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:
MARCH 31, 2000
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ________ to ________.
Commission File Number 0-6983
[GRAPHIC OMITTED - LOGO]
COMCAST CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1709202
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
--------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No
--- ---
--------------------------
As of March 31, 2000, there were 873,837,065 shares of Class A Special Common
Stock, 23,854,080 shares of Class A Common Stock and 9,444,375 shares of Class B
Common Stock outstanding.
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet as of
March 31, 2000 and December 31, 1999 (Unaudited).............2
Condensed Consolidated Statement of
Operations and Accumulated Deficit for the
Three Months Ended March 31, 2000 and 1999 (Unaudited).......3
Condensed Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 2000 and 1999 (Unaudited).......4
Notes to Condensed Consolidated Financial Statements
(Unaudited).............................................5 - 13
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................14 - 19
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings...........................................20
ITEM 6. Exhibits and Reports on Form 8-K............................20
SIGNATURE...........................................................21
-----------------------------------
This Quarterly Report on Form 10-Q is for the three months ended March 31,
2000. This Quarterly Report modifies and supersedes documents filed prior to
this Quarterly Report. The SEC allows us to "incorporate by reference"
information that we file with them, which means that we can disclose important
information to you by referring you directly to those documents. Information
incorporated by reference is considered to be part of this Quarterly Report. In
addition, information that we file with the SEC in the future will automatically
update and supersede information contained in this Quarterly Report. In this
Quarterly Report, "Comcast," "we," "us" and "our" refer to Comcast Corporation
and its subsidiaries.
You should carefully review the information contained in this Quarterly
Report and in other reports or documents that we file from time to time with the
SEC. In this Quarterly Report, we state our beliefs of future events and of our
future financial performance. In some cases, you can identify those so-called
"forward-looking statements" by words such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of those words and other comparable
words. You should be aware that those statements are only our predictions.
Actual events or results may differ materially. In evaluating those statements,
you should specifically consider various factors, including the risks outlined
below. Those factors may cause our actual results to differ materially from any
of our forward-looking statements.
Factors Affecting Future Operations
We have in the past acquired and we will be acquiring cable communications
systems in new communities in which we do not have established relationships
with the franchising authority, community leaders and cable subscribers.
Further, a substantial number of new employees must be integrated into our
business practices and operations. Our results of operations may be
significantly affected by our ability to efficiently and effectively manage
these changes.
In addition, the cable communications industry and the provision of
programming content may be affected by, among other things:
o changes in laws and regulations,
o changes in the competitive environment,
o changes in technology,
o franchise related matters,
o market conditions that may adversely affect the availability of debt
and equity financing for working capital, capital expenditures or
other purposes,
o demand for the programming content we distribute or the willingness of
other video program distributors to carry our content, and
o general economic conditions.
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions, except share data)
March 31, December 31,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents......................................................... $750.6 $922.2
Investments....................................................................... 4,841.9 7,606.0
Accounts receivable, less allowance for doubtful accounts of $150.3 and $136.6.... 654.6 673.3
Inventories, net.................................................................. 374.8 402.8
Other current assets.............................................................. 93.2 100.1
--------- ---------
Total current assets.......................................................... 6,715.1 9,704.4
--------- ---------
INVESTMENTS.......................................................................... 6,542.9 5,548.8
--------- ---------
PROPERTY AND EQUIPMENT............................................................... 6,404.6 5,153.2
Accumulated depreciation.......................................................... (1,640.0) (1,700.9)
--------- ---------
Property and equipment, net....................................................... 4,764.6 3,452.3
--------- ---------
DEFERRED CHARGES..................................................................... 23,516.2 12,722.1
Accumulated amortization.......................................................... (2,894.0) (2,742.0)
--------- ---------
Deferred charges, net............................................................. 20,622.2 9,980.1
--------- ---------
$38,644.8 $28,685.6
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses............................................. $2,516.5 $2,786.5
Accrued interest.................................................................. 167.3 104.5
Deferred income taxes............................................................. 1,363.4 2,118.6
Current portion of long-term debt................................................. 128.8 517.5
--------- ---------
Total current liabilities..................................................... 4,176.0 5,527.1
--------- ---------
LONG-TERM DEBT, less current portion (including adjustment to carrying value of
$1,353.5 and $666.0).............................................................. 10,805.6 8,707.2
--------- ---------
DEFERRED INCOME TAXES................................................................ 5,966.0 3,150.5
--------- ---------
MINORITY INTEREST AND OTHER.......................................................... 877.0 959.5
--------- ---------
COMMITMENTS AND CONTINGENCIES
COMMON EQUITY PUT OPTIONS............................................................ 82.0
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 20,000,000 shares; 5.25% series B mandatorily
redeemable convertible, $1,000 par value; issued, 577,116 and 569,640
at redemption value............................................................. 577.1 569.6
Class A special common stock, $1 par value - authorized, 2,500,000,000 shares;
issued, 897,161,976 and 716,442,482; outstanding, 873,837,065 and 716,442,482 .. 873.8 716.4
Class A common stock, $1 par value - authorized,
200,000,000 shares; issued, 23,854,080 and 25,993,380........................... 23.9 26.0
Class B common stock, $1 par value - authorized,
50,000,000 shares; issued, 9,444,375............................................ 9.4 9.4
Additional capital................................................................ 11,108.8 3,527.0
Accumulated deficit............................................................... (975.9) (619.8)
Accumulated other comprehensive income............................................ 5,121.1 6,112.7
--------- ---------
Total stockholders' equity.................................................... 16,738.2 10,341.3
--------- ---------
$38,644.8 $28,685.6
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in millions, except per share data)
Three Months Ended March 31,
2000 1999
--------- ---------
<S> <C> <C>
REVENUES
Service income......................................................... $1,117.9 $724.4
Net sales from electronic retailing.................................... 741.3 649.6
--------- ---------
1,859.2 1,374.0
--------- ---------
COSTS AND EXPENSES
Operating.............................................................. 548.9 373.6
Cost of goods sold from electronic retailing........................... 447.4 390.5
Selling, general and administrative.................................... 276.0 184.8
Depreciation........................................................... 171.9 116.6
Amortization........................................................... 373.8 121.9
--------- ---------
1,818.0 1,187.4
--------- ---------
OPERATING INCOME........................................................... 41.2 186.6
OTHER (INCOME) EXPENSE
Interest expense....................................................... 168.6 111.2
Investment income...................................................... (644.6) (127.8)
Expense related to indexed debt........................................ 687.5
Equity in net losses (income) of affiliates............................ 2.9 (1.1)
Other expense (income)................................................. 10.8 (0.2)
--------- ---------
225.2 (17.9)
--------- ---------
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAX, MINORITY INTEREST AND EXTRAORDINARY ITEMS......................... (184.0) 204.5
INCOME TAX (BENEFIT) EXPENSE............................................... (31.8) 87.4
--------- ---------
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST AND EXTRAORDINARY ITEMS.............................. (152.2) 117.1
MINORITY INTEREST.......................................................... 34.2 15.3
--------- ---------
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEMS.................................................... (186.4) 101.8
LOSS FROM DISCONTINUED OPERATIONS, net of income tax
benefit of $11.9 in 1999............................................... 20.1
--------- ---------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEMS................................... (186.4) 81.7
EXTRAORDINARY ITEMS........................................................ (5.1) (0.7)
--------- ---------
NET (LOSS) INCOME.......................................................... (191.5) 81.0
PREFERRED DIVIDENDS........................................................ (7.5) (7.5)
--------- ---------
NET (LOSS) INCOME FOR COMMON STOCKHOLDERS.................................. ($199.0) $73.5
========= =========
ACCUMULATED DEFICIT
Beginning of period.................................................... ($619.8) ($1,488.2)
Net (loss) income...................................................... (191.5) 81.0
Retirement of common stock............................................. (164.6) (9.6)
--------- ---------
End of period.......................................................... ($975.9) ($1,416.8)
========= =========
BASIC (LOSS) EARNINGS FOR COMMON STOCKHOLDERS PER COMMON SHARE
(Loss) income from continuing operations before extraordinary items.... ($.23) $.13
Loss from discontinued operations...................................... (.03)
Extraordinary items.................................................... (.01)
--------- ---------
Net (loss) income................................................... ($.24) $.10
========= =========
BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING................. 836.6 741.4
========= =========
DILUTED (LOSS) EARNINGS FOR COMMON STOCKHOLDERS PER COMMON SHARE
(Loss) income from continuing operations before extraordinary items.... ($.23) $.12
Loss from discontinued operations...................................... (.02)
Extraordinary items.................................................... (.01)
--------- ---------
Net (loss) income................................................... ($.24) $.10
========= =========
DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING............... 836.6 814.9
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in millions)
Three Months Ended March 31,
2000 1999
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income................................................................ ($191.5) $81.0
Adjustments to reconcile net (loss) income to net cash (used in) provided
by operating activities from continuing operations:
Depreciation................................................................... 171.9 116.6
Amortization................................................................... 373.8 121.9
Non-cash interest income, net.................................................. (13.3) (1.4)
Non-cash expense related to indexed debt....................................... 687.5
Equity in net losses (income) of affiliates.................................... 2.9 (1.1)
Gains on investments, net...................................................... (590.7) (101.2)
Minority interest.............................................................. 34.2 15.3
Loss from discontinued operations.............................................. 20.1
Extraordinary items............................................................ 5.1 0.7
Deferred income taxes and other................................................ (253.6) 25.3
--------- --------
226.3 277.2
Changes in working capital..................................................... (369.8) 23.1
--------- --------
Net cash (used in) provided by operating activities from
continuing operations................................................ (143.5) 300.3
--------- --------
FINANCING ACTIVITIES
Proceeds from borrowings......................................................... 88.2 778.3
Retirement and repayment of debt................................................. (700.7) (66.4)
Repurchases of common stock, net................................................. (109.1) (3.5)
Dividends........................................................................ (9.0)
Deferred financing costs......................................................... (14.4)
--------- --------
Net cash (used in) provided by financing activities from
continuing operations................................................ (721.6) 685.0
--------- --------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired............................................... (75.3)
Proceeds from sales of (purchases of) short-term investments, net................ 663.0 (40.6)
Purchases of investments......................................................... (174.9) (116.4)
Proceeds from sales of investments............................................... 649.2 50.7
Capital expenditures............................................................. (289.1) (122.4)
Additions to deferred charges.................................................... (79.4) (78.6)
--------- --------
Net cash provided by (used in) investing activities
from continuing operations........................................... 693.5 (307.3)
--------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS -
CONTINUING OPERATIONS............................................................ (171.6) 678.0
CASH AND CASH EQUIVALENTS, beginning of period...................................... 922.2 870.7
--------- --------
CASH AND CASH EQUIVALENTS, end of period............................................ $750.6 $1,548.7
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 1999 has been
condensed from the audited consolidated balance sheet as of that date. The
condensed consolidated balance sheet as of March 31, 2000 and the condensed
consolidated statements of operations and accumulated deficit and of cash
flows for the three months ended March 31, 2000 and 1999 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 necessary to present fairly the financial position, results of
operations and cash flows as of March 31, 2000 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, 1999 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the period ended March 31, 2000
are not necessarily indicative of operating results for the full year.
Sale of Comcast Cellular Corporation
In July 1999, the Company sold its indirect wholly owned subsidiary,
Comcast Cellular Corporation ("Comcast Cellular"), to SBC Communications,
Inc. The results of operations of Comcast Cellular for the three months
ended March 31, 1999 have been presented as a discontinued operation in
accordance with Accounting Principles Board Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This statement
establishes the accounting and reporting standards for derivatives and
hedging activity. Upon the adoption of SFAS No. 133, all derivatives are
required to be recognized in the statement of financial position as either
assets or liabilities and measured at fair value. In July 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133" deferring the effective date for
implementation of SFAS No. 133 to fiscal years beginning after June 15,
2000. The Company is currently evaluating the impact the adoption of SFAS
No. 133 will have on its financial position and results of operations.
(Loss) Earnings for Common Stockholders Per Common Share
(Loss) earnings for common stockholders per common share is computed by
dividing net (loss) income, after deduction of preferred stock dividends,
when applicable, by the weighted average number of common shares
outstanding during the period on a basic and diluted basis.
5
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The following table reconciles the numerator and denominator of the
computations of diluted (loss) earnings for common stockholders per common
share ("Diluted EPS") for the three months ended March 31, 2000 and 1999,
respectively.
<TABLE>
<CAPTION>
(Amounts in millions, except per share data)
Three Months Ended
March 31,
2000 1999
--------- ---------
<S> <C> <C>
Net (loss) income for common stockholders........................ ($199.0) $73.5
Preferred dividends.............................................. 7.5 7.5
--------- ---------
Net (loss) income for common stockholders used for
Diluted EPS.................................................... ($191.5) $81.0
========= =========
Basic weighted average number of common shares outstanding....... 836.6 741.4
Dilutive securities:
Series A and B convertible preferred stock..................... 45.2
Stock option and restricted stock plans........................ 28.3
--------- ---------
Diluted weighted average number of common shares
outstanding.................................................... 836.6 814.9
========= =========
Diluted (loss) earnings for common stockholders
per common share............................................... ($.24) $.10
========= =========
</TABLE>
Put options sold by the Company on a weighted average 0.6 million shares
and 5.5 million shares, respectively, of its Class A Special Common stock
(see Note 6) were outstanding during the three months ended March 31, 2000
and 1999 but were not included in the computation of Diluted EPS as the
options' exercise price was less than the average market price of the
Company's Class A Special Common Stock during the periods.
For the three months ended March 31, 2000, potentially dilutive securities
related to the Company's Series B convertible preferred stock, stock option
and restricted stock plans have been excluded in determining the total
weighted average number of common shares outstanding because of their
antidilutive effect on loss for common stockholders per common share.
Reclassifications
Certain reclassifications have been made to the prior year condensed
consolidated financial statements to conform to those classifications used
in 2000.
3. SIGNIFICANT EVENTS
Acquisition of Lenfest Communications, Inc.
In January 2000, the Company acquired substantially all of the assets of
Lenfest Communications, Inc. ("Lenfest"), a cable communications company
serving approximately 1.1 million subscribers primarily in the Philadelphia
area from AT&T Corp. ("AT&T") and the other Lenfest stockholders for
approximately 121.4 million shares of the Company's Class A Special Common
Stock, subject to adjustment, with a value of $6.077 billion (the "Lenfest
Acquisition"). In connection with the Lenfest Acquisition, the Company
assumed approximately $1.343 billion of debt. Immediately upon closing of
the Lenfest Acquisition, Lenfest was merged with and into Comcast LCI
Holdings, Inc. ("LCI Holdings"), a wholly owned subsidiary of the Company,
with LCI Holdings as the successor to Lenfest.
6
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Consolidation of Garden State Cablevision L.P.
Garden State Cablevision L.P. ("Garden State Cable"), a cable
communications company serving approximately 216,000 subscribers in New
Jersey, is a partnership which was owned 50% by Lenfest and 50% by the
Company. The Company had accounted for its interest in Garden State Cable
under the equity method (see Note 4). As a result of the Lenfest
Acquisition, the Company now indirectly owns 100% of Garden State Cable. As
such, the operating results of Garden State Cable have been included in the
Company's condensed consolidated statement of operations and accumulated
deficit from the date of the Lenfest Acquisition.
Acquisition of CalPERS' Interest in Jointly Owned Cable Properties
In February 2000, the Company acquired the California Public Employees
Retirement System's 45% interest in Comcast MHCP Holdings, L.L.C. ("Comcast
MHCP"), formerly a 55% owned consolidated subsidiary of the Company which
serves approximately 642,000 cable subscribers in Michigan, New Jersey and
Florida. As a result, the Company now owns 100% of Comcast MHCP. The
consideration was $750.0 million in cash.
Acquisition of Jones Intercable, Inc.
In April 1999, the Company acquired a controlling interest in Jones
Intercable, Inc. ("Jones Intercable"), a cable communications company
serving approximately 1.1 million subscribers, for aggregate consideration
of $706.3 million in cash. The acquisition was accounted for under the
purchase method of accounting. As such, the operating results of Jones
Intercable have been included in the Company's condensed consolidated
statement of operations and accumulated deficit from the acquisition date.
In June 1999, the Company purchased an additional 1.0 million shares of
Jones Intercable Class A Common Stock for $50.0 million in cash in a
private transaction. The Company contributed its interest in Jones
Intercable to Comcast Cable Communications, Inc. ("Comcast Cable"), a
wholly owned subsidiary of the Company.
In March 2000, the Jones Intercable shareholders approved a merger
agreement pursuant to which the Jones Intercable shareholders, including
Comcast Cable, were to receive 1.4 shares of the Company's Class A Special
Common Stock in exchange for each share of Jones Intercable Class A Common
Stock and Common Stock (the "Jones Merger") and Jones Intercable was merged
with and into Comcast JOIN Holdings, Inc., a wholly owned subsidiary of the
Company ("JOIN Holdings"), with JOIN Holdings as the successor to Jones
Intercable. In connection with the closing of the Jones Merger, the Company
issued approximately 58.9 million shares of its Class A Special Common
Stock to the Jones Intercable shareholders, including approximately 23.3
million shares to Comcast Cable and 35.6 million shares with a value of
$1.727 billion to the public shareholders. As required under generally
accepted accounting principles, the shares issued to Comcast Cable are
presented as issued but not outstanding (held in treasury) in the Company's
March 31, 2000 condensed consolidated balance sheet.
The acquisitions completed by the Company during the three months ended
March 31, 2000 were accounted for under the purchase method of accounting.
As such, the operating results of the acquired systems have been included
in the Company's condensed consolidated statement of operations and
accumulated deficit from the acquisition date. The allocation of the
purchase price for the acquisitions completed by the Company during the
three months ended March 31, 2000 is preliminary pending completion of
final appraisals. As the consideration given in exchange for Jones
Intercable, Lenfest and the additional 50% interest in Garden State Cable
was shares of the Company's Class A Special Common Stock, the acquisitions
of such interests had no significant impact on the Company's condensed
consolidated statement of cash flows during the three months ended March
31, 2000 (see Note 7).
7
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Unaudited Pro Forma Information
The following unaudited pro forma information for the three months ended
March 31, 1999 has been presented as if the Lenfest Acquisition occurred on
January 1, 1999. This information is based on historical results of
operations, adjusted for acquisition costs, and, in the opinion of
management, is not necessarily indicative of what the results would have
been had the Company operated Lenfest and Garden State Cable since January
1, 1999 (dollars in millions).
