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Home My WebLink About900055.tiff AR22O3126 RESOLUTION RE: TRANSFER AND ASSIGNMENT OF CABLE T.V. FRANCHISE FROM JAMES CABLE PARTNERS, L.P. , TO CHARTWELL CABLE OF COLORADO, INC. mO O 0 O rq o WHEREAS, the Board of County Commissioners of Weld County, Colorado, pursuant to Colorado statute and the Weld County Home • Rule Charter, is vested with the authority of administering the o-4 3 affairs of Weld County, Colorado, and cp oz WHEREAS, Weld County, Colorado ("County") , approved and q• enacted Ordinance No. 94 on December 14 , 1981 , authorizing the p grant of a Cable T.V. franchise; which Ordinance was amended by Ordinance No. 94-A on December 21 , 1982 , and Ordinance No. 94-B on z o February 12 , 1985 , and .•w WHEREAS, on December 19 , 1988 , County adopted a Resolution z granting to Chartwell Cable of Colorado, Inc. ( "Chartwell") , a o a cable television franchise, and �U 004 WHEREAS, on June 12 , 1989 , County approved the transfer of ~ said cable television franchise to James Cable Partners, L.P. �E+ ( "James") , and om WHEREAS, James desires to sell its franchise to Chartwell, (Nal and Chartwell desires to assume all of the duties and obligations of James under the franchise , and 02 Nz N< WHEREAS, Chartwell will hold the franchise directly, and cox WHEREAS , the Board of County Commissioners of the County of z Weld recognizes that Chartwell will initially be serving only a cnw small area in Weld County of less than 500 subscribers , and LilrH N ri N WHEREAS, the applicant has presented facts sufficient to 44, persuade the Board of County Commissioners of the County of Weld to invoke the WAIVER OF REQUIREMENTS section of Ordinance No. 94-A, and WHEREAS, application has been duly made by Chartwell requesting approval of the transfer of the franchise. NOW, THEREFORE, BE IT RESOLVED by the Board of County Commissioners of Weld County, Colorado: 900055 'r4 Page 2 RE: TRANSFER CABLE TV FRANCHISE TO CHARTWELL CABLE OF COLORADO SECTION 1 . O o County hereby consents to the assumption by Chartwell of all of o the duties and obligations under the franchise, such assumption to be effective upon the transfer of the capital stock of James to N o Chartwell. O o a SECTION 2 . O3 o x County acknowledges that as of the date hereof, the franchise is n W in full force and effect, the same as is held by, and the rights oand privileges granted thereunder, inure to the benefit of James, o and that to the best knowledge of County, James is in full z compliance with the franchise. n `a SECTION 3 . Hx X▪ That the consent and approval hereby granted is given pursuant to m the terms and provisions of the franchise, but do not, however, z constitute, and shall not be construed to constitute, a disclaimer H or waiver of any rights granted or any duties or obligations H imposed by the franchise, except as provided herein. Cfl ▪ SECTION 4 . CVa N ;zl r-+ w That County hereby approves and consents to the following oz exception pursuant to the WAIVER OF REQUIREMENTS section of N Z Ordinance No. 94-A: v .X Section C. of heading "Company Services" shall be waived, unless and until there are a total of 1 ,000 subscribers on the system. M LI1 C SECTION 5 . That the franchise originally held by James was duly and legally adopted and approved by County, and that said franchise is hereby validated, ratified, and confirmed. SECTION 6 . That Chartwell shall be controlled at all times during its operation, installation , and maintenance of the system pursuant to the franchise by all provisions of the County Ordinance No. 94 , as amended, and that any such terms of said Ordinance are incorporated herein as if fully restated. 900055 Page 3 RE: TRANSFER CABLE TV FRANCHISE TO CHARTWELL CABLE OF COLORADO SECTION 7. o U That Chartwell shall not assign the franchise granted herein, or any right or interest contained therein, without the written M o consent of County; provided, however, that Chartwell has the right to assign, mortgage, or pledge the franchise as collateral ca security for any loan to purchase and/or operate the cable 0 3 television system. o w SECTION 8 . O o That the sections of this Resolution are hereby declared to be 0 severable , and if any section, provision, or any part hereof shall o X be held to be unconstitutional or invalid or unenforceable, such N w section, provision, or part shall be fully severable and this Resolution shall be construed and enforced as if such section, ~ x provision, or part never comprised a part hereof and the remaining a o sections , provisions, and parts hereof shall remain in full force a v and effect and shall not be affected by any unconstitutional or z invalid or unenforceable section, provision, or part, or by its ti H A severance herefrom. ti H o X SECTION 9 C That this franchise shall become effective upon signature of this o z Resolution. N N < The above and foregoing Resolution was, on motion duly made Ux and seconded, adopted by the following vote on the 15th day of w January, A.D. , 1990 . x en co ' 11 Cf /— BOAR OF COUNTY COMMISSIONERS "' " ATTET: I 04B(�J WEL UNTY, COLORADO c N S H w w Weld CountyTt and Recorder _ and Clerk t rd ene R. rantner, Chairman eor e Kennedy, Pro-Tem Deputy erk APPROVED AS O FORM: C stance L. Herbert u ty Attor y Gordon ac ✓ ✓// 900055 HEARING CERTIFICATION DOCKET NO. 90-1 RE: TRANSFER OWNERSHIP OF CABLE TELEVISION FRANCHISE A public hearing was conducted on January 15, 1990, at 9:00 A.M. , with the following present: Commissioner Gene R. Brantner, Chairman Commissioner George Kennedy, Pro-Tem Commissioner Constance L. Harbert Commissioner C.W. Kirby Commissioner Gordon E. Lacy Also present: Acting Clerk to the Board, Tommie Antuna Weld County Attorney, Thomas 0. David The following business was transacted: I hereby certify that pursuant to a notice dated January 3, 1990, and duly published January 4, 1990, in The New News, a public hearing was conducted to consider a change of ownership to Chartwell Cable of Colorado, Inc. , for the cable television franchise granted to James Cable Partners. Said hearing was held pursuant to Ordinance No. 94, as amended. Tom David, County Attorney, made this matter of record. Guy Larson, representing Chartwell Cable of Colorado, Inc. , came forward to answer questions of the Board. Commissioner Lacy moved to approve this request for the transfer of ownership of a cable television franchise. Commissioner Harbert seconded the motion, and it carried unanimously. This Certification was approved on the 17th day of January, 1990. APPROVED: BOARD OF COUNTY COMMISSIONERS ATTEST: 'll�' I< `° WELD NTY, COLORADO Weld County C erk and Recorder and Clerk to the Bo en en Brantne , Chairman putt' County Cle r e Kennedy, Pro-Tem JJJJJJ `7 � d Constance L. Harbe��' l�t 1LtC.W. Kitet7rby , i Gordo �� TAPE #90-2 DOCKET #90-1 ORD 94 900055 NOTICE Docket No. 90-1 Pursuant to Ordinance No 94, as amended, a public hearing will be held in the Chambers of the Board of County Commissioners of Weld County, Colorado, Weld County Centennial Center, 915 10th Street, First Floor, Greeley, Colorado, at the time indicated below, for consideration of a change of ownership to Chartwell Cable of Colorado, Inc. , for the cable television franchise granted to James Cable Partners. Should any interested party desire the presence of a court reporter to make a record of the proceedings, in addition to the taped record which will be kept during the hearing, the Clerk to the Board's Office shall be advised in writing of such action at least five days prior to the hearing. The cost of engaging a court reporter shall be borne by the requesting party. Application materials may be examined in the office of the Clerk to the Board of County Commissioners, located in the Weld County Centennial Center, 915 10th Street, Third Floor, Greeley, Colorado. DATE: January 15, 1990 TIME: At or about 9:00 A.M. REQUEST: Transfer ownership of cable television franchise BOARD OF COUNTY COMMISSIONERS WELD COUNTY, COLORADO BY: MARY ANN FEUERSTEIN COUNTY CLERK AND RECORDER AND CLERK TO THE BOARD BY: Mary Reiff, Deputy DATED: January 3, 1990 PUBLISHED: January 4, 1990, in The New News 0 900055 STATE OF COLORADO COUNTY OF WELD ) David B. Reynolds, being duly sworn, says t:hat he is publisher of the New News, a weekly newspaper published NOTICE in Keenes.burg in said County and Docket No. 90-1 State; that said newspaper has a Pursuant to Ordinance No. 94 as amended, a public hearin will be general circulation in said County heldiunty Chambeioners oB Weld _i of County Commissioners of Weld and has been continuously and County, Colorado, Weld County Centennial Center,915 10th Street uninterruptedly l published therein, First Floor, Greeley Colorado, at p F 3 the time indicated below, for a during period.i.C_1 d of t least<'t t consideration of a change of a p ownership to Chartwe❑ Cable of fifty--two consecutive weeks prior to Colorado, Inc., for the cable television franchise granted to the first publication of the annexed James Cable Partners. p Should any interested party desire t ,;, the presence of a court reporter to notice; that c _ said 1 d newspaper 3. w r.t make a record of the proceedings newspaper within the meaning of the in record addition be theptad�uring the ac::t of the General Assembly of the hearing, the Clerk to the Boards Office shall be advised in writing State of C_]1 e r a d o, entitled.i t l e d "An Act of such action at least five days prior to the Waring. The cost of t l legal caul engaging a crt reporter shall be C: regulate r' the printing t7 i borne by the requesting party. notices and i d��r e r t.i s e m e n t s, " and Application materials may be examined in the office of the amendments thereto; that the notice Clerk to the Board ut ,County Commissioners, located m the Weld Coun Centennial Center, c f which t h c annexed is aprinted 915 lots, Street, Third Floor, Greeley Colorado. copy taken from said newspaper:, was DAre:'January 15,1990 TIME: At or about 9:00 A.M. published in said newspaper, and in REQ T: Transfer ownership of cable television franchise the regular and entire issue of BOARD OF COUNTY COMMISSIONERS every number thereof , once a/eFr74 WELD COUNTY COLORADO y said BY: MARY ANN i''EUERSTEIN Q-tbel- week. fcfor _,.../..__,.../.._ week.�- ; that COUNTY CLERK AND RECORDER AND CLERK TO notice was SC) published in said T1W BOARD BY: Mary Reiff,Deputy newspaper proper and not in any DATED: January 3,1990 PUBL SHED: January 4, 1990, in supplement. thereof , and that the The New News first publication of said notice at: aforesaid , was on the wl__ dc.Ay of rla user•1 , 1990, and the lasto they L/ 'IrOi --(1-673-7.1:Th Subscribed and sworn to before zucc:.c // r c_ me this •- 1 day of V, 196r9 4Z-�J No�ary Public My commission expires 9 .r...-9t) 9C0055 Chartwell 5299 DTC Boulevard Suite 260 Englewood, CO 80111 303/694-1700 i990 FAX 694-0070 ti January 2 , 1990 Clerk & Recorder Weld County P. O. Box 758 Greeley, Colorado 80632 Dear Madams and Sirs, Please accept the following as our request for a waiver of the following requirements under the Weld County Cable Television Franchise Ordinance #94. Because our system will serve less than 500 subscribers, we hereby request a variance from: Company Services, Section C : Equipment for local production and presentation of cablecast programs . Chartwell Cable of Colorado, Inc. is looking forward to serving Weld County residents . Sincerely, Br fl McDoug 1 President WP\MB1\WELD 9C 0055 Chartwell 5299 DTC Boulevard Suite 260 Englewood, CO 80111 303/694-1700 FAX 694-0070 January 2, 1990 TO WHOM IT MAY CONCERN I , Bryan McDougal, im my position as President for Chartwell Cable of Colorado, Inc. , do hereby state that I have reviewed Weld County Ordinances, #94, #94A, #94B in their entirety. I hereby declare that Chartwell Cable of Colorado, Inc . ' s planned cable system (network) will meet all requirements set forth in the above stated ordinances. ( _-- yam , ScDou' a President WP\MB1\ORD Fit 0055 DATE: January 3 , 1990 TO: The Board of County Commissioners Weld County, Colorado FROM: Clerk to the Board Office Commissioners: If you have no objections, we have tentatively set the following hearing for the 15th day of January, 1990 , at or about 9 :00 A.M. Docket No. 90-1 - Transfer ownership of cable television franchise from James Cable Partners to Chartwell Cable of Colorado, Inc . OFFICE OF THE C RK TO THE BOARD BY: 7% _ Deputy The above mentioned hearing date and hearing time may be scheduled on the agenda as stated above. BOARD F COUNTY COMMISSIONERS WEL OUNTY, CO ORADO 11,4 Z714 (� ahci 9€®055 Chartwell5299 DTC u4e Boulevard Suicc 26060 _ Englewood, CO 80111 303/694-1700 FAX 694-0070 pEC 909 0 I ' December 14, 1989 Bruce T. Barker Assistant Weld County Attorney Office of County Attorney P . O. Box 1948 Greeley, Colorado 80632 RE: TRANSFER OF CABLE TELEVISION FRANCHISE TO CHARTWELL OF COLORADO, INC . Dear Mr. Barker: Enclosed is the completed Application For Weld County Cable Television Franchise Transfer that you reqested in your letter of December 5, 1989 . The application sets forth the information required under pages 10 through 15 of Ordinance 94 . The financial information is set forth in the Form 10-K enclosed. The information required under Ordinance 94-B for Section "A" , subsection "16" , relating to the area encompassed by the proposed cable system, is identical to the information on the maps previously submitted by Chartwell and James previously. Please advise me if any additional information is necessary prior to placing this matter on the Board ' s agenda. Very truly your, a L. McDougal , re ident Chartwell Cable of Colorado, Inc. O053 Chartwell Cabl. if Colorado, Inc . 5299 DTC Blvd. , Suite 260 Englewood, CO 80111 ( 303 ) 843-0301 APPLICATION FOR WELD COUNTY CABLE TELEVISION FRANCHISE TRANSFER The following is to provide information in accordance with the requirements under Weld County Ordinance #94 -- APPLICATION Section pages 10-14: A. ( 1 ) Applicant: Chartwell Cable of Colorado, Inc . 5299 DTC Blvd. , Suite 260 Englewood, CO 80111 Application Date : December 14 , 1989 ( 2 ) Proposed Chartwell ' s present system System: comes from Del Camino and extends to Enchanted Hills and Casa Grande Estates Sub- divisions . Activation is set for early 1990 . Business Office : 9 am - 5 pm Weekdays Hours: excluding holidays Staff: Manager Technician: Don Heck Clerk: Suzette McAtee Maintenance General : On-going planned Procedures : System. Maintenance Program that incorporates the highest of CATV technical standards. Customer repairs completed within 24 hours. Outages worked on and repaired immediately -- 24 hours a day, 7 days a week. Management- The system will always have a Marketing: full-time manager. Also, additional management and marketing support will be provided by the regional office in Englewood, CO. Most marketing procedures will be in the area of direct sales and direct mail . Direct sales will mainly involve contacting the potential subscriber at the time of installation. Public Access : A channel will be set aside for use by the public and will conform to the County guidelines. However, a waiver is requested from providing any public access equipment until the system reaches a level of 1000 '- subscribers . 