from the operation of our cable systems, including, without limitation,
subscriber payments, advertising revenues, and revenues from other services
provided by our cable systems. Gross revenues do not include interest income or
income from investments unrelated to our cable systems.
Payment of the management fee to Charter Investment is permitted under our
current credit facilities, but ranks below our payment obligations under our
current credit facilities. In the event any portion of the management fee due
and payable is not paid by us, it is deferred and accrued as a liability. Any
deferred amount of the management fee will bear interest at the rate of 10% per
annum, compounded annually, from the date it was due and payable until the date
it is paid. As of June 30, 1999, no interest had been accrued.
The management fee is payable to Charter Investment quarterly in arrears.
If the current management agreement is terminated, Charter Investment is
entitled to receive the fee payable for an entire quarter, even if termination
occurred before the end of that quarter. Additionally, Charter Investment is
entitled to receive payment of any deferred amount.
Pursuant to the terms of the new management agreement, we have agreed to
indemnify and hold harmless Charter Investment and its shareholders, directors,
officers and employees. This indemnity extends to any and all claims or
expenses, including reasonable attorneys' fees, incurred by them in connection
with any action not constituting gross negligence or willful misconduct taken by
them in good faith in the discharge of their duties to us.
The total management fees, including expenses, earned by Charter Investment
under all management agreements were as follows:
YEAR FEES PAID EARNED
---- --------- ----------
<S> <C> <C>
Six Months Ended June 30, 1999................... $23,388 $20,796
Year Ended December 31, 1998..................... 17,073 27,500
Year Ended December 31, 1997..................... 14,772 20,290
Year Ended December 31, 1996..................... 11,792 15,443
As of June 30, 1999, approximately $17.0 million remains unpaid for all
MANAGEMENT AGREEMENT WITH CHARTER COMMUNICATIONS, INC. Upon the closing of
the initial public offering by Charter Communications, Inc. of its Class A
common stock, Charter Communications, Inc. intends to enter into a management
agreement with Charter Communications Holding Company. This management agreement
will provide that Charter Communications, Inc. will manage and operate the cable
television systems owned or to be acquired by Charter Communications Holding
Company and its subsidiaries.
The terms of the Charter Communications, Inc. management agreement will be
substantially similar to the terms of the Charter Operating management
agreement, except that Charter Communications, Inc. will not be paid a yearly
3.5% management fee. Charter Communications, Inc. will be entitled to
reimbursement from Charter Communications Holding Company for all expenses,
costs, losses, liabilities and damages incurred by Charter Communications, Inc.
under the service agreement described below.