Three Months Ended
March 31, 1999
------------------
Revenues............................................. $1,524.9
Net loss............................................. (43.4)
4. INVESTMENTS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Fair value method........................................... $10,648.2 $11,972.1
Cost method................................................. 481.8 1,134.6
Equity method............................................... 254.8 48.1
---------- ----------
Total investments.................................... 11,384.8 13,154.8
Less, current investments................................... 4,841.9 7,606.0
---------- ----------
Non-current investments..................................... $6,542.9 $5,548.8
========== ==========
</TABLE>
Fair Value Method
The Company holds unrestricted equity investments in certain publicly
traded companies, with an historical cost (including $2.219 billion and
$2.186 billion of aggregate pre-tax gains recognized through March 31, 2000
and December 31, 1999, respectively) of $2.761 billion and $2.558 billion
as of March 31, 2000 and December 31, 1999, respectively. The unrealized
pre-tax gains as of March 31, 2000 and December 31, 1999 of $7.887 billion
and $9.414 billion, respectively, have been reported in the Company's
condensed consolidated balance sheet as a component of accumulated other
comprehensive income, net of related deferred income tax expense of $2.760
billion and $3.294 billion, respectively.
Sprint PCS. As of March 31, 2000 and December 31, 1999, as adjusted for
Sprint PCS' 2-for-1 stock split in February 2000, the Company holds
approximately 93.8 million shares of unregistered Series 2 Sprint PCS
common stock, 123,452 shares of Sprint PCS convertible preferred stock
(convertible into approximately 4.0 million shares of unregistered Series 2
Sprint PCS common stock) and a warrant to purchase approximately 6.0
million shares of unregistered Series 2 Sprint PCS common stock at $12.01
per share (the "Sprint PCS Stock"). The Company has registration rights,
subject to customary restrictions, which will allow the Company to sell its
Sprint PCS Stock. As of March 31, 2000 and December 31, 1999, the Company
has recorded its investment in Sprint PCS at its estimated fair value of
$5.149 billion and $4.234 billion, respectively (see Note 5).
In January 2000, the Company entered into a securities loan agreement with
a third party (the "Borrower") pursuant to which the Company agreed to lend
22.0 million shares (as adjusted for Sprint PCS' 2-for-1 stock split in
February 2000) of its Sprint PCS Stock (the "Transferred Shares") to the
Borrower. The Borrower provided cash collateral equal to the value of the
Transferred Shares (initially $1.123 billion), adjusted daily for changes
in the value of the underlying Transferred Shares. The Transferred Shares
are included in current investments in the Company's March 31, 2000
condensed consolidated balance sheet.
8
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
AT&T. As of March 31, 2000 and December 31, 1999, the Company holds
approximately 39.9 million shares of unregistered AT&T common stock (as
adjusted for AT&T's 3-for-2 stock split in April 1999). As of March 31,
2000, and December 31, 1999, the Company has recorded its investment in
AT&T at its estimated fair value of $2.250 billion and $2.026 billion,
respectively. The Company has registration rights, subject to customary
restrictions, which allow the Company to sell its AT&T common stock.
In May 1999, the Company entered into an agreement with AT&T to exchange
various cable communications systems. Under the terms of the agreement, the
Company will receive cable communications systems serving approximately 1.5
million subscribers. In exchange, AT&T will receive systems that the
Company currently owns or will acquire serving 750,000 subscribers. At
closing, the Company will pay AT&T an equalizing payment of approximately
$3.4 billion (subject to adjustment based on the actual number of net
subscribers acquired and the per subscriber price of certain subscribers)
for the 750,000 net subscribers to be acquired as a result of the
exchanges. The Company will pay for the net subscribers acquired in
connection with the exchanges with shares of AT&T common stock that the
Company currently owns or may acquire and other securities or assets which
would permit the exchanges to be tax-free to the maximum extent possible.
The agreed upon value of any AT&T common stock used in the exchange that
was owned by the Company at the time of the agreement is $54.41 per share.
Internet Capital Group. In August 1999, Internet Capital Group ("ICG"), an
investee of the Company previously accounted for under the cost method,
completed an initial public offering of its common stock. ICG is an
Internet holding company engaged in managing and operating a network of
business-to-business e-commerce companies. During the three months ended
March 31, 2000, the Company sold approximately 2.3 million shares of its
ICG common stock for proceeds of $327.1 million and recognized a pre-tax
gain of $325.9 million. Such gain was recorded as a reclassification from
accumulated other comprehensive income to investment income. As of March
31, 2000 and December 31, 1999, the Company holds approximately 21.4
million shares and 23.7 million shares of ICG common stock and warrants and
options to purchase approximately 0.6 million shares and 0.6 million shares
of ICG common stock, respectively. As of March 31, 2000 and December 31,
1999, the Company has recorded its investment in ICG at its estimated fair
value of $1.982 billion and $4.127 billion, respectively.
Excite@Home. Excite@Home provides Internet services to subscribers and
businesses over the cable communications infrastructure in a limited number
of cities in the US. As of March 31, 2000 and December 31, 1999, the
Company holds approximately 29.1 million shares of Excite@Home Series A
Common Stock (the "Excite@Home Series A Stock") and warrants and options to
purchase an additional 2.0 million shares and 0.6 million shares,
respectively, of Excite@Home Series A Stock. As of March 31, 2000 and
December 31, 1999, 30% of the Excite@Home Series A shares held by the
Company were contractually restricted shares (the "Restricted Shares") and
70% of the Excite@Home Series A shares held by the Company were
unrestricted shares (the "Unrestricted Shares"). The Company has recorded
the Restricted Shares at their historical cost of $0.6 million and the
Unrestricted Shares and warrants, which are classified as available for
sale, at their estimated fair value of $783.4 million and $918.0 million,
respectively, as of March 31, 2000 and December 31, 1999.
In March 2000, Excite@Home and its principal cable partners, including the
Company, entered into an agreement pursuant to which the Company agreed to
enter into a new distribution agreement with Excite@Home for the period
from June 2002 through June 2006, give up its Board level veto rights and
resign from the Excite@Home Board of Directors. The Company may elect to
terminate the existing or the new distribution agreement beginning June
2001 on at least six months notice. Under the terms of the agreement, AT&T
agreed to give the Company the right to sell its Excite@Home Series A
shares to AT&T at any time between January 1, 2001 and June 4, 2002 at a
price equal to the higher of $48 per share or the average per share trading
price for a 30-day trading period (as defined). The aggregate value of the
Excite@Home Series A shares that AT&T would be required to purchase from
the Company is limited to $1.5 billion. The Company has the right to elect
payment in the form of cash or in shares of AT&T common stock.
9
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The existing Excite@Home warrants held by the Company will be amended to
eliminate any performance vesting conditions. The Company will also receive
new warrants with an exercise price of $29.54 to purchase two shares of
Excite@Home Series A Stock for each home passed by the Company's cable
communications systems. The new warrants vest in installments every six
months beginning in June 2001 and will be fully vested in June 2006
provided that the Company has not elected to earlier terminate its existing
or the new distribution agreement. The new warrants include customary
registration rights and will expire in March 2015.
The agreement summarized in the two previous paragraphs is subject to the
receipt of necessary stockholder and other approvals and is expected to
close in the third quarter of 2000.
Sales of Other Fair Value Method Investments
During the three months ended March 31, 2000 and 1999, the Company
recognized pre-tax gains of $230.5 million and $0.3 million, respectively,
on sales of certain of its other fair value method investments. These gains
were recorded as a reclassification from accumulated other comprehensive
income to investment income.
Gains on Exchanges of Fair Value Method Investments
During the three months ended March 31, 2000 and 1999, in connection with
certain mergers of publicly traded companies held by the Company accounted
for as investments available for sale, the Company recognized pre-tax gains
of $33.0 million and $187.6 million, respectively, representing the
difference between the fair value of the securities received by the Company
and the Company's cost basis in the securities exchanged. Such gains were
recorded as a reclassification from accumulated other comprehensive income
to investment income.
Impairment Losses
During the three months ended March 31, 2000 and 1999, the Company recorded
pre-tax losses of $4.9 million and $35.3 million on certain of its
investments based on a decline in value that was considered other than
temporary. Such losses are included in investment income in the Company's
condensed consolidated statement of operations and accumulated deficit.
Investment Expense Related to Call Options
During the three months ended March 31, 1999, the Company recorded $51.4
million of investment expense related to changes in the value of and the
settlement of call options on certain of the Company's fair value method
investments, all of which expired by November 1999.
Equity Method
The Company records its proportionate interests in the net income (loss) of
certain of its equity method investees in arrears. The Company's recorded
investments exceed its proportionate interests in the book value of the
investees' net assets by $58.5 million as of March 31, 2000 (related to the
Company's investment in The Golf Channel). Such excess is being amortized
to equity in net income or loss, over a period of twenty years, which is
consistent with the estimated lives of the underlying assets. The original
cost of investments accounted for under the equity method totaled $341.8
million and $235.6 million as of March 31, 2000 and December 31, 1999,
respectively.
During February 2000, the Company exercised a call option to purchase
shares held by certain founding members and members of management of The
Golf Channel for a total purchase price of $99.0 million. In addition, the
Company purchased shares held by other minority shareholders for $26.3
million during March 2000 and $11.2 million during April 2000,
respectively. The Company's current ownership after these transactions is
60.3%. The Company will continue to record its investment in The Golf
Channel under the equity method due to certain veto rights that are held by
one of the remaining minority partners.
As a result of the Lenfest Acquisition (see Note 3), the Company has
consolidated the results of Garden State Cable, previously accounted for
under the equity method, effective January 2000.
10
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. LONG-TERM DEBT
ZONES
During the fourth quarter of 1999, the Company issued an aggregate of
approximately 48.3 million (as adjusted for Sprint PCS' 2-for-1 stock split
in February 2000) 2.0% Exchangeable Subordinated Debentures due 2029 (the
"ZONES") for aggregate gross proceeds of $1.807 billion. At maturity,
holders of the ZONES are entitled to receive in cash an amount equal to the
higher of (a) the principal amount of the ZONES, or (b) the market value of
Sprint PCS Stock. Prior to maturity, each ZONES is exchangeable at the
holders option for an amount of cash equal to 95% of the market value of
Sprint PCS Stock.
The ZONES are being accounted for as an indexed debt instrument since the
maturity value is dependent upon the fair value of Sprint PCS Stock.
Therefore, the carrying value of the ZONES is marked to market each balance
sheet date to reflect the fair value of the underlying Sprint PCS Stock
with the change included in expense related to indexed debt in the
Company's condensed consolidated statement of operations and accumulated
deficit. During the three months ended March 31, 2000, the Company recorded
$687.5 million of expense related to indexed debt. The Company's investment
in Sprint PCS is accounted for as available for sale, with changes in fair
value being reflected in accumulated other comprehensive income (see Note
4).
Debt Assumed
In connection with the Lenfest Acquisition and the consolidation of Garden
State Cable (see Note 3), the Company assumed aggregate debt of $1.629
billion with interest rates ranging between 6.95% and 10.5%, and maturities
between 2001 and 2008.
Extraordinary Items
Extraordinary items during the three months ended March 31, 2000 of $5.1
million consist of unamortized debt issue costs and debt extinguishment
costs, net of related tax benefits, expensed principally in connection with
the redemption and retirement of certain indebtedness.
Interest Rates
As of March 31, 2000 and December 31, 1999, the Company's effective
weighted average interest rate on its long- term debt outstanding was 6.62%
and 6.67%, respectively. The Company's effective weighted average interest
rate excludes the effects of the ZONES mark to market adjustments for both
dates presented.
Lines of Credit
As of March 31, 2000, certain subsidiaries of the Company had unused lines
of credit of $1.196 billion, $595.7 million of which is restricted by the
covenants of the related debt agreements and to subsidiary general purposes
and dividend declaration.
6. STOCKHOLDERS' EQUITY
Repurchase Program
Based on the trade date for stock repurchases, during the three months
ended March 31, 2000 and 1999, the Company repurchased approximately 3.3
million and approximately 0.2 million shares, respectively, of its common
stock for aggregate consideration of $127.9 million and $11.5 million,
respectively, pursuant to its Board- authorized repurchase program.
As part of the repurchase program, during the three months ended March 31,
2000, the Company sold put options on 2.0 million shares of its Class A
Special Common Stock. The put options mature on specific dates from July
through October 2000. The amount the Company would be obligated to pay to
repurchase such shares upon exercise of the put options, totaling $82.0
million, was reclassified from additional capital to common equity put
options in the Company's March 31, 2000 condensed consolidated balance
sheet.
11
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Share Exchange
During the three months ended March 31, 2000, the Company issued
approximately 1.0 million shares of its Class A Special Common Stock in
exchange for approximately 1.1 million shares of its Class A Common Stock.
The Class A Common Stock was subsequently retired.
Comprehensive (Loss) Income
Total comprehensive (loss) income for the three months ended March 31, 2000
and 1999 was $1.183 billion and $1.215 billion, respectively. Total
comprehensive (loss) income includes net income (loss), unrealized gains
(losses) on marketable securities and foreign currency translation gains
(losses) for the periods presented.
7. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
During the three months ended March 31, 2000, the Company acquired all of
the capital stock and/or partnership interests not previously owned by the
Company of Lenfest, Garden State Cable, Jones Intercable and Comcast MHCP,
principally through the issuance of the Company's Class A Special Common
Stock (see Note 3). The fair values of the assets and liabilities acquired
by the Company during the three months ended March 31, 2000 are presented
as follows (in millions):
Current assets..................................... $268.7
Investments........................................ 129.5
Property, plant & equipment........................ 1,264.9
Deferred charges................................... 10,866.8
Current liabilities................................ (237.5)
Long-term debt..................................... (1,628.6)
Deferred incomes taxes............................. (2,859.7)
--------
Net assets acquired....................... $7,804.1
========
The Company made cash payments for interest of $126.8 million and $56.4
million during the three months ended March 31, 2000 and 1999,
respectively.
The Company made cash payments for income taxes of $456.0 million and $18.9
million during the three months ended March 31, 2000 and 1999,
respectively.
8. COMMITMENTS AND 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.
In connection with a license awarded to an affiliate, the Company is
contingently liable in the event of nonperformance by the affiliate to
reimburse a bank which has provided a performance guarantee. The amount of
the performance guarantee is approximately $500 million; however the
Company's current estimate of the amount of expenditures (principally in
the form of capital expenditures) that will be made by the affiliate
necessary to comply with the performance requirements will not exceed $150
million.
12
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
9. FINANCIAL DATA BY BUSINESS SEGMENT
The following represents the Company's significant business segments,
"Cable" and "Commerce." The components of net income (loss) below operating
income (loss) are not separately evaluated by the Company's management on a
segment basis (see the Company's condensed consolidated statement of
operations and accumulated deficit) (dollars in millions).
<TABLE>
<CAPTION>
Cable Corporate and
Communications Commerce Other (1) Total
-------------- -------- --------- -----
<S> <C> <C> <C> <C>
Three Months Ended March 31, 2000
---------------------------------
Revenues, net........................... $976.3 $741.3 $141.6 $1,859.2
Operating income before depreciation
and amortization (2)................ 436.8 144.8 5.3 586.9
Depreciation and amortization........... 502.5 29.5 13.7 545.7
Operating (loss) income................. (65.7) 115.3 (8.4) 41.2
Interest expense........................ 127.6 9.0 32.0 168.6
Capital expenditures.................... 228.5 34.7 25.9 289.1
As of March 31, 2000
--------------------
Assets.................................. 24,404.7 2,250.2 11,989.9 $38,644.8
Long-term debt, less current portion.... 6,167.5 451.7 4,186.4 10,805.6
Three Months Ended March 31, 1999
---------------------------------
Revenues, net........................... $604.8 $649.6 $119.6 $1,374.0
Operating income before depreciation
and amortization (2)................ 280.5 130.9 13.7 425.1
Depreciation and amortization........... 194.2 28.4 15.9 238.5
Operating income (loss)................. 86.3 102.5 (2.2) 186.6
Interest expense........................ 65.7 10.4 35.1 111.2
Capital expenditures.................... 105.6 11.0 5.8 122.4
---------------
<FN>
(1) Other includes segments not meeting certain quantitative guidelines
for reporting. Other includes certain other operating businesses, such
as Comcast-Spectacor, L.P., E! Entertainment Television, Inc. and
elimination entries related to the segments presented. Corporate and
other assets consist primarily of the Company's investments (see Note
4).
(2) 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 and amortization expense,
operating cash flow is frequently used as one of the bases for
comparing businesses in the Company's industries, although the
Company's measure of operating cash flow may not be comparable to
similarly titled measures of other companies. Operating cash flow is
the primary basis used by the Company's management to measure the
operating performance of its businesses. Operating cash flow does not
purport to represent net income or net cash provided by operating
activities, as those terms are defined under generally accepted
accounting principles, and should not be considered as an alternative
to such measurements as an indicator of the Company's performance.
</FN>
</TABLE>
13
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
We have experienced significant growth in recent years both through
strategic acquisitions and growth in our existing businesses. We have
historically met our cash needs for operations through our cash flows from
operating activities. Cash requirements for acquisitions and capital
expenditures have been provided through our financing activities and sales of
investments, as well as our existing cash, cash equivalents and short-term
investments.
We have in the past acquired and we will be acquiring cable communications
systems in new communities in which we do not have established relationships
with the franchising authority, community leaders and cable subscribers.
Further, a substantial number of new employees must be integrated into our
business practices and operations. Our previously announced agreement to assume
management control of the operations of Prime Communications LLC is expected to
close in the second quarter of 2000. Our previously announced cable system
exchanges with Time Warner Cable, Adelphia Communications and AT&T Corp.
("AT&T") are subject to closing conditions and regulatory approvals and are
expected to close in the second, fourth and fourth quarter of 2000,
respectively. Our results of operations may be significantly affected by our
ability to efficiently and effectively manage these changes.
General Developments of Business
See Note 3 to our condensed consolidated financial statements included in
Item 1.
Liquidity and Capital Resources
The cable communications and the electronic retailing industry are
experiencing increasing competition and rapid technological changes. Our future
results of operations will be affected by our ability to react to changes in the
competitive environment and by our ability to implement new technologies.