9€0055 Sery :s The system ' tially will consist Provided: of 22 channels of programming with a capacity of 36 . Also, the system will be designed for 450 MHz which will give it the eventual capacity to over 50 channels. The proposed programming will consist of the primary Denver Off-Air stations and approximately 15 National Basic Cable services that will include at least three premium channels, i . e . , HBO, Showtime and Disney. (See attached Channel Line-up. ) ( 3 ) Automated Basically, all CATV headend Services : services are automated. (4 ) Production The Company is requesting a waiver Facilities and from the production facilities Assistance : requirement. However, channel space will be allocated to the County government, local school district and surrounding community. The Company pledges its assistance whenever possible by providing its local staff and facilities for any programming that the County, schools or community provides . The Company will provide the distribution equipment necessary, such as modulators or receivers . ( 5 ) Rates Per Month: Basic ( 18 channels ) $15 . 95 Premium (HBO/Disney/Showtime ) : 1 Premium 9 . 95 2 Premium 8. 95 3 Premium 8 . 95 Additional Outlets FREE Remote Control Units 2 . 95 One-Time Charges : Connection 25 . 00 Added Outlet Connection 15 . 00 Miscellaneous at time and materials Motel/Hotel/Commercial - variable Converter Deposit Manual 20 . 00 Remote 50 . 00 ( 6 ) Company Chartwell Cable of Colorado, Inc. Structure : a Colorado corporation qualified to do business in the State of Colorado. Ownership: The full ownership of the system and its facilities is : Chartwell Cable of Colorado, Inc . ( 7 ) Applicant See attached "Form 10-K" . Relationships : ( 8 ) Franchises : See attached "Form 10-K" . 900055 ( 9 ) Audited Financial : See attached "Form 10-K" . AMENDMENT TO WELD COUNTY CABLE TELEVISION APPLICATION Officers and Directors : See attached "Background" . 6 (d) Ownership: The System will be owned 100% by: Chartwell Cable of Colorado, Inc . 5299 DTC Blvd. , Suite 260 Englewood, CO 80111 ( 303 ) 694-1700 Local Office : The System' s local office is located within the required 30 miles from the system and its address is : 187 S . E . 14th Street Loveland, CO 80537 Toll Free The System' s toll free number for Number: subscribers is 1-800-955-1515 and will be fully operational before the franchise is approved. 900055 ( 10 ) Tech. :al The System u. 1 be 36 Channel Description: Capacity, 330 MHz with the future expansion possibility of 50 channels and 450 MHz. It will operate from its main headend facility located in the River Valley Village Mobil Home Park in Del Camino at the Junction of Hwy. 119 and I-25 . The System will run 24 hours a day, and although no studio equipment will be available, the County, School District or members of the local community may use the allotted system facilities at any time with reasonable notice. ( 11 ) Technical Staff The Senior Technical Staff Statement: Statement as to the System ' s compliance with this Ordinance is hereby attached. ( 12 ) Franchises Held: See attached "Subscribers" . ( 13 ) Statement: The applicant, nor none of its officers or directors, has, in the past, been convicted of a felony. ( 14 ) Experience : See attached "Background" and "Subscribers" . ( 15 ) Renewal : Does not apply. ( 16 ) System Boundaries : (map previously submitted by James Cable Partners LP ) Del Camino area at Hwy. 119 & I-25 then east along Hwy. 119 to Enchanted HIlls and Casa Grande Estates . These are the primary areas we wish to serve now. However, we will be applying for the Mead franchise and if we receive it we will want to serve the outlying area along with the areas needed to get there with our lines. We also would like to serve a few scattered areas within the County once we complete our feasibility studies. We will serve the residents within the system boundaries in accordance with the guidelines set forth in the franchise ordinance under the "DEFINITIONS" Section Item "T" , page 5 . 900055 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended: August 31, 1989 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission File Number: 33-18174-D CHARTWELL CABLE FUND, INC. (Exact name of Registrant as specified in charter) Colorado 84-1067172 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 5299 DTC Boulevard, Suite 260 Englewood, Colorado 80111 (Address of principal executive offices) (Zip Code) Registrant' s telephone number, including area code: (303) 694-1700 Securities registered pursuant to Section 12(b) or 12(g) of the Act: None 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 12 months (or for such shorter period that the registrant was required to file such reports) , and ( 2) has been subject to such filing requirements for the past 90 days. YES X NO At November 1, 1989, 203,603,300 shares of Common Stock (the Registrant' s only class of voting stock) were outstanding. The aggregate market value of the 101,103,300 shares of Common Stock of the Registrant held by non-affiliates on that date (based upon the mean of the closing bid and asked price in the over-the-counter market) was approximately $1,516,549. DOCUMENTS INCORPORATED HEREIN BY REFERENCE: None 900055 PART I ITEM 1. BUSINESS In General Chartwell Cable Fund, Inc. (the "Company" ) was organized under the laws of the State of Colorado on September 17 , 1987 . The Company was formed to acquire and develop operating cable television systems. In January 1988 the Company closed its initial public offering of securities upon sale of the maximum of 100,000,000 Units offered, each consisting of one of its shares of Common Stock and two Warrants, for net proceeds of $814,910. The business of the Company provides the following two principal potential sources of cash flow and profit: revenue from the operation of cable television systems, and gain realized on future sale of an acquired system. Management presently contemplates that any revenue or profit will be reinvested in the Company' s operations. Exercise of Class A and Class B Warrants General. Commencing April 13, 1989, the Company offered 200,000,000 shares of its $.0001 par value common stock ("Common Stock") to the holders of outstanding Common Stock Purchase Warrants. The warrants were exercisable to purchase one share of Common Stock at $ .02 and $. 04 per share for the Class A and Class B Warrants, respectively. Net proceeds received from this offering were $23,161 after payment of $50,155 of offering costs. An additional 3,603 ,300 shares of stock were issued bringing the total number of shares outstanding as of the date of this report to 203,603,300. Redemption. The Class A and Class B Warrants are redeemable by the Company during their respective exercise periods at any time prior to their exercise or expiration upon 30 days prior written or published notice. The redemption price for the Warrants is $ .0001 per Warrant. The Company had paid $15,351.60, as of November 15, 1989, to redeem Class A and Class B Warrants. As of May 31, 1989 (the "Redemption Date") any Warrantholder who had not exercised the Warrants prior to the Redemption Date forfeited the right to purchase shares of Common Stock underlying the Warrants. Any Warrants outstanding after the Redemption Date were deprived of any value except the right to receive the redemption price of $.0001 per Warrant. 2 900055 Operations And Investments In August 1988 the Company acquired 50% of Class Communications, Inc. , ( "Class") a privately held company engaged in construction and development of cable television systems in east central Michigan. In October 1989 Class purchased 20,000 shares (representing all of the Company's stock in Class) of Class Stock owned by the Company for $1,250,000. See "Class Communications, Inc." , below. The Company organized Chartwell Cable of Colorado, Inc. ("CCC") on September 2, 1988, as a wholly-owned subsidiary for the purpose of developing cable television systems in the State of Colorado. CCC has acquired a franchise to construct cable television systems in Larimer County and Weld County, Colorado. Construction of the Larimer County system began November 1, 1988. See "Chartwell Cable of Colorado, Inc." below. The Company is continuing its search for other cable television systems to acquire. Class Communications, Inc. On August 15, 1988, the Company acquired shares representing 50% of the outstanding common stock of Class, a privately held company, for $475,000. In connection with the Company' s acquisition of an interest in Class, the Company assisted Class in obtaining a loan from Firstmark Credit Corporation (subsequently assigned to Summit Bank of Indianapolis) in the amount of $850,000. The Company had pledged all of its shares in Class as security for the loan. The loan proceeds, together with the investment by the Company, were used by Class to develop and expand its cable television business in Michigan. In October 1989 Class purchased 8,000 shares of Class Stock owned by the Company for $500,000. On November 17, 1989 Class purchased the Company' s remaining 12,000 shares for $750,000. Chartwell Cable of Colorado, Inc. In September of 1988, the Company formed a wholly-owned subsidiary, CCC, for the purpose of developing cable television systems within the State of Colorado. CCC has acquired franchises for Larimer County and Weld County, Colorado. Construction of the Larimer County cable system began in November 1988. The Larimer County system will have almost 75 miles of plant and will serve an area of 1,500 homes. In December 1988 the Company acquired a franchise for Weld County, Colorado and simultaneously acquired a partially built and partially operational cable television system which CCC intends to develop. Completion of construction is anticipated by mid-1990. 3 9C0055 On June 30, 1989, CCC finalized a transaction with James Cable Partners, L. P. ( "James") whereby CCC's cable television systems in Larimer and Weld Counties, Colorado were to be sold. The contract provided that James would purchase all of the assets of CCC for between $1,650,000 and $1,850,000 depending upon the actual number of subscribers 120 days after closing. At the Pre-Closing held on June 30, 1989, James made an initial payment of $333,861.65. The balance of the purchase price was to be paid at or before a Post-Closing to be held shortly after completion of construction that the parties estimated as November 1, 1989. The sale price was directly tied to the number of subscribers at the "Post-Closing" , with the first 1,100 subscribers being sold for $1,500 each, and the remainder, not to exceed an additional 200 subscribers being sold for $1,100 each. Between the "Closing" and the "Post-Closing" , CCC was to operate the systems pursuant to a written management agreement. On October 25, 1989, CCC re-acquired 100% ownership of its cable systems in Larimer and Weld, Counties, Colorado from James under the terms of a Termination and Option Agreement. CCC re- acquired ownership by repaying all funds advanced by James under the construction financing provisions of the contract and by granting an option to James to repurchase the systems during the next four years under certain conditions. Final closing is subject to the re-transfer of the franchises and contracts, and the funds are being held in escrow pending receipt of the necessary consents and documents. Market Opportunity Management believes a significant opportunity exists in the cable television industry for investment in and/or development of small rural cable television systems. The Company has found that typical small cable operators are undercapitalized and lack the management background and expertise to successfully develop and operate small rural cable television systems. However, small rural cable television operators have the ability and the opportunity to significantly grow by building cable systems in rural America. Management has found that small, typically family-owned, cable operators are willing to devote the "sweat equity" necessary to make the rural cable systems economically viable. 4 900055 Investment Philosophy After examining numerous investment opportunities in the cable industry, including the possible acquisition of mature cable television systems with an existing subscriber base, management has adopted an investment philosophy of growth through new-builds or the investment in small, rural cable television companies that have the ability to grow through the extension of existing systems or the clustering of small systems within a limited geographic area. The primary objective of the Company is to achieve long-term capital appreciation, rather than current income, on its investments. Use of Leverage The Company has, and will continue to, if possible, finance a substantial portion of the cost of developing cable television systems by utilizing borrowed funds. The continued extensive use of borrowed funds exposes the Company to risks involved with responsibility for fixed obligations, including the risk that the revenues from the operations of the cable systems invested in or developed, may not be sufficient to meet the required payments. The Company believes that it will be able to meet all repayment obligations. Government Regulation of the Cable Television Industry The cable television industry is subject to regulation by Federal, state, regulatory and governmental agencies. Cable television systems usually operate under authority (usually a "franchise") granted by a governmental unit. Franchises generally are nontransferable without the consent of the franchising authority. Franchises generally set forth performance standards which the operator must meet and may, in limited circumstances, control the rates, terms and conditions of providing cable television service. Competition in the Cable Television Industry The cable television industry is highly competitive, and in seeking business opportunities in the industry the Company has, and will continue to be, faced with stiff competition with many established companies, many of which have much greater financial and personnel resources. The Company believes that the principal factors which make it competitive are its willingness to invest in new small, rural cable television ventures which do not generally receive a great deal of attention from large multi-system operators and the administrative support that it can offer small independent operators. 5 9430055 Management Effective September 1, 1988, the Company entered into a management agreement with Chartwell Capital Corporation (d/b/a Chartcom Capital Corporation) ("Capital") , its principal shareholder, whereby Capital provides the Company with services related to corporate administration, including legal, accounting, bookkeeping, finance and secretarial services and related administrative services. The Company pays Capital $3,000 per month for such services. At a meeting of the Board of Directors of the Company held on July 24, 1989, the Board approved a resolution granting compensation to Capital for Capital's investment banking, brokerage and operating services based on the following formula: 5% of the first $1 million gross value of the transaction; 4% of the second million; 3% of the third million; and 2% of the balance. The foregoing is subject to ratification by the shareholders of the Company at the next annual meeting. Management believes that the terms of its agreements with Capital are on terms at least as favorable to the Company as those available from non-affiliated parties. The Company' s subsidiary, CCC, had three full-time employees as of November 15, 1989. ITEM 2. PROPERTIES. Offices The Company' s principal office is located at 5299 DTC Boulevard, Suite 260, Englewood, Colorado 80111. The Company utilizes office space in the offices of its shareholder, Capital. This office space is provided at no charge. CCC utilizes office space at 5299 DTC Boulevard, Suite 260, Englewood, Colorado 80111. This office space is provided by Capital on a month-to-month basis at the rate of $250.00 per month. Office space is also utilized at 187 SE 14th Street, Loveland, Colorado 80537 . This office space and warehouse space is leased from a non-affiliated party on a monthly basis at $550 per month. This lease expires in June of 1990. Class utilizes office space at 524 1/2 West Parish Road, Kawkawlin, Michigan 48631, for which it pays $300 per month. The Company's interest in Class was sold on November 17, 1989. 