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Home My WebLink About19- Telecommunications CITY OF SAN BERNARDINO-REQUEST FOR COUNCIL ACTION FROM: Frank Keller, Cable Television Manager SUBJECT:Resolution Approving transfer of ACE to Charter Communications DEPT: Telecommunications x� pp DATE: April 5, 1999 -•-------------------------------------------------------------------------------------- ----=-==-==-------------------------------------- Svnoasis of Previous Council Action: t None ..---------------------------------------------------------------------------------------------------------------------------------------- Recommended Motion: Adopt Resolution. ..---------------------------------------- - ------------------------------------------------------------------------------------ Contact Person(s): Frank S. Kell Phone: 5147 'Ward(s): Supporting Data Attached:® Staff Report ❑ Resolution(s) ❑ Agreement(s)/Contract(s)❑ Map(s) ❑ Ltr/Memo FUNDING REQUIREMENTS: Amount: $N/A Source: Budget Authority: SIGNATURE: F S. LER Cable Television Manager ..---------------------------------------------------------------------------------------------------------------------------------------- Council Notes: •------------------------------------------------------------------------------------------------------------------ FSK: ldl COUNCIL MEETING AGENDA MEETING DATE: 04/19/1[999 Agenda Item Number: f CITY OF SAN BERNARDINO REQUEST FOR COUNCIL ACTION STAFF REPORT SUBJECT: Transfer franchise from American Cable Entertainment to Charter Communications. BACKGROUND: American Cable Entertainment acquired ownership of the Marks Cablevision Franchise in October 1998. ACE now requests a transfer of that franchise to Charter Communications. Charter Communications has submitted the proper FCC Form 394 for a transfer of franchise. And, has met with the Community Cable Television Commission on February 9, 1999 and has agreed by letter dated March 31, 1999 (letter attached)to assume and abide by all terms and conditions of the existing franchise agreement. Charter also intends to upgrade the current cable system to 750 or 850 MHz providing a greater bandwidth and two-way capability. This increased bandwidth will not only provide more viewing capability,but also allow for Charter Pipeline high-speed Internet access, as well as digital television and other data services. The 1996 Telecommunications Act allows for the short-term ownership and does not prohibit the sale. Charter Communications has met the proof of financial responsibility and managerial competency(documentation attached). It is therefore recommended that the transfer from ,American Cable Entertainment to Charter Communications be approved. :FINANCIAL IMPACT: Franchise fees paid to the City of San Bernardino in 1998 $284,980.00 :RECOMMENDATION: Approval of franchise transfer from American Cable Entertainment to Charter Communications. •-------------------------•----------------------------------------------------------------------------------------- FSK: Idl COUNCIL MEETING AGENDA MEETING DATE: 04/19/1999 Agenda Item Number: �_ 1 RESOLUTION NO. 2 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF CABLE TELEVISION FRANCHISE FROM AMERICAN CABLE 3 ENTERTAINMENT COMPANY, L.L.C., TO CHARTER COMMUNICATIONS ENTERTAINMENT II, L.L.C. 4 5 WHEREAS, American Cable Entertainment Company, L.L.C., ["A.C.E.C."] a Delaware 6 limited liability company ["Seller"] is a duly authorized holder of a franchise authorizing the 7 operation and maintenance of a cable system within the City of San Bernardino pursuant to the 8 City of San Bernardino's Ordinances No. MC-2395, as amended, and an assignment dated August 9 30, 1993, and Resolution 93-383, and Resolution 98-263 ["the Franchise"]; and, 10 WHEREAS, Seller and Charter Communications Entertainment I1, L.L.C., a Delaware 11 limited liability company ["Purchaser"] are parties that certain Asset Purchase and Sale Agreement 12 dated January, 1999 and assignment dated March 8, 1999 ["the Agreement"] wherein Seller and 13 Purchaser agree that Purchaser will acquire all the assets used in the ownership and operation of 14 the cable television system; and, 15 WHEREAS, the Agreement provides that Purchaser has the right to assign all of its rights, 16 title and interest in the Agreement to Charter Communications Entertainment II, L.L.C., hereafter 17 has assigned its rights to Charter Communications Entertainment II, L.L.C.; and, 18 WHEREAS, CCE-II as Charter Communications Entertainment II, L.L.C. desires to 19 acquire from Seller all the rights and privileges of the Franchise and assume all of the obligations 20 of Seller under the Franchise accruing from the date of closing under the Agreements above 21 described; and, 22 WHEREAS, the Franchise, as amended in 1968, authorizes transfer and assignment of the 23 Franchise by Seller, provided that the net worth of Purchaser at the time of such transfer is not 24 less than $250,000.00 (adjusted to include increases in the Cost of Living Index for Southern 25 California over the then current Cost of Living Index), as shown by a statement of net worth 26 certified to by a licensed certified public accountant; and, 27 28 Resolution(American Cable Trans to charter Comm.)