However, we believe that competition and technological changes will not
significantly affect our ability to obtain financing.
We believe that we will be able to meet our current and long-term liquidity
and capital requirements, including fixed charges, principally through our cash
flows from operating activities, existing cash, cash equivalents and short-term
investments.
See Note 8 to our condensed consolidated financial statements included in
Item 1.
Cash, Cash Equivalents and Short-term Investments
We have traditionally maintained significant levels of cash, cash
equivalents and short-term investments to meet our short-term liquidity
requirements. Our cash equivalents and short-term investments are recorded at
fair value. Cash, cash equivalents and short-term investments as of March 31,
2000 were $5.593 billion, substantially all of which is unrestricted.
Investments
See Note 4 to our condensed consolidated financial statements included in
Item 1. A significant portion of our investments are in publicly traded
companies and are reflected at fair value which fluctuates with market changes.
We do not have any significant contractual funding commitments with respect
to any of our investments. However, to the extent we do not fund our investees'
non-binding capital calls, we are subject to dilution of our ownership
interests. We continually evaluate our existing investments, as well as new
investment opportunities.
Financing
See Notes 5 and 6 to our condensed consolidated financial statements
included in Item 1.
As of March 31, 2000 and December 31, 1999, our long-term debt, including
current portion, was $10.934 billion and $9.225 billion, respectively. Excluding
the effects of interest rate risk management instruments, 22.2% and 25.4% of our
long-term debt as of March 31, 2000 and December 31, 1999, respectively, was at
variable rates.
The $1.709 billion increase in our long-term debt results principally from
the $1.343 billion of Lenfest Communications, Inc. ("Lenfest") debt that we
assumed and the $286.0 million of Garden State Cablevision L.P. ("Garden State
Cable") debt that we consolidated in connection with the acquisition of Lenfest
in January 2000 (see Notes 3 and 5 to our condensed consolidated financial
statements included in Item 1), the $687.5 million non-cash, non-interest
bearing adjustment to the carrying value of the Company's 2.0% Exchangeable
Subordinated Debentures due 2029 (the "ZONES")
14
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
during the three months ended March 31, 2000 (see Note 5 to our condensed
consolidated financial statements included in Item 1) and $88.2 million of
borrowings, offset in part by retirements and repayments of our long- term debt
of $700.7 million during the three months ended March 31, 2000.
We have and may from time to time in the future, depending on certain
factors including market conditions, make optional repayments on our debt
obligations, which may include open market repurchases of our outstanding public
notes and debentures.
Equity Price Risk
At maturity, holders of the ZONES are entitled to receive in cash an amount
equal to the higher of (a) the principal amount of the ZONES, or (b) the market
value of Sprint PCS stock. The ZONES are being accounted for as an indexed debt
instrument since the maturity value is dependent upon the fair value of Sprint
PCS stock.
During 1999, we entered into cashless collar agreements (the "Equity
Collars") covering $1.365 billion notional amount of investment securities
accounted for at fair value. The Equity Collars limit our exposure to and
benefits from price fluctuations in the underlying equity securities. The Equity
Collars mature between 2001 and 2003. As we account for the Equity Collars as a
hedge, changes in the value of the Equity Collars are substantially offset by
changes in the value of the underlying investment securities which are also
marked to market through accumulated other comprehensive income in our condensed
consolidated balance sheet.
Interest Rate Risk
During the three months ended March 31, 2000, in connection with our
acquisition of Lenfest (see Note 3 to our condensed consolidated financial
statements included in Item 1), we acquired interest rate exchange agreements
("Swaps") with an aggregate notional amount of $275.0 million. Swaps with an
aggregate notional amount of $150.0 million either were terminated or expired
during the three months ended March 31, 2000. As of March 31, 2000, we have
Swaps with an aggregate notional amount of $1.537 billion having an average pay
rate of 6.32% and an average receive rate of 6.89%.
-----------------------
Statement of Cash Flows
Cash and cash equivalents decreased $171.6 million as of March 31, 2000
from December 31, 1999. The decrease in cash and cash equivalents resulted from
cash flows from operating, financing and investing activities which are
explained below.
Net cash used in operating activities from continuing operations amounted
to $143.5 million for the three months ended March 31, 2000, due principally to
changes in working capital as a result of the timing of receipts and
disbursements, offset by the effects of our acquisition of Lenfest in January
2000 (see Note 3 to our condensed consolidated financial statements included in
Item 1) and increases in our operating income before depreciation and
amortization (see "Results of Operations").
Net cash used in financing activities from continuing operations, which
includes borrowings and repayments of debt, as well as the issuances and
repurchases of our equity securities, was $721.6 million for the three months
ended March 31, 2000. During the three months ended March 31, 2000, we borrowed
$88.2 million, consisting primarily of borrowings under revolving lines of
credit held by our subsidiaries. During the three months ended March 31, 2000,
we repaid $700.7 million of our long- term debt, consisting primarily of $485.0
million of repayments on certain of our revolving credit facilities and $199.8
million of aggregate repurchases of various of our senior subordinated
debentures. In addition, during the three months ended March 31, 2000, we had
net repurchases of $109.1 million of our common stock.
Net cash provided by investing activities from continuing operations was
$693.5 million for the three months ended March 31, 2000. Net cash provided by
investing activities includes net proceeds from sales of short-term investments
of $663.0 million and proceeds from sales of investments of $649.2 million,
offset by the effects of acquisitions, net of cash acquired, of $75.3 million,
consisting of our acquisition of certain cable communications systems,
investments of $174.9 million, capital expenditures of $289.1 million and
additions to deferred charges of $79.4 million.
15
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
Results of Operations
Our summarized consolidated financial information for the three months
ended March 31, 2000 and 1999 is as follows (dollars in millions, "NM" denotes
percentage is not meaningful):
<TABLE>
<CAPTION>
Three Months Ended
March 31, Increase / (Decrease)
2000 1999 $ %
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues..................................................... $1,859.2 $1,374.0 $485.2 35.3%
Cost of goods sold from electronic retailing................. 447.4 390.5 56.9 14.6
Operating, selling, general and administrative expenses...... 824.9 558.4 266.5 47.7
--------- ---------
Operating income before depreciation and
amortization (1) ......................................... 586.9 425.1 161.8 38.1
Depreciation................................................. 171.9 116.6 55.3 47.4
Amortization................................................. 373.8 121.9 251.9 NM
--------- ---------
Operating income............................................. 41.2 186.6 (145.4) (77.9)
--------- ---------
Interest expense............................................. 168.6 111.2 57.4 51.6
Investment income............................................ (644.6) (127.8) 516.8 NM
Expense related to indexed debt.............................. 687.5 687.5 NM
Equity in net losses (income) of affiliates.................. 2.9 (1.1) 4.0 NM
Other expense (income)....................................... 10.8 (0.2) 11.0 NM
Income tax (benefit) expense................................. (31.8) 87.4 (119.2) NM
Minority interest............................................ 34.2 15.3 18.9 NM
--------- ---------
(Loss) income from continuing operations before
extraordinary items....................................... ($186.4) $101.8 ($288.2) NM
========= =========
<FN>
- ------------
(1) Operating income before depreciation and amortization is commonly referred
to in our businesses as "operating cash flow." Operating cash flow is a
measure of a company's ability to generate cash to service its obligations,
including debt service obligations, and to finance capital and other
expenditures. In part due to the capital intensive nature of our businesses
and the resulting significant level of non-cash depreciation expense and
amortization expense, operating cash flow is frequently used as one of the
bases for comparing businesses in our industries, although our measure of
operating cash flow may not be comparable to similarly titled measures of
other companies. Operating cash flow is the primary basis used by our
management to measure the operating performance of our businesses.
Operating cash flow does not purport to represent net income or net cash
provided by operating activities, as those terms are defined under
generally accepted accounting principles, and should not be considered as
an alternative to such measurements as an indicator of our performance. See
"Statement of Cash Flows" above for a discussion of net cash (used in)
provided by operating activities.
</FN>
</TABLE>
16
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
Operating Results by Business Segment
The following represent the operating results of our significant business
segments, "Cable Communications" and "Commerce." The remaining components of our
operations are not independently significant to our consolidated financial
position or results of operations (see Note 9 to our condensed consolidated
financial statements included in Item 1).
Cable Communications
The following table presents the operating results of our cable
communications segment (dollars in millions):
<TABLE>
<CAPTION>
Three Months Ended
March 31, Increase
2000 1999 $ %
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Service income............................................... $976.3 $604.8 $371.5 61.4%
Operating, selling, general and
administrative expenses................................. 539.5 324.3 215.2 66.4
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $436.8 $280.5 $156.3 55.7%
========= ========= ========= ========
<FN>
- ---------------
(a) See footnote (1) on page 16.
</FN>
</TABLE>
Of the $371.5 million increase in service income for the three month period
from 1999 to 2000, $321.7 million is due to the effects of our acquisitions of
cable communications systems and $49.8 million is due to growth in our
historical operations. Of the $49.8 million increase related to our historical
operations, $24.2 million is due principally to subscriber growth in digital
cable and cable modem Internet access service, $15.0 million is due to
subscriber growth in analog cable service, $10.1 million is related to changes
in rates and $4.8 million is attributable to growth in cable advertising sales,
offset by the effects of a $4.3 million decrease in pay per view revenue as a
result of fewer events during the three months ended March 31, 2000.
Of the $215.2 million increase in operating, selling, general, and
administrative expenses for the three month period from 1999 to 2000, $183.8
million is due to the effects of our acquisitions of cable communications
systems and $31.4 million is due to growth in our historical operations. Of the
$31.4 million increase related to our historical operations, $14.3 million is
due to increases in the costs of cable programming as a result of changes in
rates, subscriber growth and additional channel offerings, $13.2 million is due
principally to subscriber growth in cable modem Internet access service, and
$6.6 million results from increases in labor costs and other volume related
expenses, offset by the effects of a $2.7 million decrease in pay per view
programming costs as a result of fewer events during the three months ended
March 31, 2000.
17
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
Commerce
The following presents the operating results of our commerce segment,
consisting of the operations of QVC, Inc. and its subsidiaries ("QVC"), a
majority owned and controlled subsidiary (dollars in millions):
<TABLE>
<CAPTION>
Three Months Ended
March 31, Increase
2000 1999 $ %
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net sales from electronic retailing.......................... $741.3 $649.6 $91.7 14.1%
Cost of goods sold from electronic retailing................. 447.4 390.5 56.9 14.6
Operating, selling, general and administrative
expenses................................................ 149.1 128.2 20.9 16.3
--------- --------- --------- --------
Operating income before depreciation
and amortization (a).................................... $144.8 $130.9 $13.9 10.6%
========= ========= ========= ========
Gross margin................................................. 39.7% 39.9%
========= =========
<FN>
- ---------------
(a) See footnote (1) on page 16.
</FN>
</TABLE>
The increase in net sales from electronic retailing of $91.7 million for
the three month period from 1999 to 2000 is due to the effects of 3.6%, 11.8%
and 37.3% increases in the average number of homes receiving QVC services in the
United States ("US"), United Kingdom ("UK") and Germany, respectively, and 6.8%
and 17.5% increases in net sales per home in the US and Germany, respectively,
and a 5.2% decrease in net sales per home in the UK.
The increase in cost of goods sold is primarily related to the growth in
net sales. The changes in gross margin are a result of a shift in sales mix.
Of the $20.9 million increase in operating, selling, general and
administrative expenses for the three month period from 1999 to 2000, $10.9
million is attributable to higher variable costs associated with the increase in
sales volume. The remaining increases are attributable to higher personnel costs
to support the increased sales volume in the US, UK and Germany.
-----------------------
Consolidated Analysis
The effects of our recent acquisitions were to increase our revenues and
expenses resulting in increases in our operating income before depreciation and
amortization. The increases in depreciation expense, amortization expense and
interest expense for the three month period from 1999 to 2000 are primarily due
to the effects of our acquisition of Lenfest in January 2000, our acquisition of
a controlling interest in Jones Intercable, Inc. ("Jones Intercable") in April
1999, as well as our increased levels of capital expenditures.
Interest Expense
The $57.4 million increase in interest expense for the three month period
from 1999 to 2000 is primarily due to the effects of our acquisition of Lenfest
in January 2000, our acquisition of a controlling interest in Jones Intercable
in April 1999 and the issuance of the ZONES in October and November 1999.
We anticipate that, for the foreseeable future, interest expense will be a
significant cost to us and will have a significant adverse effect on our ability
to realize net earnings. We believe we will continue to be able to meet our
obligations through our ability both to generate operating income before
depreciation and amortization and to obtain external financing.
Investment Income
During the three months ended March 31, 2000 and 1999, we recognized
pre-tax gains of $556.4 million and $0.3 million, respectively, on sales of
certain of our fair value method investments. These gains were recorded as a
reclassification from accumulated other comprehensive income to investment
income.
18
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
During the three months ended March 31, 2000 and 1999, in connection with
certain mergers of publicly traded companies held by us and accounted for as
investments available for sale, we recognized pre-tax gains of $33.0 million and
$187.6 million, respectively, representing the difference between the fair value
of the securities received by us and our basis in the securities exchanged. Such
gains were recorded as a reclassifications from accumulated other comprehensive
income to investment income.
During the three months ended March 31, 1999, we recorded investment
expense of $51.4 million related to changes in the value of and the settlement
of call options on certain of our unrestricted equity investments, all of which
expired by November 1999.
During the three months ended March 31, 2000 and 1999, we recorded pre-tax
losses of $4.9 million and $35.3 million on certain of our investments based on
a decline in value that was considered other than temporary.
Expense Related to Indexed Debt
The ZONES are being accounted for as an indexed debt instrument since the
maturity value is dependent upon the fair value of Sprint PCS stock. Therefore,
the carrying value of the ZONES was increased by $687.5 million during the three
months ended March 31, 2000 to reflect the fair value of the underlying Sprint
PCS stock.
Income Tax (Benefit) Expense
The change in income tax (benefit) expense for the three month period from
1999 to 2000 is primarily the result of the effects of changes in our income
before taxes and minority interest, and non-deductible goodwill amortization.
Minority Interest
The $18.9 million increase in minority interest for the three month period
from 1999 to 2000 is attributable to the effects of our acquisition of the
California Public Employees Retirement System's 45% interest in Comcast MHCP
Holdings L.L.C. in February 2000 and to changes in the net income or loss of our
other less than 100% owned consolidated subsidiaries.
Extraordinary Items
During the three months ended March 31, 2000, we incurred debt
extinguishment costs and wrote off unamortized debt issue costs principally in
connection with the redemption and retirement of certain indebtedness, resulting
in an extraordinary loss, net of tax of $5.1 million.
We believe that our operations are not materially affected by inflation.
19
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to legal proceedings and claims which arise in the ordinary
course of our business. In the opinion of our management, the amount of
ultimate liability with respect to these actions will not materially affect
our 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 Compensation Agreement by and between Comcast Corporation and
Brian L. Roberts.
10.2 Compensation and Deferred Compensation Agreement by and between
Comcast Corporation and Ralph J. Roberts, as amended.
10.3 The Comcast Corporation Retirement-Investment Plan, as amended
and restated.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
(i) We filed a Current Report under Item 5 on January 4, 2000
relating to our announcement that we entered into a definitive
agreement to acquire the California Public Employees'
Retirement System's 45% ownership interest in cable operator
Comcast MHCP Holdings, L.L.C., an indirect majority owned
subsidiary of ours.
(ii) We filed a Current Report under Item 5 on January 21, 2000
relating to our announcement that we, through our wholly owned
subsidiary Comcast LCI Holdings, Inc., had completed our
acquisition of Lenfest Communications, Inc.
(iii) We filed a Current Report under Item 2 on March 3, 2000
relating to our announcement that we, through our wholly owned
subsidiary, Comcast JOIN Holdings, Inc., had completed our
acquisition of Jones Intercable, Inc.
20
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMCAST CORPORATION
---------------------------------
/S/ LAWRENCE J. SALVA
---------------------------------
Lawrence J. Salva
Senior Vice President
(Principal Accounting Officer)
Date: May 5, 2000
21
COMPENSATION AGREEMENT
AGREEMENT made as of the 16th day of June, 1998, by and
between COMCAST CORPORATION, a Pennsylvania corporation (the "Company," as
further defined in Section 12), and BRIAN L. ROBERTS (the "Executive," as
further defined in Section 1).
R E C I T A L S
WHEREAS, the Executive has been employed by the Company for
over 20 years and is currently its President and a member of its Board of
Directors and Executive Committee; and
WHEREAS, during the Executive's tenure as President of the
Company, the Company has enjoyed outstanding success, due in large part to
Executive's leadership and to transactions initiated by him; and
WHEREAS, the Company's Board of Directors (the "Board"), as
well as the Board's Compensation Committee (the "Compensation Committee") and
its Subcommittee on Performance-Based Compensation (the "Subcommittee"),
recognize that the Executive's contribution to the growth and success of the
Company is substantial and that without his continued leadership the Company
would not have achieved and maintained its current preeminent status in the
cable television industry nor would the Company have achieved its performance
levels or successfully consummated the many strategic transactions that have
closed during the past five years; and
WHEREAS, the Board desires to assure the Company of the
Executive's continued employment in an executive capacity and to compensate him
therefor; and
WHEREAS, the Board has established the Subcommittee as a
subcommittee of its Compensation Committee comprised of independent outside
directors and which has the
<PAGE>
responsibility for establishing the criteria for the payment of
performance-based compensation to the Executive and the Company's other senior
executive officers; and
WHEREAS, the Subcommittee has engaged in discussions with
Executive over a period of more than one year regarding formalizing the terms of
Executive's continued employment, and has sought advice from two independent
compensation consultants regarding the principal terms of such employment,
including Executive's salary, bonus, and stock-based compensation; and
WHEREAS, on June 21, 1999, the Company's shareholders approved
amendments to the Company's 1996 Stock Option Plan and 1996 Executive Cash Bonus
Plan that make such plans consistent with the terms set forth herein; and
WHEREAS, the Executive and the Company entered into a
Noncompetition Agreement as of August 1, 1996, and a Term Life Insurance Premium
and Tax Bonus Agreement as of September 23, 1998; and
WHEREAS, the Executive is currently a participant in the
Company's 1992 Executive Split-Dollar Insurance Plan and its 1994 Executive
Split-Dollar Insurance Plan (together, the "Split-Dollar Insurance Plans"), each
of which provides a death benefit to the Executive's family following the death
of the last survivor of the Executive and his spouse and a repayment of all
loans advanced by the Company on behalf of the Executive and his spouse for the
purpose of assisting the Executive to maintain in force the split-dollar
insurance policies issued thereunder; and
WHEREAS, the Executive is willing to commit himself to serve
the Company on the terms herein provided;
-2-
<PAGE>
NOW THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein contained, the parties
hereto agree as follows:
1. Employment. The Company hereby agrees to continue to
employ the Executive and the Executive hereby agrees to continue to serve the
Company, on the terms and conditions set forth herein, for a term commencing on
the date hereof and expiring on June 30, 2003 (unless sooner terminated as
hereinafter set forth).