6 900055 Cable Properties The Company owned 50% of the Common Stock of Class as of August 31, 1989, which has subsequently been sold back to Class. (See Class Communications, Inc. at Page 3. ) Class owns cable television franchises in Beaver, Fraser, Garfield, Kawkawlin, Tobacco, Sage and Chippewa Townships, Michigan. Class has built, and continues to build operating cable television systems within their franchise areas. The Company, through its wholly-owned subsidiary, CCC, owns cable television franchises in Latimer County and Weld County, Colorado. ITEM 3. LEGAL PROCEEDINGS. On December 2, 1988, the Company initiated legal proceedings in the Superior Court of California, County of Placer (CASE No. 83733) in which it alleges, inter alia, that the defendants, Cableview Communications, Inc. and Pyms Cable Brokerage, Inc. breached or caused to be breached an agreement relating to the acquisition of an interest in Cableview. Chartwell seeks damages of $5,000,000 on a number of different theories, including breach of contract, bad faith denial of contract, breach of implied covenant of good faith and fair dealing, fraud, etc. No counter claims against the Company have been filed by the Defendants. The Company is not a party to any other pending legal proceedings and no such proceedings are known to be contemplated. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders during the fourth quarter of the Company' s fiscal year ended August 31, 1989 . PART II Item 5. Market for Registrant' s Common Equity and Related Stockholder Matters. In January 1988 the Company completed an offering of 100,000,000 Units, each consisting of one of its shares of Common Stock and two Warrants in an offering registered under the Securities Act of 1933. Commencing April 13, 1989, the Company offered 200,000,000 shares of common stock to the holders of outstanding Common Stock Purchase Warrants. The Warrants were exercisable to purchase one share of Common Stock at $.02 and $.04 per share for the Class A and Class B Warrants, respectively. Warrants which were not exercised prior to May 31, 1989 were called and deprived of any 7 900055 value except the right to receive the redemption price of $.0001 per Warrant. The Class A and Class B Warrants (the "Warrants") were components of the Units ( "Units") sold by the Company in its initial public offering of securities and expired on May 31, 1989. Malone & Associates, Inc. , Denver, Colorado, underwriter for the Company' s initial public offering, is the principal market maker in the Units of the Company. The high and low bid and asked prices for the Company' s Units as reported from the "pink sheets" as published by the National Quotation Bureau, Inc. are set forth below. These quotes reflect inter-dealer prices without retail mark-up, mark-down, or commissions and may not necessarily reflect actual transactions. Period High Bid Low Bid High Ask Low Ask Qtr. ended 11/30/88 .0175 .0175 .03 .025 Qtr. ended 02/29/89 .01125 .01 .02 .01875 Qtr. ended 05/31/89 .015 .0125 .025 .02 Qtr. ended 08/31/89 .01375 .01375 .02 .02 The number of holders of record of the Company' s Common Stock as of November 15, 1989, was approximately 420. Of the Company' s 203,603,300 shares of Common Stock outstanding approximately 101,103,300 shares are freely tradeable. All of the approximately 102,500,000 shares remaining are restricted securities under Rule 144 of the Securities Act of 1933 (the "Act") . Officers and directors of the Company beneficially own 102,500,000 shares of Common Stock but, pursuant to an agreement with its underwriter, have agreed that 100,000,000 shares will not be available for resale under Rule 144 until January 1991. The underwriter of the public offering has the right to acquire from the Company, for $.00001 per warrant, warrants to purchase up to 10,000,000 shares of the Company's common stock. The underwriters warrants may be exercised for $.012 per share at any time during the four-year period commencing December 4, 1988. 8 SC 0055 Item 6. Selected Financial Data Balance Sheet Data: August 31, 1989 August 31, 1988 Total Assets $ 1,442,001 $1,019,706 Liabilities 624,308 8,425 Stockholders' Equity 817,693 1,011,281 Operations Summary: Period From September 17, 1987 Year Ended to August 31, 1989 August 31, 1988 Revenue $26,043 $48,523 Expenses 242,792 52,152 Net Loss $216,749 $ 3,629 Loss Per Share * Less than $ .01 per share. Item 7. Management' s Discussion and Analysis of Financial Condition and Results of Operations. Capital Resources and Liquidity: The Company was formed in September of 1987. The Company completed a public offering of 100,000,000 Units, each consisting of one of its shares of Common Stock and two Warrants, in January of 1988. The Company received $814,910 net of offering costs of $185,090 from its public sale of Units, which resulted in the Company having a total of approximately $1,000,000 of working capital with which it could invest in or acquire interests in cable television companies or properties. Upon completion of the Company' s initial public offering, the Company began to investigate and evaluate investment opportunities in the cable industry. 9 900055 In August of 1988, the Company used $475,000 of its available working capital to purchase a 50% interest in Class, a small, private, cable television operator, actively engaged in building a series of small, rural cable television systems in northern Michigan. The Company pledged its Class shares in August 1988, as security for an $850,000 loan to Class from Firstmark Credit Corporation. During 1988 and through November of 1989, Class constructed and operated a number of small rural cable systems in northern Michigan. On October 30, 1989, the Company sold 8,000 of its Class shares to Class for $500,000 cash. On November 17, 1989, the Company sold the balance of its shares in Class (12,000) to Class for $750,000 cash. Simultaneously with the second transaction, the Company' s designees on Class' s Board of Directors resigned. As of August 31, 1989, the Company had invested approximately $1,000,000 in the development of cable systems in Larimer and Weld Counties, Colorado. The Colorado systems were developed through the Company' s wholly-owned subsidiary, CCC. On June 30, 1989, CCC finalized a definitive contract with James whereby CCC' s cable television systems in Larimer and Weld Counties, Colorado were to be sold. The contract provided that James would purchase all of the assets of CCC for between $1,650,000 and $1,850,000 depending upon the actual number of subscriber 120 days after closing. At the Pre-Closing held on June 30, 1989, James made an initial payment of $333,861.65. The balance of the purchase price was to be paid at or before a Post-Closing to be held shortly after completion of construction which the parties estimated as November 1, 1989. The sale price was directly tied to the number of subscribers at the "Post-Closing" , with the first 1,100 subscribers being sold for $1,500 each, and the remainder, not to exceed an additional 200 subscribers being sold for $1,100 each. Between the "Closing" and the "Post-Closing" , CCC was to operate the systems pursuant to a written management agreement. On October 25, 1989, CCC re-acquired 100% ownership of its cable systems in Larimer and Weld, Counties, Colorado from James under the terms of a Termination and Option Agreement. CCC re- acquired ownership by repaying all funds advanced by James under the construction financing provisions of the contract and by granting an option to James to repurchase the systems during the next four years under certain conditions. Final closing is 10 900055 subject to the re-transfer of the franchises and contracts, and the funds are being held in escrow pending receipt of the necessary consents and documents. The Company utilized approximately $480,000 of the proceeds from the Class sale to re-acquire the Colorado systems from James. The balance of the Class proceeds, which are approximately $750,000, will be utilized over the next six to nine months to complete the Larimer and Weld systems and to pursue other cable acquisitions or new-builds in surrounding areas. Management believes that it has sufficient capital to meet its capital requirements for the next fiscal year. The Company' s capital needs can be met by the balance of the Class proceeds, revenues from operations, and, if needed and available, debt financing related to additional construction. Results of Operations: During the fiscal year ended August 31, 1989, the Company was developing the cable systems in Larimer and Weld counties, and accordingly, total revenues were $26,043 of which $20,038 was interest income and the balance was from the cable systems. General and administrative and other operating expenses were $144,744, resulting in a net loss from operations of $118,701. An additional loss of $98,048 was attributable to its investment in Class so the total loss for the year was $216,749. For the period from September 17, 1987 (Inception) to August 31, 1988, the Company incurred a loss of $3 ,629, primarily attributable to its investment in Class. Revenues consisted of interest and other income of $48,523 and operating expenses of $49,647, resulting in an operating loss of $1,124 for the period. Due to the start-up nature of CCC, management does not anticipate that the operation will generate revenues sufficient to provide for the payment of any dividends to the Company in the near future. Item 8. Financial Statements and Supplemental Data. Financial Statements follow the Signature Page. 11 800055 Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure. There have been no disagreements concerning matters of accounting principle or financial statement disclosure between the Company and its independent accountant of the type requiring disclosure hereunder. PART III Item 10. Directors and Executive Officer of the Registrant ' The following sets forth information concerning each executive officer and/or director of the Company as of December 1, 1989. Name Age Position and Dates of Service A. Clinton Ober 45 President and Chairman of the Board of Directors since September 1987 Bryan L. McDougal 36 Vice President and Director since September 1987 and Secretary/ Treasurer since January 1989 W. R. Brazeal 61 Director since September 1987 S. Brent Bales 38 Director since January 1989 The directors of the Company are elected to hold office until the next annual meeting of shareholders and until their respective successors have been elected and qualified. Officers of the Company are elected by the Board of Directors and hold office until their successors are duly elected and qualified. A. Clinton Ober, President and Chairman of the Board of Directors. From 1977 until August 1987, Mr. Ober was President and Chairman of the Board of Telecrafter Corporation (TLCR) , Lakewood, Colorado, a company which he founded. TLCR is a publicly-held national cable television services company that specializes in marketing, auditing, and installations for cable television system operators. From 1973 to 1976 Mr. Ober was employed as director of marketing for Tele-Communications, Inc. , ("TCI") Englewood, Colorado, currently the largest publicly-owned multiple cable television system operator in the United States. From November 1985 until his resignation in March 1988, Mr. Ober served as a director of Automated Scanning, Inc. , a publicly-held company in the business of selling document conversion services. From February 1985 until his resignation in March 1988, Mr. Ober also served as a director of Satellite Information Systems, 12 900055 Company, a publicly-held company in the business of developing software for the communications industry and the electronic distribution of information. Mr. Ober is an officer and director of Capital, a publicly-held corporation (see "Potential Conflicts of Interest" below) . Mr. Ober is also a director of Media Image Corporation. Bryan L. McDougal, Vice President, Secretary/Treasurer and Director. Prior to moving to Colorado in January of 1988, Mr. McDougal was engaged in the practice of law in Salt Lake City, Utah since 1977 . His practice concentrated on business and corporate law, with a particular emphasis on communications law, including broadcast and cable television, cable television franchising, cable system acquisition and the financing of cable system purchases and expansions. Mr. McDougal is an officer and director of American TeleVenture Corporation ("ATV" ) and an officer and director of Capital, a publicly-held corporation (see "Potential Conflicts of Interest" , below) . Mr. McDougal is also an officer and director of Media Image Corporation. Mr. Brazeal has been self-employed as a consultant to the cable television industry since March 1985. From August 1980 to March 1985 Mr. Brazeal was a 50% shareholder and served as general manager of Steamboat Cablevision, Steamboat Springs, Colorado. This system was sold to TCI in March 1985. From 1964 through August 1980, Mr. Brazeal held various management positions with TCI, serving as executive vice president of TCI from 1969 until 1979 and thereafter as vice president until his retirement from TCI in 1980. From 1970 through 1983 he was a director of the National Cable Television Association, serving as secretary of that organization in 1973 . Mr. Brazeal was a director of Telecrafter Corporation from 1981 to August 1987 , and was a director of HiPeak International Corporation from September 1986 to August 1987. He is a director of Capital, a publicly- held corporation. (See "Potential Conflicts of Interest" below. ) S. Brent Bales, Director. Mr. Bales is employed as operations manager for Sheya Brothers Distributing, Inc. an exclusive Colorado statewide distributor of eight national brands of non-alcoholic beverages. From 1985 to July 1988 he was a self-employed Certified Public Accountant and financial consultant. From 1978 to 1985, Mr. Bales was assistant treasurer for Johnson and Higgins, a nationwide insurance brokerage firm. From 1975 to 1977 he was employed as a staff accountant by the Denver office of Touche Ross & Co. , an international firm of Certified Public Accountants. See "Agreement Concerning Election of Director," below. 