceased
Participant, if applicable, may elect to:
3.4.3.1 Defer the time of payment of the
Deceased Participant's Account for a
minimum of two additional years from the
date payment would otherwise be made
(provided that if an Election is made
pursuant to this Paragraph 3.4.3.1, the
Deceased Participant's Account shall be
distributed in full on or before the
fifth anniversary of the Deceased
Participant's death); or
3.4.3.2 Accelerate the time of payment of such
amount from the date payment would
otherwise be made to January 2nd of the
calendar year beginning after the
Deceased Participant's death.
An Election pursuant to this Paragraph 3.4.3 must
be filed with the Administrator on or before the
close of business on (i) the June 30 following the
Participant's death on or before May 1 of a
calendar year, (ii) the 60th day following the
Participant's death after May 1 and before
November 2 of a calendar year or (iii) the
December 31 following the Participant's death
after November 1 of a calendar year. One and only
one Election shall be permitted pursuant to this
Paragraph 3.4.3 with respect to a Deceased
Participant's Account.
3.4.4 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. An Election
pursuant to this Paragraph 3.4.4 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
-9-
<PAGE>
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 2 of
a calendar year.
3.4.5 A Retired Participant, or the Permitted Transferee
of a Retired Participant, if applicable, 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 an Election is
made pursuant to this Paragraph 3.4.5, the Retired
Participant's Account shall be distributed in full
on or before the fifth anniversary of the Retired
Participant's Normal Retirement). An Election
pursuant to this Paragraph 3.4.5 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 2
of a calendar year.
3.5 Effect of 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 discretion,
provide in such notice that notwithstanding any other provision of the Plan or
the terms of any Election, upon the consummation of a Terminating Event, the
Account balance of each Participant shall be distributed in full and any
outstanding Elections shall be revoked.
4. FORM OF DISTRIBUTION
4.1 Form of Distribution. Deferred Stock Units credited to an
Account shall be distributed in the form of shares of A Stock and/or K Stock, as
applicable. Dividend equivalents shall be distributed in a lump sum in cash.
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 Election is in effect.
-10-
<PAGE>
5.2 Crediting of Dividend Equivalents. The Account of each
Participant shall be credited with dividend equivalents at the same rate per
Deferred Stock Unit as are actually paid per Share. Earnings shall be credited
with respect to dividend equivalents credited to Accounts and credited with
interest annually at the Prime Rate.
5.3 Status of Deferred Amounts. Regardless of whether or not
the Company is a Participant's employer, all Deferred Stock Units and dividend
equivalents 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 the 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 his or her 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.
6. NON-ASSIGNABILITY, ETC.
6.1 Non-assignability. The right of each Participant in or to
any Account, benefit or payment hereunder shall not be subject in any manner to
attachment or other legal process for the debts of such Participant; and no
Account, benefit or payment shall be subject to anticipation, alienation, sale,
transfer, assignment or encumbrance.
6.2 Designation of Beneficiaries. Each Participant shall have
the right to designate one or more beneficiaries to receive distributions in the
event of the Participant's death by filing with the Administrator a beneficiary
designation on the form provided by the Administrator for such purpose. The
designation of beneficiary or beneficiaries may be changed by a Participant at
any time prior to his or her death by the delivery to the Administrator of a new
beneficiary designation form. If no beneficiary shall have been designated, or
if no designated beneficiary shall survive the Participant, the Participant's
estate shall be deemed to be the beneficiary.
7. INTERPRETATION
7.1 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.
7.2 Claims Procedure. The Committee shall administer a
reasonable claims procedure with respect to the Plan in accordance with
Department of Labor Regulation section 2560.503-1, or any successor provision.
-11-
<PAGE>
8. AMENDMENT OR TERMINATION
8.1 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.
9. MISCELLANEOUS PROVISIONS
9.1 No Right to Continued Employment. Nothing contained herein
shall be construed as conferring upon any Participant the right to remain in the
employment of a Participating Company as an executive or in any other capacity.
9.2 Governing Law. This Plan shall be interpreted under the
laws of the Commonwealth of Pennsylvania.
9.3 Expiration of Options. Notwithstanding any provision of the
Plan or an Election, no Election shall be effective with respect to an Option
that has expired. In addition, no provision of the Plan or an Election shall be
construed to extend the expiration date of any Option.
10. EFFECTIVE DATE
The effective date of the Plan shall be September 16, 1997.
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 16th day of September, 1997.
COMCAST CORPORATION
BY: /s/ Stanley Wang
ATTEST: /s/ Arthur R. Block
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of operations and consolidated balance sheet and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000022301
<NAME> COMCAST CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 574
<SECURITIES> 207
<RECEIVABLES> 508
<ALLOWANCES> (102)
<INVENTORY> 339
<CURRENT-ASSETS> 1,682
<PP&E> 4,089
<DEPRECIATION> (1,317)
<TOTAL-ASSETS> 12,790
<CURRENT-LIABILITIES> 1,446
<BONDS> 6,700
507
32
<COMMON> 349
<OTHER-SE> 590
<TOTAL-LIABILITY-AND-EQUITY> 12,790
<SALES> 3,520
<TOTAL-REVENUES> 3,520
<CGS> (867)
<TOTAL-COSTS> (3,157)
<OTHER-EXPENSES> (92)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (423)
<INCOME-PRETAX> (153)<F1>
<INCOME-TAX> (45)
<INCOME-CONTINUING> (131)
<DISCONTINUED> 0
<EXTRAORDINARY> (26)
<CHANGES> 0
<NET-INCOME> (157)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> (.50)
<FN>
<F1>loss before income tax expense and other items excludes the effect of
minority interests, net of tax, of $67.
</FN>
</TABLE>
