Charter 2005 Annual Report Download - page 102

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
Interested
Transaction Related Party Description of Transaction
Digeo, Inc. Broadband Carriage Paul G. Allen We paid Digeo approximately $3 million for customized development of the
Agreement Carl E. Vogel i-channels and the local content tool kit in 2005. We entered into a license
Jo Allen Patton agreement in 2004 for the Digeo software that runs DVR units purchased from a
W. Lance Conn third party. Charter paid approximately $1 million in license and maintenance fees
Michael J. Lovett in 2005. We paid approximately $10 million in capital purchases in 2005.
Payment for relative’s services Carl E. Vogel During all of 2005, Mr. Vogel’s brother-in-law was an employee of Charter Holdco
and was paid a salary commensurate with his position in the engineering
department.
Radio advertising Marc B. Nathanson We believe that, through a third party advertising agency, we have paid
approximately $67,600 in 2005 to Mapleton Communications, an affiliate of
Mapleton Investments, LLC.
Indemnification Advances Current and former Charter reimbursed certain of its current and former directors and executive officers
directors and current a total of approximately $16,200 for costs incurred in connection with litigation
and former officers matters in 2005.
named in certain legal
proceedings
The following sets forth additional information regarding compounded annually, from the date it was due and payable
the transactions summarized above. until the date it is paid. For the year ended December 31, 2005,
the subsidiaries of Charter Holdings paid a total of $128 million
TRANSACTIONS ARISING OUT OF OUR ORGANIZATIONAL STRUCTURE AND in management fees to Charter.
MR. ALLEN’S INVESTMENT IN CHARTER COMMUNICATIONS, INC. AND ITS Mutual Services Agreement
SUBSIDIARIES Charter, Charter Holdco and CII are parties to a mutual services
As noted above, a number of our related party transactions arise agreement whereby each party shall provide rights and services
out of Mr. Allen’s investment in Charter and its subsidiaries. to the other parties as may be reasonably requested for the
Some of these transactions are with CII and Vulcan Ventures management of the entities involved and their subsidiaries,
(both owned 100% by Mr. Allen), Charter (controlled by including the cable systems owned by their subsidiaries all on a
Mr. Allen) and Charter Holdco (approximately 55% owned by cost-reimbursement basis. The officers and employees of each
us and 45% owned by other affiliates of Mr. Allen). See ‘‘Item 1. party are available to the other parties to provide these rights
Business — Organizational Chart’’ for more information regarding and services, and all expenses and costs incurred in providing
the ownership by Mr. Allen and certain of his affiliates. these rights and services are paid by Charter. Each of the parties
will indemnify and hold harmless the other parties and their
Intercompany Management Arrangements directors, officers and employees from and against any and all
Charter is a party to management arrangements with Charter claims that may be made against any of them in connection
Holdco and certain of its subsidiaries. Under these agreements, with the mutual services agreement except due to its or their
Charter provides management services for the cable systems gross negligence or willful misconduct. The mutual services
owned or operated by its subsidiaries. These management agreement expires on November 12, 2009, and may be
agreements provide for reimbursement to Charter for all costs terminated at any time by any party upon thirty days’ written
and expenses incurred by it for activities relating to the notice to the other. For the year ended December 31, 2005,
ownership and operation of the managed cable systems, Charter paid approximately $89 million to Charter Holdco for
including corporate overhead, administration and salary expense. services rendered pursuant to the mutual services agreement. All
The total amount paid by Charter Holdco and all of its such amounts are reimbursable to Charter pursuant to a
subsidiaries is limited to the amount necessary to reimburse management arrangement with our subsidiaries. See
Charter for all of its expenses, costs, losses, liabilities and ‘‘— Intercompany Management Arrangements.’’ The accounts
damages paid or incurred by it in connection with the and balances related to these services eliminate in consolidation.
performance of its services under the various management CII no longer provides services pursuant to this agreement.
agreements and in connection with its corporate overhead,
administration, salary expense and similar items. The expenses Previous Management Agreement with Charter Investment, Inc.
subject to reimbursement include fees Charter is obligated to Prior to November 12, 1999, CII provided management and
pay under the mutual services agreement with CII. Payment of consulting services to our operating subsidiaries for a fee equal
management fees by Charter’s operating subsidiaries is subject to to 3.5% of the gross revenues of the systems then owned, plus
certain restrictions under the credit facilities and indentures of reimbursement of expenses. The balance of management fees
such subsidiaries and the indentures governing the Charter payable under the previous management agreement was accrued
Holdings public debt. If any portion of the management fee due with payment at the discretion of CII, with interest payable on
and payable is not paid, it is deferred by Charter and accrued as unpaid amounts. For the year ended December 31, 2005,
a liability of such subsidiaries. Any deferred amount of the Charter’s subsidiaries did not pay any fees to CII to reduce
management fee will bear interest at the rate of 10% per year, management fees payable. As of December 31, 2005, total
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