13 900055 Agreement Concerning Election of Director S. Brent Bales was nominated for election as a director pursuant to an agreement between Capital, a principal shareholder of the Company, and Mark D. Franco, a former officer and director of the Company. Mr. Franco holds an option to purchase from Capital 20,000,000 shares of the Company' s Common Stock which are owned by Capital. The option expires on December 4, 1993. Capital has agreed to vote all of the Company' s shares which it owns in favor of the election of Mr. Franco or his nominee as a director of the Company until December 4, 1993. S. Brent Bales, Mr. Franco' s designee, was elected at the Annual Meeting of Shareholders held in January 1989. No family relationship exists between or among any of the persons named above as of December 1, 1989. Item 11. Executive Compensation Effective September 1, 1988, the Company entered into an oral management agreement with Capital, a principal shareholder of the Company. Pursuant to this agreement, Capital provides the Company with clerical and corporate administration services, including legal, accounting, bookkeeping, finance and secretarial services and related administrative services. The Company pays Capital $3,000 per month pursuant to this agreement. At a meeting of the Board of Directors of the Company held on July 24, 1989, the Board approved a resolution granting compensation to Capital for Capital' s investment banking, brokerage and operating services based on the following formula: 5% of the first $1 million gross value of the transaction; 4% of the second million; 3% of the third million; and 2% of the balance. The foregoing is subject to ratification by the shareholders of the Company at the next annual meeting. Management believes that the terms of its agreements with Capital are on terms at least as favorable to the Company as those available from non-affiliated parties. Except as noted above, the Company has no agreement or understanding, express or implied, with any officer, director or any other person regarding employment with the Company or compensation for service. Compensation of officers and directors is determined by the Company' s Board of Directors and is not subject to shareholder approval. 14 900055 The Company has no retirement, pension, profit sharing or insurance or medical reimbursement plans covering its officers and directors, and does not contemplate implementing any such plans at this time. Potential Conflicts of Interest Agreement With American TeleVenture Corporation. Mr. McDougal is an officer and director of ATV which owns and operates cable television systems and also seeks suitable acquisitions of cable television systems. In order to resolve potential conflicts of interest which might arise concerning corporate opportunities, the Company and American TeleVenture Corporation ("ATV") have entered into an agreement governing the allocation of acquisition opportunities of which each of these companies becomes aware. Opportunities which are located beyond a 250-mile radius of Monticello, Utah, the site of ATV' s primary operations, will be presented to the Company for acceptance or rejection prior to any action by ATV. Opportunities which are located within a 250-mile radius of Monticello, Utah will be presented to ATV for acceptance or rejection prior to any action by the Company. This policy applies to all opportunities of which the Company and ATV become aware, even if the opportunity is brought to the attention of either board of directors by a member of management who is not affiliated with both companies. Relationship with Chartwell Capital Corporation. Three of the Company' s officers and directors beneficially own 60% of the outstanding common stock of Capital, a publicly-held corporation created upon the merger of Chartwell Capital, Inc. with ETC Enterprises, Inc. , a publicly-held corporation. Capital has elected to be a "Business Development Company" under the Small Business Investment Incentive Act of 1980 which amended the Investment Company Act of 1940. Two of the Company' s directors are officers of Capital. Prior to this merger, Chartwell Capital, Inc. provided management and other services to the Company. Capital continues to provide these services to the Company. Capital owns 49. 1% of the Company' s outstanding common stock and also owns 15% of the outstanding Common Stock of ATV. 15 900055 Item 12. Security Ownership of Certain Beneficial Owners and Management. Name and Address Number of of Beneficial Owner Shares Percentage Chartwell Capital Corporation 100,000,000 49.12% 5299 DTC Boulevard, #260 (1) ( 4) Englewood, CO 80111 A. Clinton Ober 100,000,000 49.12% 5299 DTC Boulevard, #260 ( 2) Englewood, CO 80111 Bryan L. McDougal 102,500,000 50.34% 5299 DTC Boulevard, #260 ( 2) (3) Englewood, CO 80111 W. R. Brazeal 100,000,000 49.12% Box 410 ( 2) Hidden Valley Ranch Conifer, CO 80433 S. Brent Bales -0- -0-% 701 Pearl Street, #203 Denver, CO 80203 All Directors and 102,500,000 50.34% Officers as a Group (3) (2) (four persons) Mark D. Franco 20,000,000 9.82% 8225 Fairmount Drive (4) #8-203 Denver, CO 80231 (1) Chartwell Capital Corporation is the holder of record of 100,000,000 shares of Common Stock of the Company. Pursuant to an agreement with Malone & Associates, Inc. the Underwriter of the Company' s initial public offering of securities, these shares may not be sold publicly prior to December 4, 1990, without the prior written consent of Malone & Associates, Inc. (2) As of August 31, 1989, the Company' s officers and directors beneficially owned 60% of the outstanding shares of Capital and are officers and/or directors of that company. Each may, therefore, be deemed beneficial owners of the 100,000,000 shares of Common stock owned of record by Capital. 16 900055 (3) Includes 2,500,000 shares owned of record by Mr. McDougal. ( 4) Mr. Franco holds an option to purchase 20,000,000 shares of the Company' s Common Stock which are owned by Capital at a price of $.0002 per share during the three year period beginning December 4, 1990. Capital has agreed to vote all shares it holds in favor of the election of Mr. Franco or his designee as a director until December 4, 1993. As of November 30, 1989, the Company knows of no arrangements which at a subsequent date may result in a change in control of the Company. Item 13. Certain Relationships and Related Transactions. Effective September 1, 1988, the Company entered into a management agreement with Capital, its principal shareholder, whereby Capital provides the Company with services related to corporate administration, including legal, accounting, bookkeeping, finance and secretarial services and related administrative services. The Company pays Capital $3,000 per month for such services. At a meeting of the Board of Directors of the Company held on July 24, 1989, the Board approved a resolution granting compensation to Capital for Capital' s investment banking, brokerage and operating services based on the following formula: 5% of the first $1 million gross value of the transaction; 4% of the second million; 3% of the third million; and 2% of the balance. Pursuant to this resolution, the Company paid Capital a fee of $60,000 in connection with the sale of the Class shares. The foregoing is subject to ratification by the shareholders of the Company at the next annual meeting. Management believes that the terms of its agreements with Capital are on terms at least as favorable to the Company as those available from non-affiliated parties. 17 900055 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) The following documents are filed as Item 8 of this report: 1. Financial Statements: Chartwell Cable Fund, Inc. and Subsidiary: Independent Auditors' Report Consolidated Balance Sheets - August 31, 1989 And 1988 Consolidated Statements of Operations - Year Ended August 31, 1989 And The Period From September 17, 1987 (Inception) To August 31, 1988 Consolidated Statements Of Stockholder's Equity - Year Ended August 31, 1989 And The Period From September 17, 1987 (Inception) To August 31, 1988 Consolidated Statements of Cash Flows - Year Ended August 31, 1989 And The Period From September 17, 1987 (Inception) To August 31, 1988 Notes To Consolidated Financial Statements - August 31, 1989 And 1988 Class Communications, Inc. : Independent Auditor' s Report - August 31, 1989 Balance Sheet August 31, 1989 Statement Of Income For The Year Ended August 31, 1989 Statement of Changes In Shareholders' Equity For The Year Ended August 31, 1989 Statement of Cash Flows For The Year Ended August 31, 1989 Notes To Financial Statements Independent Auditor' s Report - August 31, 1988 Balance Sheets - August 31, 1988 And December 31, 1987 And 1986 18 90©055 .. Statements Of Income - For the Eight-Month Period Ended August 31, 1988, The Year Ended December 31, 1987, And The Six-Month Period Ended December 31, 1986 Statements Of Changes In Shareholders' Equity - For The Eight-Month Period Ended August 31, 1988, The Year Ended December 31, 1987, And The Six-Month Period Ended December 31, 1986 Statements Of Cash Flows - For The Eight-Month Period Ended August 31, 1988, The Year Ended December 31, 1987, And The Six-Month Period Ended December 31, 1986 Notes To Financial Statements 2. Financial statement schedules required to be filed. Chartwell Cable Fund, Inc. and Subsidiary: Independent Auditors' Report Schedule V - Property and Equipment Schedule VI - Accumulated Depreciation and Amortization of Property and Equipment Schedule VII - Guarantees of Securities of Other Issuers (b) Reports on Form 8-K: On July 14, 1989, a Form 8-K was filed pursuant to Item 5. , regarding the definitive contract between CCC, a wholly-owned subsidiary of the Company, and James whereby CCC' s cable television systems in Larimer and Weld Counties, Colorado were sold to James. No financial statements were filed. (c) Exhibits required to be filed: The following documents are filed as exhibits to this report. Those exhibits previously filed and incorporated herein by reference are identified below by an asterisk. For each such asterisked exhibit there is shown below the description of the previous filing and exhibit number of the document in the previous filing. Exhibits which are not required for this report are omitted. *1. Underwriting agreement between the Company and Malone & Associates, Inc. dated 12/4/87, (1987 Form S-18, Commission File #33-18174-D, Exhibit 1.1) 19 900055 *3 Articles of Incorporation and By-laws. (1987 Form S-18, Commission File #33-18174-D, Exhibits 3.1 and 3.2) *4 Warrant Agreement dated 12/4/87 (Form S-18, Commission File #33-18174-D, Exhibit 4.1(b) ) *4.1 Underwriter' s Warrant (Form S-18, Commission File #33-18174-D, Exhibit 4.2) *10.1 Stock Purchase Agreement dated July 14, 1988 by and among Chartwell Cable Fund, Inc. and Class Communications, Inc. (1988 Form 8-K, Commission File #33-18174-D, Exhibit A) 10.2 Agreement For Sale And Purchase Of Corporation Stock dated August 17, 1989, by and between Chartwell Cable Fund, Inc. and Class Communications, Inc. *10.3 Asset Acquisition Agreement by and between Chartwell Cable of Colorado, Inc. and James Cable Partners, L. P. (July 14, 1989, Form 8-K, Commission File #33-18174-D) 10.4 Termination And Option Agreement dated October 25, 1989, by and between Chartwell Cable of Colorado, Inc. and James Cable Partners, L. P. (d) Financial Statement Schedules Required by Regulation S-X. None. SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT. The Registrant has not sent to its security holders, any annual report or proxy material. If any annual report or proxy material is furnished to security holders subsequent to the filing of this Form 10-K, the Registrant shall furnish copies to the Commission at that time. 20 500055 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. CHARTWELL CABLE FUND, INC. By /s/ Bryan L. McDougal Bryan L. McDougal Vice President Date: November 27, 1989 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated. Signature Title Date /s/ A. Clinton Ober A. Clinton Ober Chairman of the Board and 11/27/89 President /s/ Bryan L. McDougal Bryan L. McDougal Vice President, Chief Financial 11/27/89 Officer and Director /s/ W. R. Brazeal W. R. Brazeal Director 11/27/89 *Constitutes majority of Board of Directors. 21 900055 Peat Marwick Certified Public Accountants CHARTWELL CABLE FUND, INC. Consolidated Financial Statements Submitted in Response to Item 8 For the Years Ended August 31, 1989 and 1988 (With Independent Auditors' Report Thereon) 900055 SPA ® ..; Pea,. Marwick Certified Public Accountants Peat Marwick Main&Co. 2300 ARCO Tower 707 Seventeenth Street Denver,CO 80202 jndeoendlent Auditors' Report The Board of Directors and Stockholders Chartwell Cable Fund, Inc.: We have audited the accompanying consolidated balance sheets of Chartwell Cable Fund,Inc. and subsidiary as of August 31, 1989 and 1988, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year ended August 31, 1989 and the period from September 17, 1987 (inception) to August 31, 1988. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Chartwell Cable Fund, Inc. and subsidiary as of August 31, 1989 and 1988, and the results of their operations and their cash flows for the year ended August 31, 1989 and the period from September 17, 1987 (inception) to August 31, 1988, in conformity with generally accepted accounting principles. ietialQie *tic. (6• PEAT MARWICK MAIN &CO. Denver, Colorado November 15, 1989 1 hr • r 900055 is^f] Member Firm of Klynveld Peal Marwick Goerdeler CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Consolidated Balance Sheets August 31, 1989 and 1988 Pro Forma Assets 1989 1989 1988 (Unaudited) (Note 10) Current assets: Cash $ 1,296,355 46,355 539, 164 Accounts receivable-employees and officers(note 7) 14,919 14,919 — Accounts receivable-trade 1,400 1,400 — Accrued interest receivable — — 1, 700 Prepaid expenses 5,741 5,741 — Total current assets 1,318,415 68,415 540, 864 Investment in Class Communications,Inc. (notes 2 and 10) - 374,447 472,495 Investment in cable television systems- property and equipment (notes 3,4, and 5) 996,901 996,901 5, 147 Other assets,net of amortization 2,238 2, 238 1, 200 $ 2, 317, 554 1,442, 001 1,019, 706 Liabilities and Stockholders' EQuity Current liabilities: Advances from James Cable Partners,L.P. (note 3) $ 333, 862 333, 862 Accounts payable 266, 192 206, 192 8,425 Accrued expenses 20,717 20,717 - Income taxes payable 197,000 — — Current portion of long-term obligations(note 5) 13,558 13,558 — Total current liabilities 831,329 574, 329 8,425 Long-term obligations (note 5) 49,979 49,979 — Stockholders'equity (notes 6 and 7): Preferred stock, $.0001 par value — — — Common stock, $.0001 par value 20,360 20,360 20,000 Additional paid-in capital 1,017,711 1,017,711 994,910 Retained earnings (deficit) 398, 175 (220. 378) (3, 629) Total stockholders'equity 1,436,246 817, 693 1, 011,281 Commitments(note 2) $ 2, 317,554 1,442,001 1,019, 706 See accompanying notes to consolidated financial statements. 2 S' L 0055 CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Consolidated Statements of Operations Year Ended August 31, 1989 and the Period from September 17, 1987 (Inception) to August 31, 1988 1989 1988 Revenue: Interest income $ 20,038 48,423 Cable systems 5,603 — Miscellaneous 402 100 26,043 48.523 Expenses: General and administrative 141,464 49, 647 Operating expenses 3,280 — 144,744 49, 647 Operating loss (118,701) (1, 124) Equity in loss of Class Communications, Inc. (note 2) (98, 048) (2, 505) Net loss $(216,749) (3, 629) Net loss per common share $ * Weighted average number of common shares outstanding during the period 200, 900, 825 169, 562, 218 *Less than $.01 per share. See accompanying notes to consolidated financial statements. 