2. Position and Duties. The Executive shall serve as the
President of the Company, and, in such position, he shall have such powers and
duties as may from time to time be prescribed by the Board in accordance with
the Company's By-Laws. Executive shall devote substantially all of his working
time and effort to the business and affairs of the Company. It is recognized
that the Executive has outside interests, including, but not limited to, serving
as a director on the boards of other corporations and community and charitable
organizations, and that the Executive may devote a reasonable amount of time to
such outside interests. Moreover, the provisions of this Section 2 shall not
prevent the Executive from investing his assets in such form and manner as he
chooses; provided, however, that the Executive shall not have any personal
interest, direct or indirect (other than through the Company or its
subsidiaries), financial or otherwise, in any supplier to, buyer from, or
competitor of the Company unless such interest has been approved by the
Compensation Committee or Subcommittee or such interest is, or arises solely
from ownership of, less than two percent (2%) of the outstanding capital stock
of such supplier, buyer or competitor and such capital stock is available to the
general public through trading on any national, regional or over-the-counter
securities market. In connection with his employment by the
-3-
<PAGE>
Company the Executive shall be based at the Company's principal executive
offices in the Delaware Valley.
3. Compensation and Related Matters.
(a) Base Salary. For each full year included in the term
of this Agreement the Company shall pay the Executive a base salary ("Base
Salary") for all services to be rendered by the Executive hereunder of One
Million Dollars ($1,000,000) per annum (less appropriate deductions), payable in
installments at such times as the Company customarily pays its other senior
executive officers (but in any event no less often than monthly). Effective as
of each January 1 (beginning in 2000) or such other date as may be determined by
the Subcommittee, the Subcommittee shall adjust the Executive's Base Salary to
reflect the Executive's contribution to the growth and success of the Company.
Once established at an increased annual rate, the Executive's Base Salary
hereunder shall not thereafter be reduced unless such reduction is pursuant to
an overall plan to reduce the salaries of all senior executive officers of the
Company.
(b) Performance-Based Compensation under Cash Bonus Plan.
Effective January 1, 1999, Executive shall be entitled to an annual
performance-based cash bonus ("Cash Bonus") of up to 150% of the Base Salary for
any year during the term hereof, determined in accordance with, and upon
satisfaction of, the performance based standards contained in the Cash Bonus
Plan; provided, that if the conditions for full payment of a Cash Bonus under
the Cash Bonus Plan are met in any year, the Compensation Subcommittee shall not
have discretion to reduce Employee's Cash Bonus for such year below 100% of his
Base Salary for such year.
-4-
<PAGE>
(c) Options. Executive shall receive grants of options to
purchase no fewer than 11,000,000 shares of the Company's Class A Special Common
Stock (such number of shares reflecting the stock split in the form of a 100%
stock dividend effected by the Company May 4, 1999 (the "Stock Split")) pursuant
to the terms of the Company's 1996 Stock Option Plan, as such plan may be
amended from time to time, or any equivalent stock option plan, including,
without limitation, an option price equal to fair market value of the underlying
stock on the date of grant (except for "incentive stock options," which may have
a higher exercise price), and a duration of at least ten years (except for
"incentive stock options" which may have a duration of five years). Such options
shall be or have been granted as follows: 3,000,000 shares on June 16, 1998 (an
original grant of options to purchase 1,500,000 shares, adjusted to 3,000,000
shares to reflect the Stock Split), and 1,000,000 shares on each of the second
business days of each fiscal quarter in 1999 and 2000 (i.e., for grants prior to
May 4, 1999, 500,000 shares adjusted to 1,000,000 shares to reflect the Stock
Split), or such earlier date as the Subcommittee may determine in its sole
discretion. Such options shall be "incentive stock options" under the Internal
Revenue Code to the maximum extent permitted by law. In the event of stock
dividends, stock splits, reverse stock splits, recapitalizations, or similar
events applicable to the Class A Special Common Stock that occur subsequent to
the date hereof (other than the Stock Split, which is taken into account
herein), the number of options to be granted hereunder that have not been
granted prior to the date of such event shall be adjusted to reflect the effect
of such event.
(d) Expenses. During the term of this Agreement, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by him (in accordance
-5-
<PAGE>
with the policies and procedures established from time to time by the Board for
its senior executive officers) in performing services hereunder, provided that
the Executive properly accounts therefor in accordance with Company policy.
(e) Other Benefits. Except as otherwise provided herein,
the Executive shall continue to be eligible to participate in all employee
benefit plans and arrangements in effect on the date of this Agreement and shall
continue to obtain benefits thereunder, including, without limitation, each
bonus plan, savings and profit sharing plan, supplemental pension and retirement
plan, stock ownership plan, stock purchase plan, stock option plan, life
insurance plan, medical insurance plan, disability plan, dental plan and
health-and-accident plan. Except as otherwise provided herein or as required by
law, the Company shall not make any changes in any such employee benefit plans
or arrangements which would adversely affect the Executive's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of the Company and does not result in a proportionately greater
reduction in the rights of or benefits to the Executive as compared with any
other executive of the Company. The Executive shall be entitled to participate
in or receive benefits under any employee benefit plan or arrangement made
available by the Company in the future to its executives and key management
employees, subject to and on a basis consistent with the terms, conditions and
overall administration of such plan or arrangement. No amount paid to the
Executive under any plan or arrangement presently in effect or made available in
the future shall be deemed to be in lieu of the Base Salary or Bonus payable to
the Executive pursuant to paragraph (a) of this Section.
-6-
<PAGE>
(f) Vacations. The Executive shall be entitled to not
fewer than the same number of paid vacation days in each calendar year as he is
currently entitled. The Executive shall also be entitled to all paid holidays
given by the Company to its senior executive officers.
(g) Perquisites. So long as he serves as President, the
Executive shall be entitled to continue to receive not less than the perquisites
and fringe benefits appertaining to the office of the President in accordance
with the Company's present practice.
(h) Deferred Compensation. So long as the Company's 1996
Deferred Compensation Plan, or any other deferred compensation plan in which
senior executives of the Company are eligible to participate, is in effect, if
the Executive and the Company so agree in writing prior to December 31 of any
calendar year (or such earlier date as may be required by the Company's 1996
Deferred Compensation Plan or any other applicable deferred compensation plan),
and to the extent so agreed, the payment of all or any portion of the
compensation payable to the Executive in the next following calendar year
(including, without limitation, any compensation payable in such year by reason
of having been deferred from a prior year pursuant to an election made prior to
June 30 of the year prior to the year of distribution in accordance with Section
3.6.2 of the 1996 Deferred Compensation Plan) shall be deferred to a subsequent
calendar year selected by the Executive pursuant to the terms of the 1996
Deferred Compensation Plan or such other deferred compensation plan. Once a
deferral has been agreed to pursuant to this Section 3(h), the deferred amount
shall be subject to the same terms and conditions as apply to deferrals under
the Company's 1996 Deferred Compensation Plan or such other deferred
compensation plan then applicable, including, without limitation, the crediting
of interest. Nothing in this Section 3(h) shall
-7-
<PAGE>
require the Company to maintain the 1996 Deferred Compensation Plan in effect,
to maintain the current terms of such plan, or to adopt any other deferred
compensation plan.
(i) Life Insurance Agreement. The compensation provided
herein is in addition to, and not in limitation of, the compensation provided by
the Term Life Insurance Premium and Tax Bonus Agreement dated as of September
23, 1998 (the "Life Insurance Agreement"), which agreement continues in effect.
(j) Funding of Trust. Prior to the occurrence of a "Change
of Control" (as hereinafter defined), the Company shall establish a grantor
trust (the "Trust"), the terms of which shall be consistent with the
requirements applicable under the Code in order to avoid the constructive
receipt of the assets held in the Trust by the Executive. The trust document for
the Trust shall be in a form that is satisfactory to both the Company and the
Executive, and may, but need not, be in substantially the same form as the model
trust agreement published by the IRS in Revenue Procedure 92-64. The trustee of
the Trust shall be such person or institution acceptable both to the Company and
the Executive. The Company shall contribute such amounts in cash or such assets
as it deems appropriate for the purpose of funding the compensation and/or death
benefits payable under the terms of this Agreement and such other compensation
or plans or arrangements that may be in effect. Upon the occurrence of a Change
of Control, the Trust, if not already irrevocable, shall become irrevocable. The
Company shall be required immediately prior to a Change of Control (or in the
event the Company does not receive notice of a proposed Change of Control prior
to such event), immediately upon a Change of Control, to contribute to the Trust
(i) an amount equal to the minimum base compensation and Bonus Payment payable
under this Agreement for the then-
-8-
<PAGE>
remaining term of this Agreement (assuming that all conditions to payment of a
full Bonus under the Cash Bonus Plan were met, and disregarding any possible
decrease in Base Salary), and (ii) the present value of all deferred
compensation benefits payable to the Executive under the terms of any
nonqualified deferred compensation arrangement in which the Executive is a
participant, including, but not limited to, the Company's 1996 Deferred
Compensation Plan and the Company's Supplemental Executive Retirement Plan.
In addition, the Company shall have the further obligation
following a Change of Control to make such additional contributions to the
Trust, from time to time (but determined no less than annually), as may become
necessary to fully fund the benefits described above, determined in the same
manner as the initial funding obligation is determined. The assets contributed
to the Trust shall, except to the extent otherwise provided in the trust
agreement in the case of the bankruptcy or insolvency of the Company, be used
exclusively for the purpose of provide to the Executive the benefits described
above until all such benefits have been fully paid, at which time the Trust may
be terminated and any remaining assets revert back to the Company.
Notwithstanding the foregoing, to the extent benefits are paid by the Company
rather than out of assets held in the Trust, the trustee may reimburse the
Company out of the Trust such amounts as have been paid as benefits to the
Executive by the Company, but only to the extent that such reimbursement does
not cause the Trust to be less than fully funded, determined in the same manner
as the initial funding obligation is determined.
For purposes of this Agreement, a "Change of Control"
shall be deemed to have occurred on the date that Executive and members of his
immediate family (or trusts for their benefit)
-9-
<PAGE>
first cease to beneficially own at least 50% of the voting power of the Company.
Present value shall be calculated based on the then current yields of U.S.
Treasury Bonds maturing on the respective dates on which the payments being
valued become due.
4. Termination. The Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) Death. The Executive's employment hereunder shall
terminate upon his death.
(b) Disability. If, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties hereunder for 180 consecutive calendar days, and within
thirty (30) days after written notice of termination is given (which may occur
before or after the end of such 180 day period), shall not have returned to the
performance of his duties hereunder on the basis provided for in Sections 1 and
2 hereof, the Company may terminate the Executive's employment hereunder.
(c) Cause. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment hereunder upon (A)
the willful and continued failure by the Executive either to substantially
perform his duties hereunder or to comply with the provisions of the Company's
Code of Ethics and Business Conduct (other than a failure following a Change of
Control, as defined in Section 3(j), or a failure resulting from the Executive's
incapacity due to physical or mental illness) for a period of sixty (60) days
after demand for
-10-
<PAGE>
substantial performance or compliance is delivered by the Company specifically
identifying the manner in which the Company believes the Executive has not
substantially performed his duties or has not complied; or (B) the willful
engaging by the Executive in misconduct which is materially injurious to the
Company, monetarily or otherwise, or (C) the willful breach by the Executive
either during or after the term of this Agreement of any material provision of
this Agreement, including, but not limited to, Sections 6, 7 and 8 hereof. For
purposes of this paragraph, no act, or failure to act, on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the
best interest of the Company. Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution, duly adopted by the
affirmative vote of not less than two-thirds of the entire membership of the
Board (without counting Executive or any parent or spouse of Executive) at a
meeting of the Board called and held for such purpose (after reasonable notice
to the Executive and an opportunity for him, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above in clause (A), (B), or (C) of
the preceding sentence, and specifying the particulars thereof in detail.
(d) Notice of Termination. Any termination of the
Executive's employment by the Company shall be communicated by written Notice of
Termination to the Executive. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in
-11-
<PAGE>
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(e) Date of Termination. "Date of Termination" shall mean
(i) if the Executive's employment is terminated by his death, the date of his
death, (ii) if the Executive's employment is terminated pursuant to paragraph
(b), above, thirty (30) days after Notice of Termination is given (provided that
the Executive shall not have returned to the performance of his duties on the
basis provided for in Section 2 hereof during such thirty (30) day period) or
(iii) if the Executive's employment is terminated pursuant to paragraph (c)
above, the date specified in the Notice of Termination; provided that if within
thirty (30) days after a Notice of Termination is given the party receiving such
Notice of Termination notifies the other party that a dispute exists concerning
the termination, the Date of Termination shall be the date on which the dispute
is finally determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction (the time of appeal therefrom having expired and
no appeal having been perfected).
5. Compensation Upon Termination or During Disability.
(a) If during the term of this Agreement the Executive's
employment shall be terminated by reason of his death, the Company shall
continue to pay to the Executive's spouse, if, but only if, the spouse survives
the Executive, the Executive's then Base Salary, on a monthly basis for a period
of five (5) years, provided that, notwithstanding the foregoing, the payments to
the Executive's surviving spouse shall only be made during her lifetime and
shall cease with the payment due immediately following her death. This death
benefit shall be in addition to (x) the Company
-12-
<PAGE>
hereby agreeing to continue, for the benefit of Executive's spouse during her
lifetime, all health plan benefits which are available from time to time to the
Company's highest paid employee and (y) any other payments the Executive's
spouse, beneficiaries or estate may be entitled to receive pursuant to this
Agreement (including, but not limited to, his Cash Bonus with respect to any
period then ended which would have accrued to the Executive on the basis of the
Company's performance but which has not yet been paid) and any pension or
employee benefit plan or life insurance policy presently maintained by the
Company.
(b) During any period that the Executive fails to perform
his duties hereunder as a result of incapacity due to physical or mental illness
prior to a termination pursuant to Section 4(b) hereof, the Executive shall
continue to receive his Base Salary until the Executive's employment is
terminated pursuant to Section 4(b) hereof or until the end of the term of this
Agreement, whichever occurs first (including, but not limited to, his Cash Bonus
with respect to any period prior to the date of termination which would have
accrued to the Executive on the basis of the Company's performance but which has
not yet been paid) and any pension or employee benefit plan or life insurance
policy presently or then maintained by the Company. In the event of termination
pursuant to Section 4(b) hereof, the Executive shall be paid for five (5) years,
on a monthly basis, an annual amount equal to his Base Salary at the rate in
effect at the time the Notice of Termination is given and the Company shall also
make the payments required pursuant to Section 7 hereof. In the event the
Executive dies before the end of the five (5) year payment period, the remaining
payments shall be made to the Executive's spouse, if, but only if, the spouse
survives the Executive, but, notwithstanding the foregoing, the payments to the
Executive's surviving spouse
-13-
<PAGE>
shall only be made during her lifetime and shall cease with the payment due
immediately following her death. The death benefit provided in this Section 5(b)
shall be in lieu of, and not in addition to, the benefits provided in the first
sentence of Section 5(a) hereof.
(c) If the Executive's employment shall be terminated for
Cause, the Company shall pay the Executive his Base Salary due through the Date
of Termination at the rate in effect at the time the Notice of Termination is
given and the Company shall have no further obligation to the Executive under
this Agreement, including, but not limited to, the obligation to make the
payments provided for in Section 3 hereof.
(d) If, in breach of this Agreement, the Company shall
terminate the Executive's employment other than pursuant to Section 4(b) or 4(c)
hereof (it being understood that a purported termination pursuant to Section
4(b) or 4(c) hereof which is disputed and finally determined not to have been
proper shall be a termination by the Company in breach of this Agreement), then:
(i) the Company shall pay the Executive his Base
Salary through the Date of Termination at the rate in effect at the time the
Notice of Termination is given as well as any other amount, including his Cash
Bonus with respect to any period then ended which would have accrued to the
Executive on the basis of the Company's performance but which has not yet been
paid to him;
(ii) subsequent to the Date of Termination, the
Company shall pay as severance pay to the Executive on a monthly basis (or, in
the case of his Cash Bonus, on the basis provided in the Cash Bonus Plan) for
the remaining term of this Agreement an annual amount equal
-14-
<PAGE>
to the Executive's Base Salary at the highest annual rate in effect at any time
during the portion of the term immediately preceding the Date of Termination and
his Cash Bonus; provided that should the Executive die before the end of the
remaining term of this Agreement, the Executive's surviving spouse shall be
entitled to the death benefit provided in Section 5(a) hereof, and all benefits
referred to in the last sentence of Section 5(a) hereof, as if the Executive's
employment had been terminated by reason of his death;
(iii) the Company shall maintain in full force and
effect for the continued benefit of the Executive (and for his surviving spouse,
as provided in paragraph (ii) hereinabove) for the remaining term of this
Agreement all (x) health plan benefits available from time to time to the
Company's highest paid employee and (y) employee benefit plans and programs in
which the Executive was entitled to participate immediately prior to the Date of
Termination, including, without limitation, the Split-Dollar Arrangements. At
the end of the period of coverage, the Executive shall have the option to have
assigned to him at no cost and with no apportionment of prepaid premiums any
assignable insurance policy owned by the Company which relates specifically to
him.
(e) The Executive shall not be required to mitigate the
amount of any payment provided for in this Section 5 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 5
be reduced by any compensation earned by the Executive as a result of employment
by another employer after the Date of Termination, or otherwise.
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(f) Notwithstanding anything herein to the contrary, in
the event the Executive's employment is terminated on or after the occurrence of
a Change of Control, as defined in Section 3(j), such termination shall in no
circumstances be treated under the terms of this Agreement as a termination for
Cause, and the Executive shall be entitled to the same benefits as are payable
with respect to a termination of the Executive's employment subject to the
provisions of Section 5(d).
