failures could materially and adversely affect our results of operations,
liquidity and financial condition. Due to the general uncertainty inherent in
the year 2000 problem, resulting in part from the uncertainty of the year 2000
readiness of third-party suppliers and customers, we are unable to determine at
this time whether the consequences of year 2000 failures will have a material
impact on our results of operations, liquidity or financial condition. However,
our year 2000 taskforce has significantly reduced our level of uncertainty about
the year 2000 problem and, in particular, about the year 2000 compliance and
readiness of our material vendors.
We are in the process of acquiring certain cable television systems, and
have negotiated certain contractual rights in the acquisition agreements
relating to the year 2000 issue. We have included the acquired cable television
systems in our year 2000 taskforce's plan. We are monitoring the remediation
process for systems we are acquiring to ensure completion of remediation before
or as we acquire these systems. We have found that these companies are following
a three stage process similar to that outlined above and are on a similar time
line. We are not currently aware of any likely material system failures relating
to the year 2000 affecting the acquired systems.
CONTINGENCY AND BUSINESS CONTINUATION PLAN. Our year 2000 plan calls for
suitable contingency planning for our at-risk business functions. We normally
make contingency plans in order to avoid interrupted service providing video,
voice and data products to our customers. We also plan to distribute detailed
guidelines outlining remedial actions for year 2000 failure of any component of
our systems which is critical to the transport of our signal by mid-November.
This includes a communications plan to our key personnel in the event of a year
2000 failure so as to accelerate remediation actions throughout the company.
COST. We have incurred $5.6 million in costs to date directly related to
addressing the year 2000 problem. We have redeployed internal resources and have
selectively engaged outside vendors to meet the goals of our year 2000 program.
We currently estimate the total cost of our year 2000 remediation programs,
including pending acquisitions, to be approximately $9.8 million.
In accordance with an employment agreement between Charter Investment, Inc.
and Jerald L. Kent, the President and Chief Executive Officer of Charter
Investment, Inc. and a related option agreement between Charter Communications
Holding Company and Mr. Kent, an option to purchase 3% of the equity value of
all cable systems managed by Charter Investment, Inc. on the date of the grant,
or 7,044,127 membership units, were issued to Mr. Kent. The option vests over a
four-year period from the date of grant and expires ten years from the date of
In February 1999, Charter Holdings adopted an option plan, which was
assumed by Charter Communications Holding Company in May 1999, providing for the
grant of options to purchase up to 25,009,798 Charter Communications Holding
Company membership units. The option plan provides for grants of options to
employees and consultants of Charter Communications Holding Company and its