3 9C0055 CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Consolidated Statements of Stockholders' Equity Year Ended August 31, 1989 and the Period from September 17, 1987 (Inception) to August 31, 1988 Total Additional Accumu- stock- Common stock paid-in lated holders' Shared Amount capital deficit equity Balance, September 17, 1987 (inception) — $ — — — — Issuance of common stock to founders for cash at $.002 per share 100,000,000 10,000 190,000 — 200,000 Sale of common stock at$.01 per unit in a public offering in January 1988, net of offering costs of $185,090 100,000,000 10,000 804,910 — 814,910 Net loss — — — (3, 629) (3, 629) Balance, August 31, 1988 200,000,000 20,000 994,910 (3, 629) 1,011, 281 Exercise of common stock warrants net of offering costs of$34,803 3, 603, 300 360 38, 153 — 38,513 Redemption of warrants — — (15, 352) — (15, 352) Net loss — — — (216,749) (216,749) Balance, August 31, 1989 203, 603, 300 $ 20, 360 1,017,711 (220, 378) 817,693 See accompany notes to consolidated financial statements. 4 900055 CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows Year Ended August 31, 1989 and the Period from September 17, 1987 (Inception) to August 31, 1988 1989 1988 Net cash provided by (used in) operating activities $ (99,003) 5,901 Cash flows from investing activities: Additions to property and equipment (748, 184) (5, 147) Investment in Class Communications — (475,000) Increase in other assets (1, 338) (1, 500) Net cash used in investing activities (749, 522) (481, 647) Cash flows from financing activities: Sale of common stock, net of offering costs 38,513 1,014,910 Redemption of warrants (15, 352) — Advances from James Cable Partners, L.P. 333, 862 — Repayment of long-term obligations (1, 307)Net cash provided by financing activities 355,716 1,014,910 Net increase (decrease) in cash (492, 809) 539, 164 Cash, beginning of period 539, 164 Cash, end of period $ 46, 355 539, 164 Reconciliation of net loss to net cash provided by operating activities: Net loss $(216,749) (3, 629) Depreciation and amortization 2, 609 300 Equity in loss of Class Communications, Inc. 98,048 2, 505 Increase in accounts receivable, accrued interest receivable and prepaid expenses, net (20, 360) (1, 700) Increase in accounts payable and accrued expenses 37,449 8,425 Net cash provided by (used in) operating activities $ (99,003) 5,901 See accompanying notes to consolidated financial statements. 5 00055 CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements August 31, 1989 and 1988 (1) Organization and Summary of Significant Accounting Policies (a) Organization Chartwell Cable Fund, Inc. (the Company) was incorporated in Colorado on September 17, 1987 for the purpose of raising capital to acquire businesses in the cable television industry. On September 2, 1988, Chartwell Cable of Colorado, Inc. (Chartwell Cable), a 100% subsidiary of the Company, was incorporated in Colorado. During the year ended August 31, 1989, Chartwell Cable was engaged in the acquisition and construction of cable systems in Larimer and Weld Counties, Colorado. The accompanying consolidated financial statements include the results of the Company and Chartwell Cable. All significant intercompany balances and transactions have been eliminated in consolidation. (b) Investment in Class Communications, Inc. On August 15, 1988, the Company acquired a 50% interest in Class Communications, Inc. (Class). Class provides cable television services to residents in selected franchise areas in the State of Michigan. The Company's investment in Class has been accounted for under the equity method. The Company's investment, originally recorded at cost, is adjusted for the Company's share of the profits and losses of Class. The excess of the Company's cost over the underlying equity in net assets of Class attributable to cable property and equipment is being amortized over its estimated useful life of 15 years and the excess cost attributable to franchise costs is being amortized over the remaining term of the franchises (see note 10). (c) Property and Equipment Property and equipment is stated at cost and includes all direct construction costs. Assets acquired under capital leases are recorded at the present value of future lease payments. Depreciation is calculated on the straight-line method over the shorter of the estimated useful life of the asset or the term of the lease which is: Buildings 10 to 40 years Receiving and distribution systems 9 to 15 years Support equipment 3 to 15 years (d) Loss Per Share Loss per share has been calculated by dividing the net loss incurred by the weighted average number of shares outstanding during the period. 6 SSt ®055 CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements, Continued (e) Income Taxes Deferred income taxes are recognized for income and expense items that are reported for financial reporting purposes in different years than for income tax purposes. (f) Statement of Cash Flows For the purposes of the statement of cash flows, the Company considers investments with maturities of three months or less to be cash equivalents. (g) Reclassification Certain 1988 amounts have been reclassified for comparability with the 1989 presentation. (2) Investment in Class Communications, Inc. The Company acquired 50% of the outstanding common stock of Class in August 1988 for $475,000. Under the terms of the stock purchase agreement, the remaining shareholders in Class have the option, as a group, to convert their remaining shares in Class into common stock of the Company. Under the terms of the option, the Company will issue shares of common stock with a then fair market value equivalent to the then fair market value of the shares of common stock of Class to be acquired (see note 10). Summarized financial information of Class as of August 31, 1988 and 1989 and for the year ended August 31, 1989 is as follows: ,1,989 1988 August 31: Current assets $ 99,997 404, 851 Property and equipment, net 1,749, 390 420, 024 Other assets 14,797 12,778 Total assets $ 1, 864, 184 837, 653 Current liabilities $ 457,000 111,269 Long-term debt 867,211 39,459 Stockholders' equity 539,973 686,925 Total liabilities and stockholders' equity $ 1, 864, 184 837,653 Year ended August 31: Revenue $ 264, 664 Operating expenses (196, 638) General and administrative expenses (149,451) Depreciation and amortization (65,527) Net loss $ (146,952) 7 SC0055 CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements, Continued Operations of Class for the period from the date of acquisition to August 31, 1988 were not significant. The common stock of Class owned by the Company has been pledged as security for a loan to Class by Summit Bank of Indianapolis. (3) Investment in Cable Television Systems On June 6, 1989, the Company's investment in cable television systems in Larimer and Weld Counties, Colorado (the Systems) became the subject of an Asset Acquisition Agreement (the Agreement) with James Cable Partners, L.P., a Delaware Limited Partnership (James). Under the terms of the Agreement, the purchase price of$1,650,000 was to be adjusted, up to a maximum of $1,850,000, at a post-closing date, based on the number of basic subscribers to the Systems. The Company continued to construct the Systems under the terms of a management agreement dated June 30, 1989 using funds advanced to it by James. At August 31, 1989, James had advanced approximately $334,000 to the Company. On October 25, 1989, James and the Company entered into a Termination and Option Agreement whereby the terms of the Agreement were rescinded. The Company granted James an option to purchase the Systems for $1,850,000, adjusted for the number of basic subscribers at the time of purchase. The option can be exercised between October 25, 1990 and 1993. Funds advanced by James are repayable after August 31, 1989 and are included in current liabilities. (4) Property and Equipment Property and equipment at August 31 is summarized as follows: 1989 1988 Cable distribution systems $ 84,491 — Cable support equipment 112,991 3,497 Construction in progress 801,728 1, 650 999, 210 5, 147 Less accumulated depreciation ( 2, 309)Net property and equipment $ 996,901 5, 147 Depreciation expense for 1989 on assets held under capital leases was $691. 8 90®055 CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements, Continued (5) Long-term Obligations During the year ended August 31, 1989, the Company leased and purchased under retail installment contracts, various cable support equipment. The terms of the contracts are from 36 to 48 months and provide for equal monthly payments throughout the terms of the contracts. The interest rates vary from 7.5% to 12.47% per annum, and in certain cases, the Company has the option to purchase the asset at the end of the lease term at its then fair market value. Minimum future payments under the contracts are: Total 1990 $ 20, 404 1991 20,404 1992 18,714 1993 18, 906 78,428 Less amount representing interest 14, 891 Present value of long-term obligations 63, 537 Less current portion 13, 558 Long-term obligations $ 49979 (6) Stockholders' Equity In September 1987, the Company issued 100,000,000 shares of its $.0001 par value common stock to Chartwell Capital Corp., (Chartwell Capital), a Colorado corporation, for $200,000 ($.002 per share). In January 1988, the Company issued 100,000,000 shares of its $.0001 par value common stock to the public for $1,000,000. Costs associated with the offering amounting to $185,090 were charged against the related proceeds. For each of the 100,000,000 shares of common stock issued during January 1988, one Class A Warrant and one Class B Warrant were attached. Each Class A and Class B Warrant entitled the holder to purchase one share of common stock and were exercisable any time up to May 31, 1989 for$.02 and $.04 per share, respectively. During May 1989, the Company called the warrants for redemption. Subsequent to the call for redemption, 3,603,300 shares were issued upon exercise of the warrants for $73,316. Offering costs of $34,803 have been recorded as a reduction of the proceeds from the warrants exercised. 9 900055 CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements, Continued The underwriter of the January 1988 offering acquired from the Company, for a normal amount, warrants to purchase up to 10,000,000 shares of the Company's common stock. The underwriter's warrants may be exercised for $.012 per share through December 4, 1992. The warrant agreement includes certain antidilution provisions, including the right to purchase one additional share of common stock for every ten Class A and Class B warrants exercised. (7) Related Party Transactions Chartwell Capital owns approximately 49% of the outstanding common stock of the Company at August 31, 1989. Officers and directors of the Company, in the aggregate, own approximately 60% of the outstanding common stock of Chartwell Capital and approximately 31% of the outstanding common stock of the Company at August 31, 1989. At August 31, 1989, the Company had a $10,000 loan outstanding to an officer. The loan bears interest at 11% and is due July 3, 1990. One of the Company's officers and directors is an officer and director of American TeleVenture Corporation, a company engaged in the acquisition and operation of cable television systems. The Company has entered into an agreement with American TeleVenture Corporation, to minimize potential conflicts of interest involving corporate opportunities. On September 28, 1988, Chartwell Capital granted an option to a shareholder in the Company to purchase 20,000,000 shares of common stock of the Company at a price of $.0002 per share, together with various registration rights. The option may be exercised during the three-year period beginning December 4, 1990. During 1989, the Company paid Chartwell Capital $37,500 for management services. For services rendered in connection with the sale of any cable systems or investments the Company has agreed to compensate Chartwell Capital as follows: 5% of the first $1 million of proceeds 4% of the next$1 million of proceeds 3% of the next$1 million of proceeds 2% of the remaining proceeds (8) Income Taxes The Company files consolidated federal and state income tax returns. At August 31, 1989, the Company had approximately $119,000 of net operating loss carryforwards for tax purposes available to offset future taxable income. The difference between the net operating loss carryforward for income tax purposes and for financial statement purposes arising principally from the difference between book and tax depreciation, is not significant. 10 9900055 CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements, Continued The Company will be required to adopt the provisions of Statement of Financial Accounting Standards No. 96 "Accounting for Income Taxes" during 1993. The Company currently anticipates that the adoption of this new standard will not have a material impact on its financial statements. (9) Supplemental Disclosure of Cash Flow Information Cash payments for interest during 1989 were $2,172. Property and equipment acquired during 1989 under capital leases, retail installment contracts, and accounts payable amounted to $245,879. (10) Subsequent Event On August 17, 1989, the Company and Class entered into an agreement, as amended, for the sale of its holdings of common stock of Class for$1,250,000. The two closing dates of the sale were October 31, 1989 and November 15, 1989. The pro forma balance sheet at August 31, 1989 assumes that the sale had occurred on August 31, 1989 for $1,250,000. In connection with the sale, $60,000 was paid to Chartwell Capital. The pro forma balance sheet also assumes that approximately$197,000 of income taxes would have been payable as a result of the sale. 11 900055 Ne.?: k PeaL Marwick Certified Public Accountants Peat Marwick Main&Co. 2300 ARCO Tower 707 Seventeenth Street Denver,CO 80202 Independent Auditors' Report The Board of Directors and Stockholders Chartwell Cable Fund, Inc.: Under date of November 15, 1989, we reported on the consolidated balance sheets of Chartwell Cable Fund, Inc. and subsidiary as of August 31, 1989 and 1988, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year ended August 31, 1989 and the period from September 17, 1987 (inception) to August 31, 1988, as contained in the Company's annual report on Form 10-K for the year 1989. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules V—Property and Equipment, VI—Accumulated Depreciation and Amortization of Property and Equipment, and VII—Guarantees of Securities of Other Issuers. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. � . m ,, a . PEAT MARWICK MAIN &CO. Denver, Colorado November 15, 1989 12 9C0055 Member Firm of Klynveld Peat Marwick Goerdeler Schedule V CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Property and Equipment Balance at Balance beginning Additions Retirements at end Classification of pen at cost or sales of period Year ended August 31, 1989: Cable distribution systems $ — 84,491 - 84,491 Cable support equipment 3,497 109,494 — 112,991 Construction in progress 1,650 800,078 — 801,728 $ 5, 147 994,063 — 999,210 13 900055 Schedule VI CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Accumulated Depreciation and Amortization of Property and Equipment Balance at Additions Balance beginning charged to costs Retirements at end of period and expenses or sales of period Classification Year ended August 31, 1989: Cable distribution systems $ — 1,407 — 1,407 Cable support equipment — 902 — 902 $ — 2, 309 — 2,309 14 900055 Schedule WI CHARTWELL CABLE FUND, INC. AND SUBSIDIARY Guarantees of Securities of Other Issuers August 31, 1989 Title of issue of Total amount each class of guaranteed Name of issuer of securities securities and Nature of guaranteed by person for guaranteed outstanding guarantee which statement is filed Class Communications, Inc. Bank loan $ 849,756 Pledge of common stock held for guarantee of principal and interest Note- Columns which would have answered"none"have been omitted. 