6. Confidential Information. The Company (as hereinafter
specially defined for purposes of Sections 6 through 9 hereof), pursuant to the
Executive's employment hereunder, provides him access to and confides in him
business methods and systems, techniques and methods of operation developed at
great expense by the Company ("Trade Secrets") and which the Executive
recognizes to be unique assets of the Company's business. The Executive shall
not, during or at any time after the term of this Agreement, directly or
indirectly, in any manner utilize or disclose to any person, firm, corporation,
association or other entity, except (i) where required by law, (ii) to
directors, consultants or employees of the Company in the ordinary course of his
duties or (iii) during his employment and in the ordinary course of his services
as President for such use and disclosure as he shall reasonably determine to be
in the best interest of the Company: (a) any such Trade Secrets, (b) any sales
prospects, customer lists, products, research or data of any kind, or (c) any
information relating to strategic plans, sales, costs, profits or the financial
condition of the Company or any of its customers or prospective customers, which
are not generally known to the public or recognized as standard practice in the
industry in which the Company shall be engaged. The Executive further covenants
and agrees that he will promptly deliver to the Company all tangible
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<PAGE>
evidence of the knowledge and information described in (a), (b) and (c), above,
prior to or at the termination of the Executive's employment.
7. Prohibited Public Statements. The Executive shall not,
either during or at any time after the termination of his employment, make any
public statement (including a private statement reasonably likely to be repeated
publicly) reflecting adversely on the Company and its business prospects, except
for such statements which during the Executive's employment he may be required
to make in the ordinary course of his service as President.
8. Noncompetition, Noninterference and Nonsolicitation.
(a) Subject to the geographic limitation of Section 8(b)
hereof, the Executive during the term of this Agreement and for a period of two
(2) years following termination of employment in accordance with this Agreement
shall not, directly or indirectly, on his behalf or on behalf of any other
person, firm, corporation, association or other entity, as an employee or
otherwise, engage in, or in any way be concerned with or negotiate for, or
acquire or maintain any ownership interest in any business or activity which is
the same as or competitive with that conducted by the Company at the termination
of his employment, or which was engaged in or developed by the Company at any
time during the term of this Agreement for specific implementation in the
immediate future by the Company.
(b) The Executive acknowledges that the Company is engaged
in business throughout the United States and in various foreign countries and
that the Company intends to expand the geographic scope of its activities.
Accordingly and in view of the nature of his position and responsibilities, the
Executive agrees that the provisions of this Section shall be applicable to
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<PAGE>
each state and each foreign country, possession or territory in which the
Company may be engaged in business during the term of this Agreement, or, with
respect to the Executive's obligations following termination of his employment,
at the termination of his employment or at any time within the 12-month period
following the effective date of his termination of employment.
(c) The Executive agrees that for a period of two (2)
years following termination of employment in accordance with this Agreement, the
Executive will not, directly or indirectly, for himself or on behalf of any
third party at any time in any manner, request or cause any of the Company's
customers to cancel or terminate any existing or continuing business
relationship with the Company; solicit, entice, persuade, induce, request or
otherwise cause any employee, officer or agent of the Company to refrain from
rendering services to the Company or to terminate his or her relationship,
contractual or otherwise, with the Company; induce or attempt to influence any
supplier to cease or refrain from doing business or to decline to do business
with the Company; divert or attempt to divert any supplier from the Company; or
induce or attempt to influence any supplier to decline to do business with any
businesses of the Company as such businesses are constituted immediately prior
to the termination of employment.
(d) The Executive agrees that for a period of two (2)
years following his termination of employment in accordance with this Agreement,
the Executive will not directly or indirectly, for himself or on behalf of any
third party, solicit for business, accept any business from or otherwise do, or
contract to do, business with any person or entity who, at the time of, or any
time during the twelve (12) months preceding such termination, was an active
customer or was actively
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<PAGE>
solicited by the Company according to the books and records of the Company and
within the knowledge, actual or constructive of the Executive.
(e) Notwithstanding anything to the contrary in this
Section 8, the prohibitions and agreements contained in subsections (a), (c),
and (d) shall terminate immediately upon any termination of Executive's
employment hereunder following a Change of Control.
9. Equitable Remedies. The Executive acknowledges that his
compliance with the covenants in Sections 6, 7, and 8 of this Agreement is
necessary to protect the good will and other proprietary interests of the
Company and that, in the event of any violation by the Executive of the
provisions of Section 6, 7 or 8 of this Agreement, the Company will sustain
serious, irreparable and substantial harm to its business, the extent of which
will be difficult to determine and impossible to remedy by an action at law for
money damages. Accordingly, the Executive agrees that, in the event of such
violation or threatened violation by the Executive, the Company shall be
entitled to any injunction before trial from any court of competent jurisdiction
as a matter of course and upon the posting of not more than a nominal bond in
addition to all such other legal and equitable remedies as may be available to
the Company. The Executive further agrees that, in the event any of the
provisions of Sections 6, 7 and 8 of this Agreement are determined by a court of
competent jurisdiction to be contrary to any applicable statute, law or rule, or
for any reason to be unenforceable as written, such court may modify any of such
provisions so as to permit enforcement thereof as thus modified.
10. Successors; Related Companies; Binding Agreement.
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<PAGE>
(a) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as he would be entitled to hereunder pursuant to Section 5(d) hereof,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor to
its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 10 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(b) For purposes of Sections 6, 7 and 8 hereof the term
"Company" shall mean Comcast Corporation ("Comcast") as well as (i) each of its
more than fifty percent (50%) owned subsidiaries and (ii) each other entity in
which Comcast directly or indirectly has a greater than ten percent (10%) equity
interest, the fair market value of which interest is in excess of $50,000,000.
In determining Comcast's equity interest for purposes of this Section 10(b), any
equity interest which Comcast has an option to purchase shall be considered as
owned by Comcast.
(c) This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and shall be binding upon the
Executive's personal or legal representatives,
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executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts would still be payable
to him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee, or other designee or, if there be no such
designee, to the Executive's estate.
11. Entire Agreement. This Agreement and the Life Insurance
Agreement constitute the full and complete understanding and agreement of the
Executive and the Company respecting the subject matter hereof, and supersede
all prior understandings and agreements, oral or written, express or implied.
This Agreement may not be modified or amended orally but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
12. Headings. The section headings of this Agreement are for
convenience of reference only and are not to be considered in the interpretation
of the terms and conditions of this Agreement.
13. Actions by Board. The Company is governed by its Board
and, accordingly, all references in this Agreement to the actions and discretion
of the Company are meant and deemed to refer to the actions and discretion of
the Board.
14. Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been given
when sent by certified mail, postage prepaid, addressed as follows:
If to the Company:
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<PAGE>
35th Floor
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
Attn: Corporate Secretary
If to the Executive, at his last known personal residence.
Any party may change the persons and address to which notices
or other communications are to be sent by giving written notice of such change
to the other party in the manner provided herein for giving notice.
15. Waiver of Breach. No waiver by either party of any
condition or of the breach by the other of any term or covenant contained in
this Agreement, whether by conduct or otherwise, in any one or more instances
shall be deemed or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition, or of the breach of any
other term or covenant set forth in this Agreement. Moreover, the failure of
either party to exercise any right hereunder shall not bar the later exercise
thereof.
16. Nonalienation. The Executive shall not pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement. This Agreement and the benefits payable hereunder shall
not be assignable by either party without the prior written consent of the
other; provided, however, that nothing in this Section shall preclude the
Executive from designating a beneficiary to receive any benefit payable
hereunder upon his death, or the executors, administrators or other legal
representatives of the Executive or his estate from assigning any rights
hereunder to which they become entitled to the person or persons entitled
thereto.
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<PAGE>
17. Governing Law. This Agreement is entered into and shall be
construed in accordance with the internal laws of the Commonwealth of
Pennsylvania.
18. Continuation of Covenants. The covenants and agreements of
the Executive set forth in Sections 6, 7 and 8 hereof shall survive any
termination of employment, shall continue thereafter, and shall not expire
unless and except as may be expressly set forth in Sections 6, 7 and 8 hereof.
19. Invalidity or Unenforceability. If any term or provision
of this Agreement is held to be invalid or unenforceable, for any reason, such
invalidity or enforceability shall not affect any other term or provision hereof
and this Agreement shall continue in full force and effect as if such invalid or
unenforceable term or provision (to the extent of the invalidity or
unenforceability) had not been contained herein.
20. Counterparts. This Agreement may be executed in on or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written.
COMCAST CORPORATION
By: /s/ Stanley Wang
Title:
/s/ Brian L. Roberts
BRIAN L. ROBERTS
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AMENDMENT AGREEMENT
Dated as of August 19, 1999
to the Compensation and Deferred Compensation Agreement
between Comcast Corporation and Ralph J. Roberts
as amended and restated effective August 30, 1998
THIS AMENDMENT AGREEMENT (the "Amendment") is being made to amend the
provisions of the Compensation and Deferred Compensation Agreement between
Comcast Corporation and Ralph J. Roberts (as amended and restated effective
August 30, 1998) (the "Compensation Agreement") relating to the "Death Benefit"
provided in the Compensation Agreement.
WHEREAS, Ralph J. Roberts ("Roberts") is the founder and Chairman of
the Board of Directors of Comcast Corporation (the "Company"), and they are
parties to the Compensation Agreement; and
WHEREAS, the Compensation Agreement provides that, in lieu of certain
bonuses which would otherwise have been payable by the Company upon Roberts'
exercise of certain options he held to purchase shares of Class B Common Stock
of the Company in October 1998, Roberts' personal representatives would receive
a lump-sum Death Benefit following Roberts' death; and
WHEREAS, the Death Benefit was intended to provide equivalent value to
the bonus rights which were eliminated in connection with the Compensation
Agreement, and
WHEREAS, Roberts' willingness to accept the Death Benefit in lieu of
the terminated bonus rights and to exercise his Class B options afforded
significant tax and accounting benefits to the Company and required Roberts to
incur significant current tax expense he would not otherwise have borne, and
WHEREAS, the Subcommittee on Performance-Based Compensation of the
Company's Board of Directors (the "Subcommittee") has determined that the base
Death Benefit should be increased by $1,191,811, to reflect tax costs incurred
by Roberts which were higher than expected when the Death Benefit was originally
calculated, and
WHEREAS, Roberts has proposed, and the Subcommittee has approved, that
Roberts be given an opportunity to recommend investments to the Company and to
have a portion of the Death Benefit reflect the results of such investments, and
WHEREAS, the Subcommittee has determined that the present value cost to
the Company of the proposal made by Roberts does not exceed that of the simple
Death Benefit structure currently reflected in the Compensation Agreement, and
that the proposal includes adequate protection for the Company's interests,
NOW THEREFORE, the parties agree as follows:
<PAGE>
1. Section 3.11 of the Compensation Agreement is hereby amended and
restated in its entirety to read as follows:
3.11 Supplemental Death Benefit.
(a) Death Benefit. In addition to the other payments provided
or referred to herein, in the event of Roberts' death during the term of this
Agreement or thereafter the Company shall pay a supplemental death benefit (the
"Death Benefit") as calculated herein to Roberts' personal representatives
within six (6) months following Roberts' date of death.
(b) Amount and Payment of Death Benefit. The amount of the
Death Benefit shall be the sum of the following amounts: (i) the Base Amount
exclusive of the Aggregate Initial Variable Account Amount, as each term is
respectively defined in (c) and (d)(ii), below, plus (ii) the amount of the
Variable Account, as defined in (d)(i), below, as of the close of business on a
business day selected by the Company that is within three business days of the
date on which payment is made to Roberts' personal representatives. The Death
Benefit shall be reduced if and to the extent provided in (h)(i), below. The
Death Benefit, less applicable tax withholding, shall be paid in immediately
available funds, except that the Company may, in its sole discretion, elect to
pay all or any portion of the amount of the Variable Account by transfer in kind
to Roberts' personal representatives of Company Investments (as defined herein)
valued at the value used for calculating the Death Benefit.
(c) Base Portion of Death Benefit. The "Base Amount" is
Thirty-One Million One Hundred Ninety-One Thousand Eight Hundred Eleven Dollars
($31,191,811).
(d) Variable Portion of Death Benefit. The "Variable Account,"
and the "Aggregate Initial Variable Account Amount," shall be determined as
follows:
(i) At any time, and from time to time, during the term of
his employment by the Company (whether as an employee or as a
consultant), Roberts may request that a specific portion of the
Base Amount (up to, but not to exceed, the full amount of the
Base Amount) be included in the Variable Account. Such request
shall be made to the Company's Executive Vice President and the
Company's General Counsel (together, the "Company Officers") in
writing, shall specify the amount so proposed to be added to
the Variable Account and a particular investment or particular
investments, each of which is a Qualified Investment (as
defined in (e), below), in which the Company could invest such
amounts, and shall certify that, to the best of Roberts'
knowledge, each such investment is a Qualified Investment on
the date of such request or will be on the date the investment
is made. The Company shall have complete discretion to grant or
to refuse Roberts' request, and shall grant Roberts' request
only if it determines (as provided herein) that such proposed
investment is or will be a Qualified Investment. The effective
date of any addition to the Variable Account shall be the later
of the date on which the Company grants Roberts' request or, in
the event the Company determines in its sole discretion to make
the investment proposed by Roberts within 90 days of the
request, the date the Company makes such investment.
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(ii) The Aggregate Initial Variable Account Amount is the
sum of all amounts transferred to the Variable Account as
provided herein, calculated as of the date of transfer, and
without reflecting any gains, losses, expenses or other
transactions in the Variable Account.
(iii) Upon each transfer from the Base Amount to the
Variable Account, each sum so transferred shall be associated
with a particular Qualified Investment (which may be a
hypothetical investment by the Company, or an actual
investment, or any combination of the two, as determined by the
Company). The amount of the Variable Account on any date shall
be the sum of the fair market values of the Qualified
Investments associated with the Variable Account on such date,
less, in the event the Aggregate Initial Variable Account
Amount exceeds Twenty Million Four Hundred Twelve Thousand One
Hundred Thirty-Seven Dollars ($20,412,137), compound interest
at eight percent (8%) per annum on the amount of such excess
from the date such excess is created to the earlier of the date
on which the Variable Account is being valued or April 7, 2004.
(e) Qualified Investments. A "Qualified Investment" is an
investment which is or would be actually available to the Company and which
would meet each of the following criteria if actually made by the Company at the
time of the initial investment; provided, however, that the Company may
disapprove of any such investment (or may subsequently cause any Qualified
Investment to be eliminated or disposed of) based, in its discretion, on its
application of such criteria:
(i) the investment can be made without any actual or
potential legal or regulatory restriction or negative impact on
the Company;
(ii) the investment presents no actual or potential
conflict of interest or diversion of corporate opportunity
between Roberts and the Company or any actual or potential
conflict of interest between the Company and the entity or
entities to which the investment relates;
(iii) the investment would not require disclosure by the
Company in its financial statements as a business relationship
or transaction with management or a related party, as a
compensation committee overlap disclosure item, or otherwise
under Regulation S-K promulgated by the Securities and Exchange
Commission or Sections 13, 14 or 16 of the Securities Exchange
Act of 1934, as amended, or the regulations or forms
thereunder;
(iv) the investment does not expose the Company to any risk
of loss or mandatory additional investment in excess of the
actual amount invested;
(v) the investment would at all times be included on the
Company's audited financial statements as an investment (or as
an offset to an accrued liability);
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<PAGE>
(vi) the investment is either readily marketable or there
is a reasonable means to dispose of the investment from time to
time (and no less frequently than annually) whether or not at
full value, and there is reasonably available any information
concerning the investment which the Company deems necessary for
effectuating the purposes of this Agreement; and
(vii) the investment is to be unencumbered and available to
satisfy the claims of general creditors of the Company.
(f) Variable Account - Company Investments and Other Rules.
(i) The Variable Account shall at all times be an account
on the books of the Company reflecting the hypothetical
investment of the Aggregate Initial Variable Account Amount and
the proceeds thereof in the specific Qualified Investments.
(ii) The Company shall reflect on the books of the Variable
Account all income, gains, losses, and other proceeds
associated with the Qualified Investments therein. In the event
proceeds on a Qualified Investment are received in cash, the
value of such cash shall be included in the Variable Account
and, unless invested in another Qualified Investment, shall be
deemed to have been invested in a special Qualified Investment
on which interest accrues at the rate of eight percent (8%) per
annum from the date of investment until the earlier of the date
of payment of the Death Benefit or April 7, 2004, and which
thereafter does not pay interest.
(iii) If the Company makes actual investments corresponding
to any of such Qualified Investments (each such investment a
"Company Investment"), (A) such Company Investments shall be
part of the Company's general assets, subject to the Company's
discretion and control, and not form part of the Variable
Account; (B) Roberts shall have no right to obtain possession
or ownership of Company Investments, or to vote or otherwise
control them; (C) the transactions reflected in the Variable
Account shall be the same as those with respect to such Company
Investments (giving regard to any difference in amount or
timing with respect to the Qualified Investment in the Variable
Account and such Company Investment); (D) the Company's
out-of-pocket costs in making, maintaining, and disposing of
each Company Investment shall be charged against the value of
the corresponding Qualified Investment in the Variable Account;
and (E) the Company shall have full discretion and control with
respect to such Company Investments, including whether to
retain or to sell or otherwise dispose of such investments;
provided, that it shall exercise such discretion in good faith
with respect to Roberts. Nothing herein shall forbid Roberts to
consult with the Company regarding management of any Company
Investments.
(iv) If at any time the Company determines, as provided in
the first paragraph of (e), above, that an investment reflected
in the Variable Account is no longer a Qualified Investment,
the Company shall promptly give Roberts written
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notice of such determination and the basis therefor, and such
investment shall be deemed sold at its then-fair market value.
Such sale shall be on the terms reflected in the corresponding
sale, if any, of the appropriate Company Investment, if any,
and otherwise shall be deemed to be for cash, with the proceeds
or such sale treated as described herein. Nothing herein shall
require the sale or other disposition of a Company Investment
which is no longer a Qualified Investment.