15 900055 OBSO\ ° A Professional Corporation Certified Public Accountants INDEPENDENT AUDITOR'S REPORT October 26, 1989 To the Board of Directors Class Communications, Inc. Kawkawlin, Michigan We have audited the accompanying balance sheet of Class Communications, Inc. as of August 31, 1989, and the related statements of income, changes in shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Class Communications, Inc. as of August 31, 1989, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. %hi I Z 5800 Gratiot • P.O. Box 2025 Saginaw, Michigan 48605 (517) 799-9580 FAX (517) 799-0227 900055 RRSi CLASS COMMUNICATIONS, INC. KAWKAWLIN, MICHIGAN FINANCIAL STATEMENTS AUGUST 31, 1989 900055 CLASS COMMUNICATIONS, INC. BALANCE SHEET AUGUST 31, 1989 ASSETS CURRENT ASSETS Cash and cash equivalents $ 18,847 Accounts receivable 5,842 Prepaid expenses and other assets 8,508 Inventory - 66,800 TOTAL CURRENT ASSETS 99.997 INVESTMENT IN CABLE TELEVISION SYSTEMS (NOTES 2, 3 AND 4) Property, plant and equipment, at cost 1,840,303 Less accumulated depreciation 90.913 NET INVESTMENT IN CABLE TELEVISION SYSTEMS 1.749,390 OTHER ASSETS Deferred loan fees 7,387 Intangible assets 7.410 TOTAL OTHER ASSETS 14,797 TOTAL ASSETS $1,864,184 See Notes to Financial Statements. gO®O55 • LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 36,729 Short-term borrowings (Note 3) 300,000 Current portion of long-term debt (Note 3) 61,989 Accrued expenses and other liabilities - 58.282 TOTAL CURRENT LIABILITIES 457.000 LONG-TERM DEBT, NET OF CURRENT PORTION (NOTE 3) 867.211 TOTAL LIABILITIES 1.324.211 SHAREHOLDERS' EQUITY Common stock, $10 par value Authorized, issued and outstanding, 40,000 shares 400,000 Additional paid-in capital 336,538 Accumulated deficit (196,565) TOTAL SHAREHOLDERS' EQUITY 539,973 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,864,184 1 X0®055 CLASS COMMUNICATIONS, INC. STATEMENT OF INCOME FOR THE YEAR ENDED AUGUST 31, 1989 • REVENUES $ 264,664 OPERATING EXPENSES 196,638 GENERAL AND ADMINISTRATIVE EXPENSES 149,451 DEPRECIATION AND AMORTIZATION 65,527 TOTAL EXPENSES 411,616 NET (LOSS) $(146,952) See Notes to Financial Statements. 2 900055 F tn U CO N LiA N. F-1 .S rn H H c0 .7 en O r4 in H .--4 0 VI- v} A 1 I\ 14 H H on W k H 'O ON En U -ILI - W .�i ti r Co) q v O 4} CO - < .a 6 CO 0 CO I-1H i H H A1-+ 1/40 w 44 en en 0w0 v0> cn CO y CA F • c4 H 0 O 0 O H Z 0 O en Z W H H 6 En d -s z CO CO- c r O U H H m d 0 N G] 0 h1 0 en 0 0 0 M a O O 0 41 W O O 0 h O U CO U N N 1 w W U O z H E' W ,z4 M w H 44 H rn • 1.) w N a N co L on ed T at 1-1 CO (n On 4. 1 r r-1 ci O 7 en g 1 CO r4 0 k a c0 0 � w 14 rn C u N co co 14 r-14.1 N L 0 0 z NO Z N cu w 6n CO . 900055 • CLASS COMMUNICATIONS, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 1989 CASH FLOW FROM OPERATING ACTIVITIES: - Net (loss) $ (146,952) Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 65,527 (Gain) loss on sale of equipment 1,875 (Increase) in accounts receivable (5,405) (Increase) in inventory (66,800) (Increase) in prepaid expenses and other assets (6,908) (Decrease) in accounts payable (41,459) Increase in accrued expenses and other liabilities 36,489 TOTAL ADJUSTMENTS (16,681) NET CASH (USED) BY OPERATING ACTIVITIES (163,633) CASH FLOWS FROM INVESTING ACTIVITIES Redemption of certificate of deposit 175,000 Additions to property, plant and equipment (1,395,187) Additions to intangible assets (3,600) NET CASH (USED) BY INVESTING ACTIVITIES (1.223.787) CASH FLOWS FROM FINANCING ACTIVITIES Additions to short-term borrowings 300,000 Additions to long-term debt 899,099 Reduction of long-term debt (20,646) NET CASH PROVIDED BY FINANCING ACTIVITIES 1.178.453 NET (DECREASE) IN CASH AND CASH EQUIVALENTS (208,967) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 227.814 CASH AND CASH EQUIVALENTS, END OF YEAR $ 18,847 Supplemental Disclosures of Cash Flow Information: Cash paid for interest amounted to $67,593 for the year ended August 31, 1989. As described in Note 5, no federal income tax payments were made during this period. See Notes to Financial Statements. 4 900055 CLASS COMMUNICATIONS, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Activity Class Communications, Inc. was incorporated July 1, 1986. Operations commenced with the purchase of small franchise areas which gave the Corporation the right to provide cable television services to residents of these areas for a specific period of time. During the year ended August 31, 1989, construction of two cable systems were completed, bringing the number of completed cable television plants to three. Also, during the year, construction began on an additional six cable television plants; these plants were in various stages of construction at August 31, 1989. Cash and Cash Equivalents For the purpose of the statement of cash flows, cash and cash equivalents consist of demand deposits in banks, savings deposits in banks, and cash on hand. Inventory Inventory, which consists of supplies for cable system installation, is valued at cost. Property, Plant and Equipment Statement of Financial Accounting Standards No. 51 establishes standards of accounting and reporting for costs, expenses and revenues applicable to the construction and operation of a cable television system. In accordance with these standards, management has established a prematurity period considered to begin with the first earned subscriber revenue and to end with the achievement of a predetermined subscriber level at which no additional investment is required for other than cable television plant. During the prematurity period, direct costs of cable television plant are capitalized in full. Costs incurred to obtain and retain subscribers are expensed as period costs. (Continued) 5 S00055 CLASS COMMUNICATIONS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property. Plant and Equipment (Continued) Programming costs and certain other fixed operating expenses are also to be capitalized based on progress toward achieving the predetermined subscriber level. The Corporation has not incurred any expenses which meet this criteria for capitalization. Costs of cable television systems include materials, direct labor, construction overhead and interest incurred in construction of the system. Interest costs are capitalized during this period based on the provisions of Statement of Financial Accounting Standards No. 34, "Capitalization of Interest Cost". Expenses, other than interest, capitalized during the year ended August 31, 1989 were $1,237,023. Depreciation is determined on a composite basis, using the straight- line method, over the following estimated service lives: Cable television systems and equipment 10 to 25 years Other property, plant and equipment 5 to 10 years Additions. Maintenance and Repairs Replacements, renewals and improvements are capitalized, and maintenance and repairs are charged to expense as incurred. Intangible Assets This item represents the unamortized costs incurred in obtaining cable television permits. (Continued) 6 900055 • CLASS COMMUNICATIONS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Earnings Per Share Based on the provisions of Statement of Financial Accounting Standards No. 21, the Corporation is considered to be a nonpublic enterprise. Accordingly, earnings per share information is not required to be presented. NOTE 2: PROPERTY, PLANT AND EQUIPMENT The cost of property, plant and equipment is as follows: AUGUST 31, 1 9 8 9 Cable television systems and equipment $ 842,802 Other property, plant and equipment 111,909 Transportation equipment 22,814 Furniture and fixtures 6,305 Construction in progress 856,473 $1,840,303 NOTE 3: DEBT Short-term borrowings consist of a demand note payable to certain shareholders. Interest at 2% over the prime rate is due monthly. Long-term debt at August 31, 1989 is summarized as follows: Loan payable to Summit Bank of Indianapolis, secured by 100% of the Corporation's assets, due in monthly installments of $11,829, plus interest at 2.5% above the prime rate. $ 849,756 Loan payable to a shareholder, due in monthly installments of $334, including interest at 9.67%; unsecured. 29,377 (Continued) 7 900055 CLASS COMMUNICATIONS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 3: DEBT (CONTINUED) Loan payable to vendors, secured by equipment, due in various monthly installments including interest rates varying from 5% to 17.2%. $ 33,602 Loans payable to various banks, secured by vehicles, due in various installments at interest rates varying from 12 - 15.5%. 16,465 929,200 Less current portion 61.989 $ 867,211 Principal maturities of long-term debt for each of the five years succeeding August 31, 1989, are as follows: PRINCIPAL YEAR MATURITY 1990 $ 61,989 1991 75,124 1992 68,115 1993 71,353 1994 76,769 The Corporation's interest expense was $67,593 for the year ended August 31, 1989. All interest costs incurred were capitalized based on the provisions of Statement of Financial Accounting Standards No. 34, "Capitalization of Interest Cost". (Continued) -8- 8955 89!0 CLASS COMMUNICATIONS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4: RELATED PARTY TRANSACTIONS (INCLUDING LEASES) Class Communications, Inc. leases office facilities under an operating lease with a company in which the owners are the same as certain shareholders of the Corporation. Net rental expense under this operating lease was $4,200 for the year ended August 31, 1989. The following is a schedule by years of future minimum rental payments required under this non-cancellable operating lease. 1990 $4,200 1991 3.500 $7,700 The terms of loans payable to shareholders are described in Note 3. Interest paid on these loans was $3,188 for the year ended August 31, 1989. This interest was capitalized as explained in Note 1. NOTE 5: INCOME TAXES The Corporation utilizes a December 31 year-end for income tax purposes. The Corporation had no income tax liability for the year ended December 31, 1988, due to a net operating loss. The net operating loss carryforward from December 31, 1988, is approximately $58,000. This carryforward and any carryforward for the tax year ended December 31, 1989 resulting from an anticipated net operating loss are expected to be used when the Corporation sells its assets, as explained in Note 6. NOTE 6: SUBSEQUENT EVENT Subsequent to August 31, 1989, the shareholders entered into an agreement to sell the assets of Class Communications, Inc. The sale includes the real property and intangible assets of the Corporation. The purchaser will assume the responsibility for completing the cable television systems in progress. A taxable gain is expected to be realized upon sale of the assets which will exceed the net operating loss carryforwards available as described in Note 5. It is expected that Class Communications, Inc. will be liquidated subsequent to the sale. A Professional Corporation Certified Public Accountants INDEPENDENT AUDITOR'S REPORT October 7, 1988 To the Board of Directors Class Communications, Inc. Kawkawlin, Michigan We have audited the accompanying balance sheets of Class Communications, Inc. as of August 31, 1988, December 31, 1987 and December 31, 1986, and the related statements of income, shareholders' equity, and cash flows for the eight-month period ended August 31, 1988, the year ended December 31, 1987, and the six-month period ended December 31, 1986. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Class Communications, Inc. as of August 31, 1988, December 31, 1987 and December 31, 1986, and the results of its operations and its cash flows for the eight-month period ended August 31, 1988, the year ended December 31, 1987 and the six-month period ended December 31, 1986 in conformity with generally accepted accounting principles. 4,74, z 5800 Gratiot • P.O. Box 2025 Saginaw, Michigan 48605 (517) 799-9580 FAX (517) 799-0227 291305 �' RR51 CLASS COMMUNICATIONS, INC. • BALANCE SHEETS AUGUST 31, 1988 AND DECEMBER 31, 1987 AND 1986 AUGUST 31, DECEMBER 31, ASSETS 1 9 8 8 1 9 8 7 1 9 8 6 CURRENT ASSETS Cash and cash equivalents $227,814 $ 1,293 $ 5,054 Certificate of deposit 175,000 0 0 Accounts receivable 437 1,890 1,128 Prepaid expenses and other assets 1,600 1,515 3,609 TOTAL CURRENT ASSETS 404,851 4,698 9,791 INVESTMENT IN CABLE TELEVISION SYSTEMS (NOTES 2, 3 AND 5) Property, plant and equipment, at cost 447,285 246, 313 137,951 Less accumulated depreciation (27,261) (16,068) (3,422) NET INVESTMENT IN CABLE TELEVISION SYSTEMS 420,024 230,245 134, 529 OTHER ASSETS Deferred loan fees 8,500 0 0 Intangible assets 4,278 3,659 2,174 TOTAL OTHER ASSETS 12,778 3,659 2,174 TOTAL ASSETS $837,653 $238,602 $146,494 See Notes to Financial Statements. _1_ l .: :900055 LIABILITIES AND AUGUST 31, DECEMBER 31, SHAREHOLDERS' EQUITY 1 9 8 8 1 9 8 7 1 9 8 6 CURRENT LIABILITIES Accounts payable $ 78,1880 $ 2,465 $ 127 Current portion of long-term debt (Note 3) 11,288 8,874 9,525 Accrued expenses and other liabilities 21,793 7,570 5,899 TOTAL CURRENT LIABILITIES 111,269 18,909 15,551 LONG-TERM DEBT, NET OF CURRENT PORTION (NOTE 3) 39,459 35,753 95,728 TOTAL LIABILITIES 150,728 54,662 111,279 SHAREHOLDERS' EQUITY Common stock, $10 par value Authorized, issued and outstanding, 40,000 shares at August 31, 1988; 20,000 shares authorized, 18,160 shares issued and outstanding at December 31, 1987; 5,000 shares authorized, issued and outstanding at December 31, 1986 400,000 181,600 50,000 Additional paid-in capital 336,538 38,008 0 Accumulated deficit (49,613) (35, 668) (14,785) TOTAL SHAREHOLDERS' EQUITY 686,925 183,940 35,215 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $837, 653 $238,602 $146,494 • -1- 900055 CLASS COMMUNICATIONS, INC. STATEMENTS OF INCOME FOR THE EIGHT-MONTH PERIOD ENDED AUGUST 31, 1988, THE YEAR ENDED DECEMBER 31, 1987, AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1986 EIGHT-MONTH SIX-MONTH PERIOD ENDED YEAR ENDED PERIOD ENDED AUGUST 31, DECEMBER 31, DECEMBER 31, 1 9 8 8 1 9 8 7 1 9 8 6 REVENUES $53,744 $ 50,895 $ 11,993 OPERATING EXPENSES 30, 407 25, 496 4,575 GENERAL AND ADMINISTRATIVE EXPENSES 25,983 33,221 18,755 DEPRECIATION AND AMORTIZATION 11,299 13,061 3,448 67,689 71,778 26,778 NET (LOSS) $(13,945) $(20,883) $(14,785) See Notes to Financial Statements. -2- 3U®SS CLASS COMMUNICATIONS, INC. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE EIGHT-MONTH PERIOD ENDED AUGUST 31, 1988, THE YEAR ENDED DECEMBER 31, 1987, AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1986 ADDITIONAL COMMON STOCK PAID-IN ACCUMULATED SHARES AMOUNT . CAPITAL DEFICIT BALANCES, JULY 1, 1986 0 $ 0 $ 0 $ 0 Issuance of common stock to commence operations 5,000 50,000 0 0 Net loss 0 0 0 (14,785) BALANCES, DECEMBER 31, 1986 5,000 50,000 0 (14,785) Sale of common stock to fund additional construction 4,970 49,700 23,500 0 Conversion of shareholder loans payable to common stock 7,256 72, 560 12,848 0 Exchange of common stock for equipment 934 9,340 1, 660 0 Net loss 0 0 0 (20,883) BALANCES, DECEMBER 31, 1987 18,160 181,600 38,008 (35,668) Sale of common stock to fund additional construction 21,840 218,400 298,530 0 Net loss 0 0 0 (13,945) BALANCES, AUGUST 31, 1988 40,000 $400,000 $336, 538 $(49,613) See Notes to Financial Statements. -3- • 9&055 CLASS COMMUNICATIONS, INC. STATEMENTS OF CASH FLOWS FOR THE EIGHT-MONTH PERIOD ENDED AUGUST 31, 1988, THE YEAR ENDED DECEMBER 31, 1987, AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1986 EIGHT-MONTH SIX-MONTH PERIOD ENDED YEAR ENDED PERIOD ENDED AUGUST 31, DECEMBER 31, DECEMBER 31, 1 9 8 8 1 9 8 7 1 9 8 6 CASH FLOW FROM OPERATING ACTIVITIES: Net (loss) $ (13,945) $ (20,883) $ (14,785) Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 11,299 13,061 3,448 (Increase) decrease in accounts receivable 1,453 (762) (1, 128) (Increase) decrease in prepaid expenses and other assets (85) 2,094 (3,609) Increase in accounts payable 75,723 2,338 127 Increase in accrued expenses and other liabilities 14,223 1,671 5,899 Gain on sale of equipment 0 (100) 0 TOTAL ADJUSTMENTS 102, 613 18,302 4,737 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 88,668 (2, 581) (10,048) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of certificate of deposit (175,000) 0 0 Proceeds from sale of equipment 0 100 0 Additions to property, plant and equipment (200,972) (97,662) (137,951) Additions to intangible assets (725) (1,600) (2,200) NET CASH (USED) BY INVESTING ACTIVITIES (376, 697) (99,162) (140,151) (Continued) See Notes to Financial Statements. 4- SX) 55 CLASS COMMUNICATIONS, INC. STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE EIGHT-MONTH PERIOD ENDED AUGUST 31, 1988, THE YEAR ENDED DECEMBER 31, 1987, AND THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1986 EIGHT-MONTH SIX-MONTH PERIOD ENDED YEAR ENDED PERIOD ENDED AUGUST 31, DECEMBER 31, DECEMBER 31, 1 9 8 8 1 9 8 7 1 9 8 6 CASH FLOWS FROM FINANCING ACTIVITIES Additions to long-term debt $ 12,275 $ 34,307 $ 108,702 Reductions of long-term debt (6,155) (9,525) (3,449) Sale of common stock 516,930 73,200 50,000 Addition to deferred loan fees (8,500) 0 0 NET CASH PROVIDED BY FINANCING ACTIVITIES 514, 550 97,982 155,253 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 226, 521 (3,761) 5,054 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,293 5,054 0 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 227,814 $ 1,293 $ 5,054 Supplemental Schedule of Noncash Investing and Financing Activities: Additional common stock was issued upon the conversion of $85,408 of long-term debt during the year ended December 31, 1987. Additional common stock was issued upon receipt of equipment valued at $11,000 during the year ended December 31, 1987. Supplemental Disclosures of Cash Flow Information: Cash paid for interest amounted to $2,355, $5,335, and $1,463 for the eight- month period ended August 31, 1988, the year ended December 31, 1987, and the six-month period ended December 31, 1986, respectively. As described in Note 1, the Corporation has been a S Corporation; accordingly, no federal income tax payments were -made during these periods. See Notes to Financial Statements. -5- i°"U^S5 CLASS COMMUNICATIONS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property, Plant and Equipment Costs of cable television systems include materials, direct labor, construction overhead and interest incurred in construction of the system. Interest costs are capitalized during this period based on the provisions of Statement of Financial Accounting Standards No. 34, "Capitalization of Interest Cost" . Expenses, other than interest, capitalized during the eight-month period ended August 31, 1988, the year ended December 31, 1987 and the six-month period ended December 31, 1986 were $198,617, $103, 327 and $136, 488, respectively. Depreciation is determined on a composite basis, using the straight-line method, over the following estimated service lives: Cable television systems and equipment 10 to 25 years Other property, plant and equipment 5 to 10 years Additions, Maintenance and Repairs Replacements, renewals and improvements are capitalized, and maintenance and repairs are charged to expense as incurred. Intangible Assets This item represents the unamortized costs incurred in obtaining cable television permits. Income Taxes The Corporation, with the consent of its shareholders, elected under the Internal Revenue code to be an S Corporation. In lieu of corporate income taxes, the shareholders of a S Corporation are taxed on their proportionate share of the Corporation's taxable income or loss. Accordingly, no provision or liability for federal and state income taxes has been included - in the accompanying financial statements. On August 15, 1988, the Corporation sold shares of common stock to another corporation, resulting in an automatic revocation of the S Corporation election; in future years, the Corporation will be a tax paying entity. Earnings Per Share Based on the provisions of Statement of Financial Accounting Standards No. 21, the Corporation is considered to be a nonpublic enterprise. Accordingly, earnings per share information is not required to be presented. (Continued) -7- $©OO55 CLASS COMMUNICATIONS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2: PROPERTY, PLANT AND EQUIPMENT The cost of property, plant and equipment is as follows: AUGUST 31, DECEMBER 31, 1 9 8 8 1 9 8 7 1 9 8 6 • Cable television systems and equipment $272,732 $227,193 $119,708 Other property, plant and equipment 32, 501 18,390 17,943 Transportation equipment 3,421 730 300 Furniture and fixtures 480 0 0 Construction in progress 138,151 0 0 $447, 285 $246, 313 $137,951 NOTE 3: DEBT Long-term debt at August 31, 1988, December 31, 1987 and December 31, 1986 is summarized as follows: AUGUST 31, DECEMBER 31, 1 9 8 8 1 9 8 7 1 9 8 6 Loan payable to a shareholder, due in monthly installments of $334, including interest at 9.67%; unsecured. $ 30,487 $ 30,959 $ 32,000 Loan payable to a vendor, secured by equipment, due in monthly installments of $434, including interest at 16.33%. 11,464 0 0 Loan payable to a vendor, guaranteed by shareholder, due in monthly installments of $247, including interest at 5%. 4,951 6,726 9,487 (Continued) -8- 900055 CLASS COMMUNICATIONS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 3: DEBT (CONTINUED) AUGUST 31, DECEMBER 31, 1 9 8 8 1 9 8 7 1 9 8 6 Loan payable to a shareholder, due in monthly installments of $387, including interest at 13%; unsecured. $ 3,609 $ 5,370 $ 8,599 Loan payable to a vendor, secured by equipment, due in monthly installments of $220, including interest at 11.5% 236 1, 572 4,066 Loan payable to shareholders, non-interest bearing. This loan was converted to common stock in 1987. 0 0 47, 293 Loan payable to a shareholder, due in monthly installments of $92, including interest at 13. 5%; unsecured. This loan was converted to common stock in 1987. 0 0 3,808 50,747 44,627 105,253 Less current portion (11,288) (8,874) (9,525) $ 39,459 $ 35,753 $ 95,728 Principal maturities of long-term debt for each of the five years succeeding August 31, 1988, are as follows: PRINCIPAL YEAR MATURITY 1989 $11,288 1990 7,705 1991 5,024 1992 1, 512 1993 1,665 (Continued) -9- 900055 CLASS COMMUNICATIONS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 3: DEBT (CONTINUED) The Corporation's interest expense was $2,355, $5,335 and $1,463 for the eight-month period ended August 31, 1988, the year ended December 31, 1987, and the six-month period ended December 31, 1986, respectively. All such interest costs incurred were capitalized based on the provisions of Statement of Financial Accounting Standards No. 34, "Capitalization of Interest Cost". NOTE 4: RELATED PARTY TRANSACTIONS (INCLUDING LEASES) In 1987, the Corporation exchanged 934 shares of common stock for equipment owned by a shareholder with a fair market value of $11,000 at the date of exchange. Class Communications, Inc. leases office facilities under an operating lease with a company in which the owners are the same as the shareholders of the Corporation. Net rental expense under this operating lease was $700 for the eight-month period ended August 31, 1988 . No rental expense was incurred for the year ended December 31, 1987 or the six-month period ended December 31, 1986. The following is a schedule by years of future minimum rental payments required under this non-cancellable operating lease. 1989 $ 4,200 1990 4,200 1991 3,500 $11,900 The terms of loans payable to shareholders are described in Note 2. Interest paid on these loans was $2,093 for the eight-month period ended August 31, 1988, $4,523 for the year ended December 31, 1987, and $1,059 for the six-month period ended December 31, 1986. NOTE 5: OTHER MATTER A significant portion of the labor required in construction of the cable system was provided directly by the shareholders. The shareholders received no monetary compensation for their services. Since no reasonable basis exists to determine the value of such services, no amounts have been capitalized as a cost of the cable system in the accompanying financial statements. • -10- at:;O055 EXHIBIT 10 .2 to Form 10-K for Year Ended 8/31/89 AGREEMENT FOR SALE AND PURCHASE OF CORPORATION STOCK THIS AGREEMENT between CHARTWELL CABLE FUND, INC., a Colorado Corporation, having its principal business office at 5299 DTC Boulevard, Suite 260, Englewood, Colorado 80111, hereinafter called "Chartwell," and CLASS COMMUNICATIONS, INC., a Michigan Corporation, having its principal business office at 524' West Parish Road, Kawkawlin, Michigan 48631, hereinafter called "Class," WITNESSES AS FOLLOWS: 1. Chartwell's Agreement to Sell Stock to Class. Subject to the terms and conditions hereinafter set forth, Chartwell agrees to sell to Class, all shares of Class Communications, Inc. common stock owned by Chartwell, to wit: Twenty Thousand (20,000) shares of Class Communications, Inc. common stock, being one- half of all outstanding shares of Class Communications, Inc. stock. Said stock of Class Communications, Inc. common stock owned by Chartwell is hereafter called "Class Stock." 2. Sale Price and Finder's Fee. In accordance with provisions of following paragraph 3, Class will pay Chartwell the total sum of One Million Two Hundred Fifty Thousand and 00/100 ($1,250,000.00) Dollars in satisfaction of the purchase price of Class Stock and the agreed "finder's fee" owed by Class to Chartwell for sources of financing heretofore procured by Chartwell for Class' benefit. 3. Documents to be Delivered at Closing. At or prior to closing, Class shall deliver to Chartwell the following: a. payment of One Million Two Hundred Fifty Thousand and 00/100 ($1,250,000.00) Dollars; b. a universal release, in a form acceptable to Chartwell, executed by Class and its shareholders relieving Chartwell of all obligations under the Stock Purchase Agreement dated July 14, 1988, and all exhibits thereto; and c. a release, in a form acceptable to Chartwell, from Bresnan Communications releasing Chartwell and its officers and directors from any and all liabilities related to Bresnan's investment in or purchase of assets from Class. d. a release, in a form acceptable to Chartwell, from Summit Capital releasing Chartwell and its officers and directors from any and all liabilities related to any loan made by Summit Capital, as lender, to Class, as borrower. $0O055 At or prior to closing, Chartwell shall deliver to Class the following: a. Instruments of assignment of Class Stock to Class together with the certificates for Class Stock or if such certificates are not then in Chartwell's possession, an instrument directing the party in possession of the certificates to immediately deliver same to Class, subject only to rights and interests, if any, of Summit Capital at that time. b. A release from Chartwell in a form acceptable to Class, releasing Class and its officers and directors, from any and all liability to Chartwell arising from negotiations and agreements between Class and Bresnan Company Limited Partnership, including agreements for Bresnan to loan or advance funds to Class or to purchase assets from Class 4. Sale Closing. Sale of Class Stock by Chartwell to Class shall be concluded within five days after written consent to the sale by Summit Capital (or, alternatively, within five days after Class' payoff of the entire balance of indebtedness owed by Class to Summit Capital) but in no event later than September 30, 1989. 5. Agreement Void If Summit Capital's Consent (or Loan Payoff) Is Not Obtain by September 30. 1989. This Agreement shall be totally void and Chartwell's and Class' obligations hereunder shall be terminated, unless either one of the following events occurs on or before September 30, 1989: Summit Capital furnishes its written consent to sale of Class stock pursuant to the provisions herein, or Class pays the full amount of indebtedness owed by Class to Summit Capital. 6. Binding Effect of Agreement. The provisions of this Agreement shall be binding upon Chartwell and Class and their respective successors or assigns. SIGNED AND EXECUTED by and in behalf of Chartwell and Class on the dates specified below. CHARTWELL CABLE FUND, INC., a Colorado Corporation • L. McDougal Vic sident Signed: August 17, 1989 CLASS COMMUNICATIONS, INC., a Michigan Corporation By: 1-<—� V 4e)c0,7-6_,t_ Florian V. Grocholski, President Signed: August 17, 1989 2 8GO055 EXHIBIT 10 . 4 to Form 10-K TERMINATION AND OPTION AGREEMENT for Year Ended 8/31/89 AGREEMENT made this 2 C day of October, 1989 by and between Chartwell Cable of Colorado, Inc. , a Colorado corporation, (hereinafter referred to as "Seller") , and James Cable Partners, L.P. , a Delaware limited partnership (hereinafter referred to as "Purchaser") . _ WITNESSET H: WHEREAS, the Seller and the Purchaser entered into an Asset Acquisition Agreement dated June 6, 1989 as amended by Amendment dated June 30, 1989 (the "Asset Acquisition Agreement") providing for the sale of substantially all the assets used in connection with the operation of Seller' s cable television system serving the Counties of Larimer and Weld, Colorado. Certain capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Asset Acquisition Agreement; and WHEREAS, the Closing Date under the Asset Acquisition Agreement was June 30, 1989 and pursuant to the terms of the Asset Acquisition Agreement, the Purchaser advanced $440, 633 . 55 to the Seller between the Closing Date and the date hereof to cover construction costs in connection with the construction of the Systems ; and WHEREAS, the Purchaser paid to Seller, Brian L. McDougal , Robert Briney and Clinton Ober the sum of $25, 000 on the Closing Date as an initial advance for a covenant not to compete; and WHEREAS, on June 30, 1989, in conjunction with the Closing of the Asset Acquisition Agreement, Seller and Purchaser entered into a Management Agreement providing for the management and further construction of the Systems ; and WHEREAS, the Asset Acquisition Agreement required that certain conditions precedent to the Purchaser' s obligations shall ' have been satisfied prior to the Post Closing Date and that the Post Closing Date would occur on or before November 30, 1989; and WHEREAS, the parties have decided to rescind the Asset Acquisition Agreement pursuant to the terms hereof in the event that certain conditions as set forth herein are met. WHEREAS, pursuant to Section 6 of the Asset Acquisition Agreement the Purchaser shall reconvey to Seller the Systems, Franchises and Transferred Assets previously conveyed by Seller to Purchaser and Seller shall return to Purchaser the $440, 633 . 55 of the Initial Purchase Price Installment previously disbursed to Seller, $15, 000. 