(v) Roberts may request, from time to time, that all or any
portion of the Variable Account be transferred from the
then-current Qualifying Investment(s) to one or more different
Qualified Investments. Such request shall be made, and the
Company shall deal with such request, in the manner established
herein for initial transfers to the Variable Account, except
that the Aggregate Initial Variable Account Amount shall not be
affected if any such request is granted.
(vi) In the event holders of an investment corresponding to
a Qualified Investment are required to make an investment
decision (e.g., acceptance or not of a tender offer; exercise
of dissenter's rights), and there is no corresponding Company
Investment, the Company shall, after consultation with Roberts,
make a determination in good faith to reflect the actions the
Company determines a reasonable investor would take and adjust
the value and composition of such Qualified Investment
accordingly.
(g) Procedures and Reports. Except as otherwise provided
herein, all determinations and waivers on the part of the Company with respect
to Qualified Investments shall be made jointly by the Company Officers (after
such consultations with other management personnel, the Subcommittee, experts,
and Roberts, as they shall deem appropriate). The Company shall provide Roberts
or his personal representatives and the Subcommittee at the request of any of
them, but no less than once each calendar year, a written report regarding the
value of the Death Benefit as of a recent date, including the value of each
Qualified Investment in the Variable Account and all transactions affecting such
value (including interest, dividends, and distributions with respect to the
Qualified Investments). In the event Roberts or his personal representatives
disagree with any such valuation, the Company and Roberts or his personal
representatives shall consult in good faith to resolve such disagreement, and if
such disagreement is not so resolved the appropriate valuation shall be
determined by the Subcommittee under such reasonable procedures as it determines
at the time. The Company shall provide Roberts or his personal representatives
from time to time copies of all information received by the Company with respect
to Company Investments or the Qualified Investments in the Variable Account, and
shall promptly inform Roberts and the Subcommittee (in advance, if possible) of
all transactions with respect to Company Investments or which the Company deems
to affect the value of Qualified Investments. The Company shall notify the
Subcommittee in writing quarterly as to all amounts transferred to the Variable
Account (including the Qualified Investment associated with such amount) during
the previous calendar quarter and any changes in the composition of the
Qualified Investments.
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(h) Indemnification and Release.
(i) To the extent of the Death Benefit, Roberts hereby
indemnifies the Company, and holds it harmless, against any and
all liabilities, costs, and expenses (including reasonable
attorney and expert fees), including without limitation
indemnification liabilities to officers, directors, agents or
employees, which arise in connection with Company Investments
other than by reason of the bad faith, willful misconduct, or
gross negligence of the Company or such persons. Such
indemnification shall be effected by charging the appropriate
amount against the relevant Qualifying Investment in the
Variable Account, and, to the extent of any excess, by reducing
any other component of the Death Benefit at the time or payment
thereof.
(ii) To the maximum extent permitted by law, Roberts hereby
releases the Company and each of its officers, directors,
agents, and employees, from any and all liability to Roberts
arising out of the Company's good-faith management of Company
Investments, regardless of the effect of such management on the
value of the Death Benefit.
2. All investments made by the Company at Roberts' suggestion through
February 22, 2000, as reported to the Subcommittee, shall be considered to have
been made in compliance with Section 3.11 of the Compensation Agreement, as
amended by this Amendment. As a result, each such investment shall be considered
a Company Investment, the amount of such investment (plus any associated
out-of-pocket costs incurred by the Company) shall be treated as part of the
Aggregate Initial Variable Account Amount as of such date, and the amount of
such investment shall be treated as part of the Variable Account associated with
a Qualified Investment identical to the Company Investment.
3. This Amendment constitutes the complete agreement of the parties
regarding the Death Benefit, and supersedes all prior agreements and
understandings.
4. Except as amended hereby, the Compensation Agreement remains in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMCAST CORPORATION
/s/ Ralph J. Roberts
Ralph J. Roberts
By: /s/ Lawrence S. Smith
Lawrence S. Smith
Executive Vice President
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THE COMCAST CORPORATION RETIREMENT INVESTMENT PLAN
MASTER TRUST AGREEMENT
<PAGE>
TABLE OF CONTENTS
1. ESTABLISHMENT OF PLAN.................................................1
2. CREATION OF TRUST.....................................................1
3. PURPOSES..............................................................2
4. MANAGEMENT OF TRUST...................................................2
5. INVESTMENTS...........................................................3
6. DIRECTION AND CONTROL OF INVESTMENTS BY PLAN MEMBERS..................4
7. ASSETS WHICH ARE NOT SECTION 404(C) OF ERISA ASSETS...................4
8. INVESTMENT FUNDS......................................................4
9. TRUST INVESTMENTS IN COMPANY STOCK....................................7
10. STABLE VALUE CONTRACTS...............................................11
11. POWERS OF TRUSTEE....................................................12
12. LIQUIDATION OF ASSETS................................................14
13. DIRECTION BY COMPANY OR ADMINISTRATOR................................15
14. RECORDS AND ACCOUNTING...............................................15
15. TRUSTEE'S COMPENSATION AND EXPENSES..................................16
16. LITIGATION INVOLVING TRUST ASSETS....................................16
17. RESIGNATION OR REMOVAL OF TRUSTEE....................................17
18. DUTIES OF TRUSTEE....................................................18
19. INDEMNIFICATION......................................................18
20. AMENDMENT OR TERMINATION.............................................18
21. ADDITIONAL PARTICIPATING COMPANIES...................................19
i
<PAGE>
22. SPENDTHRIFT PROVISION................................................19
23. PAYMENT OF TAXES.....................................................19
24. SUCCESSOR TO COMPANY OR TRUSTEE......................................20
25. CONSTRUCTION.........................................................20
26. IMPOSSIBILITY OF PERFORMANCE.........................................20
27. DEFINITION OF WORDS..................................................20
28. TITLES...............................................................20
29. EXECUTION OF TRUST AGREEMENT.........................................21
ii
<PAGE>
THE COMCAST CORPORATION RETIREMENT-INVESTMENT PLAN
MASTER TRUST AGREEMENT
This Agreement is made as of this ___ day of ______, 1999, by and
between Comcast Corporation, a Pennsylvania corporation having its principal
office in Philadelphia, Pennsylvania (the "Company") and Putnam Fiduciary Trust
Company, a Massachusetts trust company having its principal office in Boston,
Massachusetts (the "Trustee").
WITNESSETH:
1. Establishment of Plan. The Comcast Corporation Retirement-Investment Plan
(the "Plan") has been adopted by the Company and is intended to satisfy
those provisions of the Internal Revenue Code of 1986, as the same may be
amended from time to time (the "Code"), relating to qualified employer
plans, as well as the provisions of Section 404(c) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), relating to
investment control by participants, beneficiaries (when a participant has
died), and alternate payees (when required under a qualified domestic
relations order) (each being hereinafter referred to as a "Plan member")
over assets allocated to their accounts under the Plan. The Participating
Companies, as defined in Section 21, are members of a controlled group of
corporations, partnership or proprietorships, within the meaning of Section
414(b) or Section 414(c) or the Code.
2. Creation of Trust. This is an amendment and restatement of an existing
trust which shall be known as "The Comcast Corporation Retirement
-Investment Plan Master Trust" (the "Trust"). The provisions of this
Agreement shall supersede and take precedence over any provision of the
Plan and any later signed amendments thereto which deal with the Trustee's
responsibilities and/or which may conflict in any way with the Trust. All
money and such other property as shall be acceptable to the Trustee as
shall from time to time be paid or delivered to the Trustee in its capacity
as such, all investments made therewith and proceeds thereof and all
earnings and profits thereon, less the payments which at the time of
reference shall have been made by the Trustee, as authorized herein, are
referred to herein as the Trust. The Trustee hereby accepts the Trust
created hereunder and agrees to perform the provisions of this Agreement on
its part to be performed. Subject to the conditions and limitations set
forth herein, the Trustee shall be responsible for the property received by
it as Trustee, but shall not be responsible for the administration of the
Plan or for those assets of the Plan which have not been delivered to and
accepted by the Trustee. The Trustee shall not have any authority or
obligation to determine the adequacy of or to enforce the collection from
the Company of any contribution to the Trust. Certain other agreements and
obligations between the Company and the Trustee or its affiliates may be
set forth
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from time to time in a service agreement between such parties (the "Service
Agreement").
The establishment of the Trust created by this Agreement shall not be
considered as giving any Plan member or any other person any legal or
equitable rights as against the Company or the Trustee or the property,
whether corpus or income, of the Trust unless such right is specifically
provided for in this Agreement, the Plan, or by law, nor shall it be
considered as giving any Plan member or other employee the right to
continue in the service of the Company.
3. Purposes. The Plan and the Trust have been established for the exclusive
benefit of the eligible employees and their beneficiaries, and for
defraying the reasonable expenses of administering the Plan and Trust. So
far as possible this Agreement shall be interpreted in a manner consistent
with the intention of the Company that the Trust satisfy those provisions
of the Code relating to qualified employees' trusts exempt from taxation
under Section 501(a) of the Code. It is specifically intended that the
Company shall have sole responsibility for maintaining the tax-qualified
status of the Plan and Trust. No property of the Trust or contributions
made by the Company pursuant to the terms of the Plan shall revert to the
Company or be used for any purpose other than providing benefits to
eligible employees or their beneficiaries and defraying the expenses of the
Plan and the Trust, except that, to the extent provided in the Plan:
(a) Upon request of the Company, contributions made to the Plan before the
issuance of a favorable determination letter by the Internal Revenue
Service with respect to the initial qualification of the Plan under
Section 401(a) of the Code may be returned to the Company, with all
attributable earnings, within one year after the Internal Revenue
Service refuses in writing to issue such a letter.
(b) Any amount contributed under the Plan by the Company by a mistake of
fact as determined by the Company may be returned to the Company, upon
its request, within one year after its payment to the Trust.
(c) Any amount contributed under the Plan by the Company on the condition
of its deductibility under Section 404 of the Code for the year for
which it was made may be returned to the Company, upon its request,
within one year after the Internal Revenue Service disallows the
deduction in writing.
(d) Earnings attributable to contributions returnable under paragraph (b)
or (c) shall not be returned to the Company, and any losses
attributable to those contributions shall reduce the amount returned.
4. Management of Trust. It shall be the duty of the Trustee:
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(a) to hold and, subject to the provisions of this Agreement, to invest
and to reinvest the assets of the Trust, and
(b) to make payments therefrom in accordance with the written directions
of the Plan Administrator specified in the Plan or otherwise appointed
by the Board of Directors of the Company pursuant to the Plan to
administer the Plan (the "Administrator"). The Administrator shall be
the "plan administrator" of the Plan as defined in Section 3(16)(A) of
ERISA, and a "named fiduciary" within the meaning of Section 402(a) of
ERISA. The Administrator may direct payments to be made from the Trust
to any person, including any member of the Administrator, or to the
Company, or to any paying agent designated by the Administrator, and
in such amounts as the Administrator may direct. Each such direction
of the Administrator shall be in writing and shall be deemed to
include a certification that any payment directed thereby is one which
the Administrator is authorized to direct, and the Trustee may
conclusively rely on such certification without further investigation.
Payments by the Trustee may be made by its check to the order of the
payee and mailed to the payee at the address last furnished to the
Trustee by the Administrator or by the payee, or if no such address
has been furnished, to the payee in care of the Company. The Trustee
shall make disbursements in the amounts and in the manner that the
Administrator directs from time to time in writing. The Trustee shall
have no responsibility to ascertain any direction's compliance with
the terms of the Plan or of any applicable law or the direction's
effect for tax purposes or otherwise; nor shall the Trustee have any
responsibility to see to the application of any disbursement. The
Trustee shall not be required to make any disbursement in excess of
the net realizable value of the assets of the Trust at the time of the
disbursement. The Trustee shall not be required to make any
disbursement in cash, or otherwise, until the Administrator has
provided a written direction as to the assets to be converted to cash
for the purpose of making the disbursement.
5. Investments. Except as otherwise provided in Sections 6 through 10 below,
the Trustee shall invest and reinvest the assets of the Trust and keep the
same invested, without distinction between principal and income, in stocks,
bonds, stock options, option contracts of any type, contracts for the
immediate or future delivery of financial instruments and other property,
or other securities or certificates of participation or shares of any
mutual investment company, trust or fund (including mutual funds which are
sponsored, underwritten or managed by affiliates of the Trustee), or
deposits in the Trustee which bear a reasonable rate of interest, or
annuity or investment contracts issued by an insurance company, or other
property of any kind, real or personal, tangible or intangible, as may be
identified by the Administrator as eligible for investment, provided that
the Trustee may hold assets of the Trust uninvested from time to time if
and to the extent that it may deem such to be in the best interests of the
Trust.
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Notwithstanding the foregoing, unless an Investment Manager is appointed in
accordance with Section 8(b), or the Service Agreement otherwise
specifically provides, all of the assets of the Trust shall be invested in
investment products sponsored, underwritten or managed by affiliates of the
Trustee, loans to Plan members or securities issued by the Company
satisfying the conditions of Section 9.
6. Direction and Control of Investments by Plan members. Unless the
Administrator indicates otherwise, the Plan members shall exercise
direction and control over the investment of their accounts in a manner
intended to insulate plan fiduciaries from liability for investments under
Section 404(c) of ERISA. Each Plan member shall instruct the Trustee, in
such form and manner as the Administrator and the Trustee agree, as to the
investment of assets allocated to the Plan member's account under the Plan
from among the eligible investments and the Trustee shall carry out such
instructions.
The Trustee shall carry out the instructions furnished by a Plan member as
to the exercise of voting, tender, or similar rights appurtenant to the
Plan member's ownership interest in any investment alternative. Unless
otherwise agreed to by the Trustee and the Company in the Service
Agreement, the Trustee shall furnish all materials it receives relating to
the exercise of such rights to the Administrator, who shall then be
responsible for distributing the materials among Plan members. Where no
instructions are timely furnished by a Plan member with respect to such
rights, the Trustee shall not exercise any such rights on the Plan member's
behalf.
7. Assets which are not Section 404(c) of ERISA Assets. The Administrator or
the Plan member, as the case may be, shall direct the Trustee, and the
Trustee shall have no discretionary authority, as to the investment of
assets for which Section 404(c) of ERISA does not apply or the exercise of
voting, tender and similar rights appurtenant to ownership interests in
such assets.
8. Investment Funds.
(a) In General. The Administrator from time to time may direct the Trustee
to establish one or more separate investment accounts within the
Trust, each such separate account being hereinafter referred to as an
"Investment Fund". The Trustee shall transfer to each such Investment
Fund such portion of the assets of the Trust as the Administrator or
Plan members direct in accordance with the specific provisions of the
Plan and in the manner provided in the Service Agreement. The Trustee
shall invest and reinvest the assets which have been allocated to an
Investment Fund in accordance with the investment guidelines,
objectives and restrictions which have been established by the
Administrator for that Investment Fund and, in the case of an
Investment Fund for which an Investment Manager has been appointed or
an Investment Fund to be directed by the
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Administrator, the specific investment directions of such Investment
Manager or the Administrator. If, and to the extent, specifically
authorized by the Plan and provided in the Service Agreement, the
Administrator may direct the Trustee to establish an Investment Fund
all, or substantially all, of the assets of which shall be invested in
shares of stock of the Company, subject to the terms and conditions of
Section 9.
All interest, dividends and other income received with respect to, and
any proceeds received from the sale or other disposition of,
securities or other property held in an Investment Fund shall be
credited to and reinvested in such Investment Fund, and all expenses
of the Trust which are properly allocable to a particular Investment
Fund shall be so allocated and charged. The Administrator may at any
time direct the Trustee to eliminate any Investment Fund or Funds and
the Trustee shall thereupon dispose of the assets of such Investment
Fund and reinvest the proceeds thereof in accordance with the
directions of the Administrator.
Pending investment in the Investment Funds in accordance with the
directions of the Administrator or the Plan members, the Trustee shall
invest assets of the Trust as provided in the Service Agreement, or if
there is no such provision, the Trustee may invest assets of the
Trust, in whole or in part, at any time or from time to time, in
interest-bearing accounts or certificates of deposit (including
deposits in the Trustee which bear a reasonable interest rate),
Treasury Bills, commercial paper, money market funds (including any
such fund sponsored, underwritten or managed by one of its
affiliates), short-term investment funds or other short-term
obligations in its discretion, and the investment return thereon shall
be allocated among the Plan members whose assets have been so invested
and added to their respective investments in the Investment Funds.
(b) Appointment of Investment Managers. The Administrator from time to
time may appoint one or more Investment Managers (as that term is
defined in Section 3(38) of ERISA) to manage (including the power to
acquire and dispose of) all or any portion or portions of the Trust.
The Administrator may enter into such agreements setting forth the
terms and conditions of any such appointment as it determines to be
appropriate. The Administrator shall retain the right to remove and
discharge any Investment Manager. The compensation of such Investment
Managers shall be an expense payable in accordance with Section 15.
The Administrator shall notify the Trustee of the appointment of any
Investment Manager by delivering to the Trustee an executed copy of
the agreement under which such Investment Manager was appointed
together with a written acknowledgment by such Investment Manager that
it is
(i) a fiduciary with respect to the Plan,
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(ii) bonded as required by ERISA, and
(iii) either
A) registered as an investment advisor under the Investment
Advisers Act of 1940, or
B) a bank as defined in said Act, or
C) an insurance company qualified to perform investment
management services under the laws of more than one state of
the United States.
The Trustee shall be entitled to rely upon such notice until such time as
the Administrator shall notify and direct the Trustee in writing that
another Investment Manager has been appointed in the place and stead of the
first-named Investment Manager, or in the alternative, that the Investment
Manager has been removed. In each case where an Investment Manager is
appointed, the Administrator shall determine the assets of the Trust to be
allocated to the Investment Manager from time to time and shall issue
appropriate instructions to the Trustee with respect thereto. The Trustee
shall carry out the written instructions of any Investment Manager with
respect to the management and investment of the assets then under control
of such Investment Manager and shall not incur any liability on account of
its compliance with such instructions. Purchase and sale orders may be
placed without the intervention of the Trustee and, in such event, the
Trustee's sole obligation shall be to make payment for purchased securities
and deliver those that have been sold when advised of the transaction. The
Trustee shall not incur any liability on account of its failure to exercise
any of the powers delegated to any Investment Manager because of the
failure of such Investment Manager to give instructions for the management
of the assets under the control of such Investment Manager. The Trustee
shall be under no duty to question any Investment Manager, nor to review
any securities or other property acquired or retained at the direction of
any Investment Manager, nor to make any suggestions to any Investment
Manager in connection therewith. The Trustee shall have no obligation to
vote upon any securities over which the Investment Manager has investment
management control unless the Trustee is instructed in writing by the
Investment Manager as to the voting of such securities within a reasonable
time before the time for voting thereof expires.