00 for out-of-pocket expenses and shall return to Purchaser the $25, 000 paid pursuant to the Covenant Not To Compete Agreement; and X0055 WHEREAS, the Seller will grant to Purchaser a future option to repurchase the Systems upon the terms contained herein. NOW, THEREFORE, in consideration of the premises and of the mutual agreements hereinafter set forth, the parties hereto agree as follows: 1. Termination of Asset Purchase Agreement. The Seller and the Purchaser agree to rescind the Asset Acquisition Agreement and the Management Agreement at such time as the Systems are reconveyed to the Sellers pursuant to the terms hereof. Seller and Purchaser acknowledge and agree that Purchaser is electing to enter into this Agreement and to terminate the Asset Acquisition Agreement in lieu of Purchaser' s other rights and remedies. Seller hereby waives any and all notice provisions in the Asset Acquisition Agreement (including, but not limited to, those contained in section 6) which relate to this Agreement or any other right or remedy Purchaser has under the Asset Acquisition Agreement. 2 . Escrow Deposit. The Seller agrees to deposit $480, 633 .55 (the "Escrow Funds") in escrow with the First Interstate Bank of Denver, N.A. (the "Escrow Agent") pursuant to the terms of an escrow agreement in the form of Exhibit A attached hereto (the "Escrow Agreement" ) on or prior to the close of business on October 31, 1989 . In the event that the Escrow Funds are not deposited by such time, this Agreement shall be null and void and the parties shall continue to have all rights and remedies contained in the Asset Acquisition Agreement. The Escrow Funds plus all accrued interest shall be disbursed to the Purchaser five business days after receipt by Escrow Agent of a written instruction executed by Purchaser (with a simultaneous copy provided to Seller) stating that the required consents from the third parties listed in Exhibit B attached hereto to the transfer of the Systems from the Purchaser to the Seller have been obtained and Purchaser has executed all required documents of conveyance in order to sell and assign the Systems back to the Seller, unless the Escrow Agent receives written notice of objection from Seller to the disbursement of the Escrow Fund and accrued interest to the Purchaser prior to the scheduled disbursement to Purchaser. In the event that the consents listed in Exhibit B are not obtained by March 31, 1990, the Seller and the Purchaser agree to proceed to close the transactions contemplated by the Asset Acquisition Agreement with the Post Closing Date considered to be close of business on December 31, 1989 for the purpose of all adjustments to the purchase price contained in the Asset Acquisition Agreement. 3 . Option. The Seller hereby grants the Purchaser an option to repurchase the Systems (the "Option") at any time commencing upon the later to occur of: (a) one year from the date hereof, or (b) at such time as the Systems serve 1, 000 Basic Subscribers, and terminating on the date which is one year from -2- 900055 • the date of commencement of the option period. In no event may the option be exercised more than four years from the date hereof. 4. Exercise of Option. The Purchaser shall exercise the option to repurchase the Systems by providing the Seller with written notice of its intent to exercise its option. Upon receipt of notice from the Purchaser of its intent to exercise the Option, the Seller will obtain the Consents provided in Section 4 . 3 of the Asset Purchase Agreement. 5. Terms of Exercise of the Option. (a) The provisions, terms and conditions for the repurchase of the System pursuant to the exercise of the Option shall be the same as those set forth in the Asset Acquisition Agreement, provided, however, such provisions as relate to construction of a new cable television system and design and performance levels shall not apply. (b) Specifically, the following shall apply to the repurchase of the Systems: The total purchase price for the repurchase of the Systems pursuant to the Option shall be the amount of One Million Eight Hundred Seventy Thousand Dollars ($1,870, 000) subject to adjustment as provided below payable at the closing of the repurchase of the Systems pursuant to the exercise of this option (the "Option Closing") . The purchase price shall be payable as follows: (i) Purchaser shall pay Seller, Bryan L. McDougal, Robert Briney and Clinton Ober the aggregate sum of One Hundred Twenty-Five Thousand Dollars ($125, 000) for a covenant not to compete in the cable television business, which covenant shall be in the form annexed as Exhibit 2 to the Asset Acquisition Agreement; (ii) the sum of One Hundred Thousand Dollars ($100, 000) (the "Post-Closing Escrow Payment") shall be deposited by Purchaser at the closing in escrow with a mutually acceptable escrow agent, to be held in escrow pursuant to a Post-Closing Escrow Agreement among Seller, Purchaser and the escrow agent in the form annexed as Exhibit 1 to the Asset Acquisition Agreement; (iii) the balance of the Purchase Price increased or decreased by adjustments set forth in Sections 1.4. 2 and 1.4 . 3 of the Asset Acquisition Agreement, and subject to any other adjustments as provided in -3- 900055 the Asset Acquisition Agreement, shall be paid by Purchaser to Seller.' (c) On the Option Closing, the Seller shall sell, transfer, assign and deliver, pursuant to Section 1. 1 of the Asset Acquisition Agreement, all of the Transferred Assets excluding the Excluded Assets set forth in Section 1. 2 of the Asset Acquisition Agreement. In addition, the Purchaser agrees to assume all liabilities set forth in Section 1.3 of the Asset Acquisition Agreement as they become due for all periods from and after the Closing Date. 6. Terms of Asset Purchase Agreement to Control. Within 30 days of the receipt by Seller of written notice from the Purchaser of exercise of the Option, the Seller and the Purchaser shall enter into an agreement similar in all substantial respects to the Asset Acquisition Agreement with appropriate changes to reflect (i) the changes in dates and the elimination of the separate Closing and Post-Closing, (ii) the other changes set forth herein, and (iii) the fact that the provisions relating to construction, design and performance levels will not apply. In order to avoid any confusion, a copy of the Asset Acquisition Agreement is attached hereto as Exhibit C. 7 . Further Assurances. The parties agree that they shall execute and deliver any and all additional writings, instruments, and other documents contemplated hereby or referred to herein and shall take such further action as shall be reasonably required in order to effectuate the terms and conditions of this Agreement. 8 . Governing Law. This Agreement shall be governed by and construed according to the substantive laws, and not the conflicts of law principles: of the State of Colorado. 9. Article Headings. The article headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 10. Modification. This Agreement shall not be amended, modified or supplemented at any time unless by a writing executed by the parties hereto. No amendment, supplement or termination of this Agreement shall affect or impair any rights or obligations which have heretofore matured hereunder. 11. Assignment. Neither this Agreement, nor any right hereunder, may be assigned by either party hereto, except that Purchaser may assign its rights hereunder to an affiliated entity controlled by James Communication Partners. -4- 9L10055 IN WITNESS WHEREOF, the parties hereto have caused this Termination and Option Agreement to be executed and delivered as of the date first above written. CHARTWELL CABLE OF COLORADO, INC. , a Colorado corporation WI#c' By: ClUir n L Mc o 1 Itsi and • By: Cl ' ton O er Its: fr JAMES CABLE PARTNERS, L.P. , a Delaware limited partnership By: James Communication Partners, its general partner By: A G•ne •al •a •tner -5- 9aO055 Exhibit B Rectuired Consents Larimer County Franchise Weld County Franchise River Valley Mobile Home Park Agreement Larimer Headend Lease with Doyle Jones (3-15)VH-TAO.AGM.4 -6- 900055 - OFFICE OF COUNTY ATTORNEY PHONE(303)356-4000 EXL 4391 P.O. 8OX 1948 GREELEY, COLORADO 80632 wfiC. COLORADO December 5, 1989 Bryan L. McDougal, President Chartwell Cable of Colorado, Inc. 5299 DTC Boulevard, Suite 260 Englewood, CO 80111 RE: Transfer of Cable Television Franchise to Chartwell Cable of Colorado, Inc. Dear Mr. McDougal: This letter is in response to your letter dated November 6 , 1989, concerning your requested transfer of cable franchise from James Cable Partners, L.P. , to Chartwell Cable of Colorado, Inc. Enclosed you will find a complete copy of Weld County Ordinance 94 , 94-A, and 94-B. In order to effect the transfer of the franchise, you must have Chartwell Cable submit an application which includes all of the information under the Section entitled "Application" on pages 10 through 15 of Ordinance 94 . Please also include the information requested in Ordinance 94-B for Section "A, " subsection "16 . " Send the same to my office at: P. O. Box 1948 , Greeley, Colorado 80632 . I will then see that the matter is placed on the agenda for the Board of County Commissioners and I will inform you of the date when the Board will consider the matter. Also enclosed you will find a copy of the application materials received by Weld County from James Cable Partners when the franchise was transferred from Chartwell to James Cable. I have enclosed these materials for you to use as a "form. " If you should have any questions or comments concerning any of the enclosed documents or concerning this letter, please feel free to call me at 356-4000 , Ext. 4391 . Sincerely, — - ( Bruce T. Barker Assistant Weld County Attorney BTB:rm Enc. I xc: Clerk to the Board , 900055 • Chartwell 5299 DTC Boulevard Suite 260 Englewood. CO 80111 303/694-1700 FAX 694-0070 November 6, 1989 Board of County Commissioners County of Weld, Colorado Weld County Centennial Center 915 Tenth Street, First Floor Greeley, CO 80632 Attn: Mary Ann Feuerstein Re: Cable Television Franchise Transfer/Chartwell Cable of Colorado, Inc. Dear Commissioners: On the 19th day of December, 1988, the County issued a cable television franchise to Chartwell Cable of Colorado, Inc. ( "Chartwell") . On June 6, 1989, Chartwell entered into an Asset Sale Agreement with James Cable Partners, L.P. and thereafter Chartwell requested that its franchise be transferred to James. This transfer was required by James in order to finance the system completion. The franchise transfer was accomplished on June 12, 1989. Under the terms of the Asset Sale Agreement the parties reserved the right to restructure the Agreement if certain conditions were or were not met on or before November 30, 1989, the "final closing date" under the Agreement. By mutual decision the parties have decided to restructure the Agreement and, subject to the County' s consent, retransfer the franchise. Under the terms of the restructured Agreement, Chartwell has arranged direct financing sufficient to complete the cable system. We would appreciate your cooperation in retransferring the franchise. We, of course, are willing to further advise you regarding the details of this matter. • 960055 0 10 Q O N 2o 0 W in N▪ W o§ H —+ W p E till LL E i m O Vl O ° ~ co v 3 y cc g,, m r.4 m o? ru U>a m xi • a? rnd m eD UVwrc t`4 o d E it - 0Cr * LL 3O 30 t C \ OQQoN U a LL Nd yv� m v A u- ?- - >_ N ac d d le" ▪ rZ Z a U O d 0 d d 2 d D 2 a O.- in w 3 . q 3 LL o o ¢„ Qa o - \ d V a4 Ei z rn a e o _m = Co E" a E _ IL H d •.• 'm'm O o 0 N C.D 2 ' t n 2 Q O cm r 2 0 ul W U N 986L aunt` `008E%IOd Sd .UNDER: Complete Items 1 and 2 when additional services are desired, and complete Items 3 and 4. Put your address In the"RETURN TO" Space on the reverse side. Failure to do this will prevent this card from being returned to you. The return receipt fee will provide vat the name of the person delivered to and the date of delivery. For additional fees the following services are available.Consult postmaster for fees and check boxes)for addition&esrvkele)requested. 1. 0 Show to whom delivered,date,and addressee's eddreee. 2. 0 Restricted Delivery t(Extra charge)t t(sxme ahersel f 3. Article Addressed to: 4. Article NumberNumbberrj /7CHARTWELL CABLE OF COLORADO, Type Service INC. ❑ farered O insured 5299 DTC BLVD. , SUITE 260 rtlfled ❑ coD ENGLEWOOD, CO 80111 [[[CC7��7��xprere Mail Alwayflbtein signature of addressee -- - - -__---- -- ----- - --- - or agent and RATE DELIVERED. B. Signature—Addressee 8. Addressee's Address(ONLY If X requested and fee paid) 6. Signature nt Xx 7. D of Dsli CI.? o X5O PS Form 3811, 187 +U8.QP.0.1eA-1762ae DOMESTIC RETURN RECEIPT - 94iO®55 (t OFFICE OF COUNTY ATTORNEY PHONE(303)3564000 EXT.4391 (� P.O. BOX 1948 \\ GREELEY,COLORADO 80632 C. COLORADO December 27 , 1989 • Bryan McDougal, President Chartwell Cable of Colorado, Inc. 5299 DTC Boulevard, Suite 260 Englewood, CO 80111 RE: Transfer of Cable Television Franchise to Chartwell Cable of Colorado, Inc. Dear Mr. McDougal: This letter is to inform you that Weld County has received your application for transfer of the cable television franchise from James Cable Partners to Chartwell Cable of Colorado, Inc. In order to effect the transfer, the Board will need the following additional information: A. A signed statement that Chartwell Cable of Colorado, Inc. , will comply with Weld County Ordinance Nos . 94 , 94-A, and 94-B. A copy of a similar statement by Platte River Cable is enclosed for your information. B. A letter from Chartwell Cable of Colorado, Inc. , requesting those items in Weld County Ordinance Nos . 84 , 94-A, and 94-B, which it is asking to be waived by the Board of County Commissioners . It is my understanding that the only item you wish to have waived is that set forth in Section C under "Company Services" of Ordinance No. 94 (page 36) . Enclosed you will find a copy of a similar request by Platte River Cable for your information. It is my understanding that the Clerk to the Board of County Commissioners of Weld County will set a hearing on the transfer of the Cable T.V. franchise for January 15 , 1990 . The hearing will take place at 9 : 00 a.m. on that date in the First Floor Meeting Room of the Weld County Centennial Center Complex, 915 Tenth Street, Greeley, Colorado. I would appreciate your having the above requested information to me before that date. 900055 Bryan McDougal Page 2 December 27 , 1989 If you should have any questions or comments concerning this letter or concerning any of the enclosed information, please feel free to call me at 356-4000 , extension 4391 . Very truly yours, Bruce T. Barker Assistant County Attorney BTB: sa Enc. 9€OO55 r ./ Platte Ritter Cable • June 6, 1989 TO WHOM IT MAY CONCERN I , Douglas Catiano , in my position as Chief Engineer and the senior technical consultant for James Cable Partners, L.P. Colorado operations, do hereby state that I have reviewed Weld County Ordinances #94 , #94A, #94B in their entirety. I hereby declare that James Cable Partners , L.P. 's planned cable system (network) will meet all requirements set forth in the above stated ordinances . • / ft/1/K; Do las Catiano C of Engineer 9100055 A sucsic:.. . ;antes Cabie Pa..n.er. L.P. 113 S. College Ave., Suite A • Ft. Collins, CO 60524 • (303) 224.3325 - • Platte River Cable June 6, 1989 - Clerk & Recorder • Weld County P.O. Box 758 Greeley, Colorado 80632 Dear Madams and Sirs, - - Please accept the following as our request for a waiver of . the following requirements under the Weld County Cable Television Franchise Ordinance 094 . Because our system will serve less than 500 subscribers , we hereby request a variance from: Company Services , Section C: Equipment for local production and presentation of cablecast programs. James Cable Partners, L.P . is looking forward to serving Weld County residents. Sincerely, Kelly Hargan General Manager 900055 A su'csid:cr: ci lanes C.:cie Pcrner. L.P 113 S. College Ave.. Suite A • Ft. Collins. CO 60524 • (303) 224.3325 Hello