Each Investment Manager shall have the authority to exercise all of the
powers of the Trustee hereunder with respect to assets under its control
but only to the extent that such powers relate to the investment of such
assets.
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Notwithstanding any provision to the contrary elsewhere herein:
(i) The Administrator may retain and exercise the powers of an Investment
Manager with respect to all or any portion or portions of the Trust.
The Administrator shall notify the Trustee in writing of any such
reservation of powers and the Trustee shall be entitled to rely upon
any such notice. In any such event, the Trustee shall carry out the
written instructions of the Administrator with respect to the
management and investment of the assets then under control of the
Administrator and shall not incur any liability on account of its
compliance with such instructions. The Trustee shall not incur any
liability on account of its failure to exercise any of the powers
retained by the Administrator because of the failure of the
Administrator to give instructions for the management of the assets
under the control of the Administrator. The Trustee shall be under no
duty to question the Administrator, nor to review any securities or
other property acquired or retained at the direction of the
Administrator, nor to make any suggestions to the Administrator in
connection therewith; and
(ii) The Company may designate an Investment Manager as a named fiduciary
with respect to the management of certain assets of the Trust, in
which event such Investment Manager shall have the authority to
appoint pursuant to this Section 8 one or more Investment Managers to
manage (including the power to acquire and dispose of) all or any
portion or portions of such assets, as if such named fiduciary were
the Administrator. In such event all of the provisions of this Section
8 shall apply with such named fiduciary substituted for the
Administrator.
9. Trust Investments in Company Stock. Trust investments pursuant to this
Section 9 shall be made only in securities constituting "qualifying
employer securities" within the meaning of Section 407(d)(5) of ERISA.
Trust investments in such securities of the Company ("Company Stock") shall
be subject to the following terms and conditions:
(a) Acquisition Limit. Pursuant to the Plan, the Trust may be invested in
Company Stock to the extent necessary to comply with investment
directions under Section 6 or 7 of this Agreement.
(b) Fiduciary Duties of Named Fiduciaries. The Administrator as named
fiduciary shall continually monitor the suitability of acquiring and
holding Company Stock under the fiduciary duty rules of Section
404(a)(1) of ERISA (as modified by Section 404(a)(2) of ERISA) and the
requirements
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of Section 404(c) of ERISA. The Trustee shall not be liable for any
loss, or by reason of any breach, which arises from a direction of the
Administrator with respect to the acquisition and holding of Company
Stock. The Company shall be responsible for determining whether, under
the circumstances prevailing at a given time, its fiduciary duty to
Plan members and beneficiaries under the Plan and ERISA requires that
the Company follow the advice of independent counsel as to the voting
and tender or retention of Company Stock.
(c) Execution of Purchases and Sales. To implement transactions regarding
investments in Company Stock, including purchases, redemptions and
exchanges, the Trustee shall purchase or sell Company Stock on the
open market, as the case may be, as soon as practicable on or
following the date on which the Trustee receives from the Company in
good order all information and documentation necessary to effect such
purchase or sale. However, the Trustee may accumulate all like
purchases into a single batch and may accumulate all like sales as a
result of receiving instructions for redemptions and exchanges out of
Company Stock into a single batch, but shall not be required to do so.
The Trustee may purchase or sell Company Stock from or to the Company
if the purchase or sale is for no more than adequate consideration
(within the meaning of Section 3(18) of ERISA) and no commission is
charged. To the extent that Company contributions under the Plan are
to be invested in Company Stock, the Company may transfer Company
Stock to the Trust in lieu of cash. The number of shares so
transferred shall be determined by dividing the amount of the
contribution by the closing price of Company Stock on any national
securities exchange on the trading day immediately preceding the date
as of which the contribution is made.
The Trustee and the Company may, in an appendix to this Section 9,
agree upon such prescribed dates for purchases and sales of Company
Stock and such rules and conventions in connection with such purchases
and sales as they may find mutually acceptable.
(d) Securities Law Reports. The Administrator shall be responsible for
filing all reports required under federal or state securities laws
with respect to the Trust's ownership of Company Stock, including,
without limitation, any reports required under Section 13 or 16 of the
Securities Exchange Act of 1934, and shall immediately notify the
Trustee in writing of any requirement to stop purchases or sales of
Company Stock pending the filing of any report. The Trustee shall
provide to the Administrator such information on the Trust's ownership
of Company Stock as the Administrator may reasonably request in order
to comply with federal or state securities laws.
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(e) Voting. Notwithstanding any other provision of this Agreement, the
provisions of this Section 9(e) shall govern the voting of Company
Stock. When the issuer of Company Stock files preliminary proxy
solicitation materials with the Securities and Exchange Commission,
the Company shall cause a copy of all the materials to be
simultaneously sent to the Trustee, and the Trustee shall prepare a
voting instruction form based upon these materials. At the time of
mailing of notice of each annual or special stockholders' meeting of
the issuer of Company Stock, the Company shall cause a copy of the
notice and all proxy solicitation materials to be sent to each Plan
member, together with the foregoing voting instruction form to be
returned to the Trustee or its designee. The form shall show the
number of full and fractional shares of Company Stock credited to the
Plan member's accounts, whether or not vested. For purposes of this
Section 9(e), the number of shares of Company Stock deemed credited to
a Plan member's accounts shall be determined as of the date of record
determined by the Company for which an allocation has been completed
and Company Stock has actually been credited to Plan members'
accounts. The Company shall provide the Trustee with a copy of any
materials provided to Plan members and shall certify to the Trustee
that the materials have been mailed or otherwise sent to Plan members.
Each Plan member shall have the right to direct the Trustee as to the
manner in which to vote that number of shares of Company Stock
credited to his accounts. Such directions shall be communicated in
writing or by facsimile or similar means and shall be held in
confidence by the Trustee and not divulged to the Company, or any
officer or employee thereof, or any other person. Upon its receipt of
directions, the Trustee shall vote the shares of Company Stock
credited to the Plan member's account as directed by the Plan member.
The Trustee shall vote those shares of Company Stock not credited to
Plan members' accounts in accordance with the instructions of the
Administrator, and shall not vote those shares of Company Stock
credited to the accounts of Plan members for which no voting
directions are received.
(f) Tender Offers. Upon commencement of a tender offer for any Company
Stock, the Company shall notify each Plan member, and use its best
efforts to distribute timely or cause to be distributed to Plan
members the same information that is distributed to shareholders of
the issuer of Company Stock in connection with the tender offer, and
after consulting with the Trustee shall provide at the Company's
expense a means by which Plan members may direct the Trustee whether
or not to tender the Company Stock credited to their accounts (whether
or not vested). The Company
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shall provide to the Trustee a copy of any material provided to Plan
members and shall certify to the Trustee that the materials have been
mailed or otherwise sent to Plan members.
Each Plan member shall have the right to direct the Trustee to tender
or not to tender some or all of the shares of Company Stock credited
to his accounts. Directions from a Plan member to the Trustee
concerning the tender of Company Stock shall be communicated in
writing or by facsimile or such similar means as is agreed upon by the
Trustee and the Company. The Trustee shall tender or not tender shares
of Company Stock as directed by the Plan member. A Plan member who has
directed the Trustee to tender some or all of the shares of Company
stock credited to his accounts may, at any time before the tender
offer withdrawal date, direct the Trustee to withdraw some or all of
the tendered shares, and the Trustee shall withdraw the directed
number of shares from the tender offer before the tender offer
withdrawal deadline. A Plan member shall not be limited as to the
number of directions to tender or withdraw that he may give to the
Trustee. The Trustee shall not tender shares of Company Stock credited
to a Plan member's accounts for which it has received no directions
from the Plan members. The Trustee shall tender that number of shares
of Company Stock not credited to Plan members' accounts determined by
multiplying the total number of such shares by a fraction, the
numerator of which is the number of shares of Company Stock credited
to Plan members' accounts for which the Trustee has received
directions from Plan members to tender (which directions have not been
withdrawn as of the date of this determination), and the denominator
of which is the total number of shares of Company Stock credited to
Plan members' accounts.
A direction by a Plan member to the Trustee to tender shares of
Company Stock credited to his accounts shall not be considered a
written election under the Plan by the Plan member to withdraw or to
have distributed to him any or all of such shares. The Trustee shall
credit to each account of the Plan member from which the tendered
shares were taken the proceeds received by the Trustee in exchange for
the shares of Company Stock tendered from that account. Pending
receipt of directions through the Administrator from the Plan member
as to the investment of the proceeds of the tendered shares, the
Trustee shall invest the proceeds as the Administrator shall direct.
(g) General. With respect to all rights other than the right to vote, the
right to tender, and the right to withdraw shares previously tendered,
the Trustee shall follow the directions of the Plan member as to
Company Stock credited to his accounts, and if no such directions are
received, the directions of the Administrator. The Trustee shall have
no duty to solicit
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directions from Plan members. With respect to all rights other than
the right to vote and the right to tender, in the case of Company
Stock not credited to Plan members' accounts, the Trustee shall follow
the directions of the Administrator. All provisions of this Section 9
shall apply to any securities received as a result of a conversion of
Company Stock.
10. Stable Value Contracts. If provided in the Service Agreement, the
Administrator or, in the case of an Investment Fund for which an Investment
Manager has been appointed under an investment management agreement and
pursuant to Section 8, the Investment Manager may direct the Trustee to
receive and hold or apply assets of the Trust to the purchase of (i)
insurance, annuity or other financial contracts issued by insurance
companies, banks or other financial institutions ("GICs") or (ii)
securities wrapped by benefit responsive wrap contracts issued by insurance
companies, banks or other financial institutions ("synthetic GICs"). Any
such contracts shall be in the form determined and approved by the
Administrator or Investment Manager, as the case may be, and the Trustee
shall have no responsibility for the selection of the issuer of any such
contract, for negotiating the terms of any such contract, for the
administration, monitoring or disposition of any such contract or for any
other decision relating to any such contract. In the case of a synthetic
GIC, the Trustee shall have no responsibility for selecting or managing the
assets which are to be wrapped, for selecting the Investment Manager, if
any, with respect to the such assets, for establishing any investment
guidelines applicable to such assets or for monitoring or reviewing in any
manner such assets, Investment Manager or investment guidelines.
If such investments are to be made, the Administrator or Investment Manager
shall direct the Trustee to execute and deliver such applications and other
documents as are necessary to establish record ownership, to value such
investments under the method of valuation selected by the Administrator or
Investment Manager, and to record or report such values to the
Administrator or Investment Manager, in the form and manner agreed to by
the Administrator.
The Administrator or Investment Manager may direct the Trustee to exercise
or may exercise directly the powers of contract holder under any GIC or
synthetic GIC, and the Trustee shall exercise such powers only upon
direction of the Administrator or Investment Manager. The Trustee shall
have no authority to act in its own discretion, with respect to the terms,
acquisition, valuation, continued holding and/or disposition of any such
GIC or synthetic GIC or any asset held thereunder. The Trustee shall be
under no duty to question any direction of the Administrator or Investment
Manager or to review the form of any such GIC or synthetic GIC or the
selection of the issuer thereof, or to make recommendations to the
Administrator or Investment Manager or to any issuer with respect to the
form of any such GIC or synthetic GIC.
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The Trustee shall be fully protected in acting in accordance with written
directions of the Administrator or Investment Manager, and shall be under
no liability for any loss of any kind which may result by reason of any
action taken or omitted by it in accordance with any direction of the
Administrator or Investment Manager, or by reason of inaction in the
absence of written directions from the Administrator or Investment Manager.
In the event that the Administrator or Investment Manager directs that any
monies or property be paid or delivered to the contract holder other than
for the benefit of specific individual beneficiaries, the Trustee agrees to
accept such monies or property as assets of the Trust subject to all the
terms hereof.
For purposes of this Section 10, traditional forms of individual or group
insurance or annuity contracts issued by insurance companies shall be
deemed to be GICs.
11. Powers of Trustee. Subject to the foregoing provisions and limitations, the
Trustee is authorized and empowered:
(a) to sell at public auction or by private contract, redeem, convey,
transfer, exchange, pledge, or otherwise realize upon, any securities,
investments or other property forming a part of the Trust, and for
such purposes may execute such instruments and writings and do such
things as it shall deem proper;
(b) to keep any or all securities or other property in the name of some
other person, nominee, firm or corporation or in its own name without
disclosing its fiduciary capacity, but the books and records of the
Trustee shall at all times show that all such securities and other
property are part of the Trust;
(c) except as otherwise provided in Sections 6 through 10, to the extent
that the Trustee receives direction from the Administrator or the Plan
members, as the case may be, to vote upon any stocks, bonds or other
securities of any corporation, association or trust at any time
comprising the Trust, or otherwise consent to or request any action on
the part of such corporation, association or trust, and to give
general or special proxies or powers of attorney, with or without
power of substitution, and to exercise any conversion privileges,
subscription rights or other options, to participate in
reorganizations, recapitalizations, consolidations, mergers and
similar transactions with respect to such securities; to deposit such
stocks or other securities in any voting trust, or with any protective
or like committee, or with a trustee, or with depositories designated
thereby; and generally to exercise any of the powers of an owner with
respect to stocks or other securities or property comprising the Trust
which the Trustee deems to be for the best interests of the Trust;
provided, however, the Trustee will not vote such stocks or other
securities as to which it receives no written directions;
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(d) when instructed or directed by the Administrator, to borrow money for
the purposes of this Trust in such amounts and upon such terms and
conditions as the Administrator, in its discretion, may approve, and
for any amount so borrowed to issue the promissory note of the Trustee
and to secure the repayment thereof by pledge, mortgage, or
hypothecation of all or any part of the property of the Trust, and no
person loaning money to the Trustee shall be bound to see to the
application of the money loaned or to inquire into the validity of any
such borrowing;
(e) to make, execute, acknowledge and deliver any and all instruments that
it shall deem necessary or appropriate to carry out the powers herein
granted;
(f) to manage, administer, operate, lease for any number of years,
develop, improve, repair, alter, demolish, mortgage, pledge, grant
options with respect to, or otherwise deal with any real property or
interest therein at any time held by it, and to cause to be formed a
corporation or trust to hold title to any such real property with the
aforesaid powers, all upon such terms and conditions as may be deemed
advisable;
(g) to renew or extend or participate in the renewal or extension of any
mortgage, upon such terms as may be deemed advisable, and to agree to
a reduction in the rate of interest on any mortgage or to any other
modification or change in the terms of any mortgage or of any
guarantee pertaining thereto, in any manner and to any extent that may
be deemed advisable for the protection of the Trust or the
preservation of the value of the investment, to waive any default
whether in the performance of any covenant or condition of any
mortgage or in the performance of any guarantee, or to enforce any
such default in such manner and to such extent as may be deemed
advisable, to exercise and enforce any and all rights of foreclosure
to bid in property on foreclosure, to take a deed in lieu of
foreclosure with or without paying a consideration therefor and in
connection therewith to release the obligation on the bond secured by
such mortgage; and to exercise and enforce in any action, suit or
proceedings at law or in equity any rights or remedies in respect to
any such mortgage or guarantee;
(h) upon express direction by the Administrator or the Investment Manager,
as the case may be, to transfer all or part of the assets of the Trust
in accordance with such investment instructions, without restriction,
to investments authorized for fiduciaries, including without
limitation any common, collective or commingled trust fund maintained
by the Trustee (or any other such fund acceptable to the Trustee) that
qualifies for exemption from federal income tax pursuant to Revenue
Ruling 81-100. Any investment in, and any terms and conditions of, any
such common, collective or
13
<PAGE>
commingled trust fund available only to employee trusts which meet the
requirements of the Code, or corresponding provisions of subsequent
income tax laws of the United States, shall constitute an integral
part of this Agreement;
(i) when instructed or directed by the Administrator, to settle,
compromise or submit to arbitration any claims, debts, or damages, due
or owing to or from the Trust, to commence or defend suits or legal
proceedings and to represent the Trust in all suits or legal
proceedings in any court of law or before any other body or tribunal;
provided, however, that the Trustee shall have no obligation to take
any legal action for the benefit of the Trust unless it shall have
first been indemnified by the Company for all expenses in connection
therewith, including counsel fees;
(j) if applicable, to lend to Plan members such amount or amounts, and
upon such terms and conditions, as the Administrator may direct in
accordance with the provisions of the Plan;
(k) to employ such agents, consultants, custodians, depositories,
advisors, and legal counsel as may be reasonably necessary or
desirable in the Trustee's judgment in managing and protecting the
Trust and, subject to the provisions of Section 15, to pay them
reasonable compensation out of the Trust;
(l) to cause any securities or other property which may at any time form a
part of the Trust to be issued, held or registered in the individual
name of the Trustee, or in the name of its nominee (including any
custodian employed by the Trustee, any nominee of such a custodian,
and any depository, clearing corporation or other similar system), or
in such form that title will pass by delivery;
(m) to transfer any assets of the Trust to a custodian or sub-custodian
employed by the Trustee; and
(n) to do all other acts in its judgment necessary or desirable for the
proper administration of the Trust, in accordance with the provisions
of the Plan and this Agreement, although the power to do such acts is
not specifically set forth herein.
No person dealing with the Trustee shall be required to take any notice of
this Agreement, but all persons so dealing shall be protected in treating
the Trustee as the absolute owner with full power of disposition of all the
monies, securities and other property of the Trust, and all persons dealing
with the Trustee are released from inquiry into the decision or authority
of the Trustee and from seeing to the application of monies, securities or
other property paid or delivered to the Trustee.
14
<PAGE>
12. Liquidation of Assets. Upon termination of the Trust as provided herein,
the Trustee shall not be required to make any payments hereunder until it
has received such documentation as it shall consider necessary to establish
that the termination complies with applicable law, or to make any payments
in excess of the net realizable value of the assets of the Trust at the
time of such payment. The Trustee shall not be required to make any
payments in cash unless there shall be in the Trust at the time an amount
of cash sufficient for the purpose. In case of a deficiency in cash, the
Trustee shall take such action as to the disposition of securities or other
property forming a part of the Trust as will provide the amount of cash for
such payments. The Trustee shall not be required to make any payment in
cash until the Administrator has provided direction as to the assets to be
converted to cash for the purpose of making such payment.
13. Direction by Company or Administrator. The Company shall certify to the
Trustee the names and specimen signatures of the Administrator. The Company
shall give prompt notice to the Trustee of changes in the Administrator,
and until such notice is received by the Trustee, the Trustee shall be
fully protected in assuming that the Administrator is unchanged and is
acting accordingly. The Administrator may certify to the Trustee the names
of persons authorized to act for it in relation to the Trustee and may
designate a person, corporation or other entity, whether or not affiliated
with the Company, to so act. Whenever the Trustee is required or authorized
to take any action hereunder pursuant to any written direction or
determination of the Company or the Administrator, such direction or
determination shall be sufficient protection to the Trustee if contained in
a writing signed by any one or more of the persons authorized to execute
documents on behalf of the Company or the Administrator, as the case may
be, pursuant to the Plan. The Trustee shall act, and shall be fully
protected in acting, in accordance with such orders, requests and
instructions of the Company or the Administrator. By such a writing the
Company or the Administrator, as the case may be, may ratify, approve or
confirm any action taken by the Trustee, and upon such ratification,
approval or confirmation the Trustee shall be protected as though
authorization or determination by the Company or the Administrator had
preceded such action. In the absence of direction by the Company or the
Administrator as to any matter provided in this Agreement or the Plan, the
Trustee may in its discretion take such action as it deems fit and proper
with respect thereto after reasonable attempts to secure Company or
Administrator direction; provided, however, that the Trustee shall not be
obligated to take any such action. The Trustee may deliver documents to the
Company or the Administrator by delivering the same, or by mailing the
same, postage prepaid, addressed to the Company or the Administrator, as
the case may be, at its principal place of business.
14. Records and Accounting. The Trustee shall keep adequate and accurate
accounts of investments, receipts, disbursements and other transactions
hereunder, and all
15
<PAGE>
accounts, books and records relating thereto shall be open at all
reasonable times to inspection and audit by the Administrator and its
authorized representatives. The Trustee shall render to the Company and the
Administrator in writing, at least once each twelve (12) months and at such
times as required by the Plan and, in any event, within ninety (90) days
after its removal or resignation as provided in Section 17 hereof, accounts
of its transactions under this Agreement, and the Administrator may approve
such accounts of the Trustee by an instrument in writing delivered to the
Trustee. In the absence of the filing in writing with the Trustee by the
Administrator of exceptions or objections to any such account within one
year after the receipt thereof, the Administrator shall be deemed to have
approved such account; and in such case, or upon the written approval of
the Administrator of any such account, the Trustee, to the extent permitted
by applicable law, shall be released, relieved and discharged with respect
to all matters and things set forth in such account. The Trustee shall from
time to time make such other reports and furnish such other information
concerning the Trust (including valuations of each Investment Fund
established pursuant to Section 8) to the Administrator as the
Administrator may reasonably request or as may be required by the Plan. The
Administrator shall arrange for each Investment Manager appointed pursuant
to Section 8(b), and each insurance company, bank, or other financial
institution issuing contracts held by the Trustee pursuant to Section 10 to
furnish the Trustee with such valuations and reports as are necessary to
enable the Trustee to fulfill its obligations under this Section 14, and
the Trustee shall be fully protected in relying upon such valuations and
reports. In any proceeding instituted by the Trustee, the Company or the
Administrator or all of them with respect to any account of the Trustee,
only the Company, the Administrator and the Trustee shall be necessary
parties.
15. Trustee's Compensation and Expenses. The Trustee shall be paid such
reasonable compensation as provided in the Fee Schedule attached to this
Agreement. The compensation of the Trustee and any reasonable expenses,
including reasonable attorneys' fees and the cost of any bond, surety or
other security which may be required of the Trustee by ERISA, incurred by
the Trustee in the performance of its duties, and all other proper charges
and disbursements of the Trustee may be paid by the Company within thirty
(30) days after so billed, and will automatically be deducted from the
Trust if, upon the expiration of thirty (30) days, such fees are not
separately paid by the Company. All expenses (including taxes pursuant to
Section 23) of the Trust, other than those expenses which are paid by the
Company, which are allocable to an Investment Fund established pursuant to
Section 8 shall be charged to such Investment Fund. All such expenses which
are not so allocable shall be charged against each of the Investment Funds
in the same proportion as the value of the assets held in such Investment
Fund bears to the value of the total assets held in all of the Investment
Funds. Any account maintenance or administration fees applicable to any
Plan member's account which are not paid hereunder by the Company shall be
charged against the interest of the Plan member and, in the case of a loan
of a Plan member, if applicable, all
16
<PAGE>
expenses (including taxes pursuant to Section 23) of the Trust, other than
those expenses which are paid by the Company, which are allocable to such
loan, shall be charged against the interest of such Plan member under the
Plan.
16. Litigation Involving Trust Assets. If any asset of the Trust is, or while
this Agreement is in effect becomes, subject to any claims or litigation
(other than a routine claim for benefits brought by a Participant or
Beneficiary against the Trust generally), the Administrator shall direct
the Trustee to execute and deliver on behalf of the Trust such forms,
pleadings, agreements or other documents necessary to the prosecution or
defense of such claims or litigation. The Trustee shall have no authority
to act on its own discretion with respect to such claim or litigation and
shall have no duty to question any direction of the Administrator relating
thereto. Except as may otherwise be provided under ERISA, the Trustee shall
be fully protected in acting in accordance with written directions of the
Administrator, and shall be under no liability for any loss of any kind
which may result by reason of any action taken or omitted by it in
accordance with any direction of the Administrator, or by reason of
inaction in the absence of written directions from the Administrator. The
Trustee's retention of counsel in order to monitor the progress of such
claim or litigation (including, but not limited to, review of all pertinent
documents), shall be separate from the counsel representing the Company or
any other party in respect of such claim or litigation. The cost of such
counsel shall be an expense of the Trust and shall be charged to the Trust
as provided in Section 15 unless paid by the Company.
17. Resignation or Removal of Trustee. The Trustee may resign at any time upon
sixty (60) days' written notice to the Company, and the Company may remove
the Trustee at any time upon sixty (60) days' written notice to the
Trustee; provided, however, that the parties may by written instrument
waive such notice. The Trustee reserves the right at any time to resign
immediately if the Company transfers the Plan's administration to a
recordkeeper other than the recordkeeper designated in the Service
Agreement, a copy of which is attached hereto, without the Trustee's prior
written consent, by delivering to the Company a notice of resignation
certified by the Trustee. The Trustee further reserves the right at any
time to resign immediately by delivering to the Company a notice of
resignation certified by the Trustee if the assets of the Trust are not
invested in investment products which are sponsored, underwritten or
managed by affiliates of the Trustee, unless the Service Agreement
otherwise specifically provides. If the Trustee shall resign, be removed or
for any other reason cease to be Trustee, the Company shall appoint a
successor Trustee or Trustees to whom the Trustee, upon receipt of
acceptance by such successor, shall promptly deliver all of the assets of
the Trust less any unpaid fees or expenses. Subject to the foregoing
provisions, any resignation or removal of the Trustee or appointment of a
new Trustee shall be by instrument in writing and shall become effective on
the date therein specified. Any successor Trustee shall have the same
powers and duties as the succeeded Trustee, subject to such changes as the
Company may then determine.
17
<PAGE>
Upon request of such successor Trustee or Trustees, the Company and the
Trustee ceasing to act shall execute and deliver such instruments of
conveyance and further assurance and do such things as may reasonably be
required for more fully and certainly vesting and confirming in such
successor Trustee or Trustees all the right, title and interest of the
retiring Trustee in and to the assets of the Trust. The Trustee is
authorized, however, to reserve such sums of money as may be reasonable for
payment of its compensation and expenses (including legal fees) in
connection with the settlement of its account or otherwise, and any balance
of such reserve remaining after payment of such compensation and expenses
shall be promptly paid over to the successor Trustee or Trustees.
18. Duties of Trustee. The duties of the Trustee shall be only those
specifically undertaken by the Trustee pursuant to this Trust Agreement.
The Trustee shall have no responsibility for the administration of the Plan
(including, but not limited to, the determination of Plan participation
rights of employees of the Company, the determination of benefits of
members of the Plan and the maintenance of individual accounts of members
of the Plan). Except as otherwise provided by ERISA, in no event shall the
Trustee be responsible for any act or omission of any fiduciary of the
Plan. The Trustee shall have no liability for the acts or omissions of any
predecessors and successors in office. The Trustee shall be under no duty
to question or review the eligible investments for Plan members, the
investment guidelines, objectives and restrictions established by the
Administrator, or the specific investment directions given by the
Administrator or the Plan members for any investment, and shall further
have no duty to make suggestions in connection therewith. The Trustee shall
not be liable for any loss, or by reason of any breach, which arises from
the Administrator's or Plan members' exercise or non-exercise of rights
under this Trust Agreement, or from any direction of the Administrator or
Plan members. The Trustee shall incur no liability on account of investing
the assets of the Trust in accordance with investment elections of the
Administrator or Plan members duly delivered to the Trustee. The Trustee
shall be a Plan fiduciary obligated to comply with the instructions of Plan
members within the meaning of Section 2550.404(c)-1(b)(2)(i)(A) of the
Department of Labor regulations, but shall have no other duties except as
specifically set forth in this Trust Agreement or the Service Agreement.
Without limiting the foregoing, it is specifically agreed that the Trustee
shall not be a plan fiduciary identified to be responsible for providing
information described in Section (b)(2)(i)(B) of such regulations, or a
fiduciary responsible for selecting a broad range of investment
alternatives within the meaning of such regulations.
19. Indemnification. The Company hereby agrees to indemnify and hold harmless
the Trustee from and against any losses, damages, liabilities, claims,
costs or expenses (including attorneys' fees) which the Trustee may incur
by reason of this Trust Agreement, (including, without limitation, by
reason of the Trustee's making benefit payments pursuant to fraudulent or
unauthorized instructions) excepting
18
<PAGE>
only losses, damages, liabilities, claims, costs or expenses arising from
the Trustee's negligence or willful misconduct. A waiver by the Trustee of
any signature guarantee requirement relating to the investments held
hereunder, or the provision of services through the Internet or other
electronic means, shall not be construed as negligence or willful
misconduct on the part of the Trustee. The provisions of this Section 19
shall survive the termination of this Agreement.
20. Amendment or Termination. The Company reserves the right at any time and
from time to time to amend, in whole or in part, any or all of the
provisions of, or to terminate, this Agreement by delivering to the Trustee
a copy of an amendment or a notice of termination certified by an officer
of the Company; provided, however, that no such amendment which affects the
rights, duties or responsibilities of the Trustee may be made without its
consent, and provided further that no such amendment shall authorize or
permit any part of the corpus or income of the Trust to be used for or
diverted to purposes other than those set forth in Section 3. Any such
amendment shall be effective upon delivery to the Trustee unless a
different effective date is specifically stated and any such amendment may
be made retroactively as shall be permitted under applicable law. Upon
termination of this Agreement, the Trustee, upon direction of the
Administrator shall liquidate the Trust to the extent required for
distribution and, after the final account of the Trustee has been approved
and settled, shall distribute the balance of the Trust remaining in its
hands as directed by the Administrator or in the absence of such direction,
as may be directed by a judgment or decree of a court of competent
jurisdiction. Following any such termination the powers of the Trustee
hereunder shall continue as long as any of the assets of the Trust remain
in its hands, but only as to those assets which during such time remain in
the Trust.
21. Additional Participating Companies. Any Participating Company as defined in
the Plan, may become a participating employer in the Trust in the manner as
set forth in the Plan. Each such additional participating employer hereby
delegates all such rights, powers, and duties, with respect to the Trust as
applied to it including amendment or termination of the Trust, to Comcast
Corporation acting alone.
22. Spendthrift Provision. Except as otherwise provided in the Plan, to the
maximum extent permitted by law, beneficial interests in the Trust of Plan
members under the Plan shall not be assignable nor subject to alienation,
sale, transfer, pledge, encumbrance, mortgage, attachment, execution, levy
or receivership, nor shall they pass to any trustee in bankruptcy or be
reached or applied by any legal process for the payment of any obligations
of any such person; provided, however, that nothing herein shall prevent a
Plan member from assigning his interest in the Trust as security for the
repayment of any loan made to him from the Trust pursuant to the Plan, and
further provided that nothing herein shall prevent the Trustee from making
payments in accordance with a Qualified Domestic Relations Order, as that
term is defined in Code Section 414(p). Any attempt at
19
<PAGE>
any other assignment, alienation, sale, transfer, pledge, encumbrance,
mortgage, attachment, execution or levy shall be void and unenforceable.
23. Payment of Taxes. The Trustee may pay out of the Trust (or the appropriate
Investment Fund or Funds) any and all taxes of any and all kinds, including
without limitation property taxes and income taxes levied or assessed under
existing or future laws upon or in respect of the Trust or any monies,
securities or other property forming a part thereof or the income therefrom
subject to the terms of any agreements or contracts made with respect to
trust investments which make other provision for such tax payments. The
Trustee may assume that any taxes assessed on or in respect of the Trust or
its income are lawfully assessed unless the Administrator shall in writing
advise the Trustee that in the opinion of counsel for the Company such
taxes are or may be unlawfully assessed. In the event that the
Administrator shall so advise the Trustee, the Trustee will, if so
requested in writing by the Administrator contest the validity of such
taxes in any manner deemed appropriate by the Company or its counsel but at
the expense of the Trust; or the Company may contest the validity of any
such taxes at the expense of the Trust and in the name of the Trustee; and
the Trustee agrees to execute all documents, instruments, claims, and
petitions necessary or advisable in the opinion of the Company or its
counsel for the refund, abatement, reduction or elimination of any such
taxes. At the direction of the Administrator the Trustee shall collect all
income tax to be withheld from any benefit payments from the Trust and
shall report and pay over such taxes to the Internal Revenue Service,
except for payments made directly by an insurer to a Plan member or
beneficiary under an annuity or insurance contract, if applicable.
24. Successor to Company or Trustee. Any successor to all or a major part of
the business of the Trustee, by whatever form or manner resulting, shall
ipso facto succeed to all the rights, powers and duties hereunder of the
Trustee. Any successor to all or a major part of the business of the
Company, by whatever form or manner resulting, may continue the Plan and
Trust by executing appropriate amendments thereto, and thereupon such
successor shall ipso facto succeed to all the rights, powers and duties
hereunder of the Company.
25. Construction. In any question of interpretation or other matter of doubt,
the Trustee, the Administrator and the Company may rely upon the opinion of
counsel for the Company or any other attorney at law designated by the
Company with the approval of the Trustee. The provisions of this Agreement
shall be construed, administered and enforced according to the laws of the
United States and, to the extent permitted by such laws, by the laws of the
Commonwealth of Massachusetts. All contributions to the Trust shall be
deemed to be made in the Commonwealth of Massachusetts.
26. Impossibility of Performance. In case it becomes impossible for the
Company, the Administrator or the Trustee to perform any act under this
Agreement, that act
20
<PAGE>
shall be performed which in the judgment of the Administrator will most
nearly carry out the intent and purpose of the Plan and Trust. All parties
to this Agreement or any way interested in the Trust shall be bound by any
acts performed under such condition.
27. Definition of Words. Feminine or neuter pronouns shall be substituted for
those of the masculine form, and the plural shall be substituted for the
singular, in any place or places herein where the context may require such
substitution or substitutions.
28. Titles. The titles of sections are included only for convenience and shall
not be construed as part of this Agreement or in any respect affecting or
modifying its provisions.
29. Execution of Trust Agreement. This Agreement may be executed in any number
of counterparts and each fully executed counterpart shall be deemed an
original.
IN WITNESS WHEREOF these presents have been signed and sealed for and on
behalf of the Company and the Trustee effective as of the above date by their
duly authorized officers as of this ___ day of _________, 19__.
COMCAST CORPORATION
By:
- --------------------------- ---------------------------
Witness
Title:
---------------------------
PUTNAM FIDUCIARY TRUST COMPANY
By:
- --------------------------- ---------------------------
Witness
Title:
---------------------------
1/28/99
21
<PAGE>
THE COMCAST CORPORATION RETIREMENT-INVESTMENT PLAN
TRUST AGREEMENT FEE SCHEDULE
The following services associated with the Trust Agreement are subject to the
fees specified below. The Company agrees to pay the Trustee fees and expenses as
follows:
1. Trust Distributions:
$10.00 per Trust distribution, which includes preparation and mailing
of IRS Form 1099-R. Distributions include all payments to Participants
and Beneficiaries, and payments to the Administrator or the
Administrator's designee. Unless otherwise paid by the Company, Trust
distribution fees will be deducted from the Trust distribution
proceeds. This fee is waived if the Participant elects a direct
rollover of 100% of his/her vested account balance into an IRA invested
solely in the Putnam mutual funds.
2. Company Stock:
$18.00 per stock certificate issued. This fee includes the preparation
and mailing of IRS Form 1099-R.
$.50 per Participant for proxy solicitation cost plus out of pocket and
postage expenses.
22
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 751
<SECURITIES> 4,842
<RECEIVABLES> 655
<ALLOWANCES> (150)
<INVENTORY> 375
<CURRENT-ASSETS> 6,715
<PP&E> 6,405
<DEPRECIATION> (1,640)
<TOTAL-ASSETS> 38,645
<CURRENT-LIABILITIES> 4,176
<BONDS> 10,806
577
0
<COMMON> 907
<OTHER-SE> 15,254
<TOTAL-LIABILITY-AND-EQUITY> 38,645
<SALES> 1,859
<TOTAL-REVENUES> 1,859
<CGS> (447)
<TOTAL-COSTS> (1,818)
<OTHER-EXPENSES> (57)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (169)
<INCOME-PRETAX> (184)<F1>
<INCOME-TAX> 32
<INCOME-CONTINUING> (152)
<DISCONTINUED> 0
<EXTRAORDINARY> (5)
<CHANGES> 0
<NET-INCOME> (192)
<EPS-BASIC> (.24)
<EPS-DILUTED> (.24)
<FN>
<F1>
Income before income tax expense and other items excludes the effect of
minority interests, net of tax, of $34.2.
</FN>
</TABLE>