[Cable.Res] 1 I RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF CABLE TELEVISION FRANCHISE FROM AMERICAN CABLE 2 ENTERTAINMENT COMPANY, L.L.C., TO CHARTER COMMUNICATIONS ENTERTAINMENT II, L.L.C. 4 WHEREAS, the City has received such evidence of financial responsibility submitted by 5 the Purchaser and its affiliates and has found that Purchaser and its affiliates have the financial 6 managerial ability to operate the system in a proper manner; and, 7 WHEREAS, Seller, and Purchaser, have jointly submitted to the City Council of the City 8 an application on Federal Communication Commission Form 394 for consent to the transfer and 9 such other information concerning the transfer as is required by applicable law and the Franchise 10 and as has been requested by the City Council; and, 1l WHEREAS, the Purchaser has agreed, by letter (a copy of which is attached hereto as 12 Exhibit "A" and incorporated herein), in response to the City's request, its assurance that Charter 13 intends to upgrade the system within the next three years to provide greater bandwidth and a two- 14 way capability, the current system architecture of choice is hybrid fiber optic and coaxial cable 15 with the fiber used to transmit signals to neighborhood service nodes of between 500 and 1000 16 homes, the upgraded bandwidth of the system is typically 750 or 860 MHZ, and upon completion 17 of the upgrade, new services such as Charter Pipeline high-speed Internet access can be offered 18 as well as digital television and other data services to the City; and, 19 WHEREAS, the Purchaser has further agreed by letter (a copy of which is attached hereto 20 as Exhibit "A" and incorporated herein) to abide by any previous Agreement between the City and 21 and Seller including, but not limited to, the franchise ordinances and any attachments or 22 amendments thereto, which concludes the Judgment and Settlement Agreement in the case of i :23 of San Bernardino v. LibeM TV Cable, Inc., Case No. 82-6876 WMB (Gx), U.S. District Court, :24 Central District of California; and, 25 WHEREAS, Seller has requested the approval of the City for the transfer and assignment 26 of the Franchise by the Seller to the Purchaser; 27 28 Resolution(American Cable Trans to charter Comm.)[Cable.Res] 2 1 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF CABLE TELEVISION FRANCHISE FROM AMERICAN CABLE 2 ENTERTAINMENT COMPANY, L.L.C., TO CHARTER COMMUNICATIONS ENTERTAINMENT II, L.L.C. BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF 4 SAN BERNARDINO AS FOLLOWS: 5 SECTION 1. The Mayor and Common Council of the City of San Bernardino hereby 6 approve the assignment of the Franchise and related assets of the cable television system by Seller 7 to the Purchaser. 8 SECTION 2. The Mayor and Common Council hereby affirm that: (a) the Franchise was 9 properly granted; (b) the Franchise is in full force and effect; (c) the Franchise is scheduled to 10 expire on December 31, 2003; and (d) to the City's knowledge there exists no fact or circumstance 11 which constitutes or which, with the passage of time or giving of notice or both, would constitute 12 a default under the Franchise or will entitle the City to cancel or terminate the rights thereunder, 13 except upon the expiration of the full term thereof. 14 SECTION 3: The authorization of the transfer and assignment of the franchise from Seller 15 to the Purchaser is expressly conditioned upon, and shall be deemed effective upon, the 16 consummation of the sale to the Purchaser of the Franchise and related assets and the closing of 17 the transaction under the Agreement. 18 19 20 21 22 23 24 25 26 27 28 Resolution(American Cable Trans to charter Comm.)[Cable.Res] 3 ] RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF CABLE TELEVISION FRANCHISE FROM AMERICAN CABLE 2 ENTERTAINMENT COMPANY, L.L.C., TO CHARTER COMMUNICATIONS ENTERTAINMENT II, L.L.C. I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor and 4 Common Council of the City of San Bernardino at a meeting thereof, 5 held on the day of 1999, by the following vote, to wit: 6 COUNCIL MEMBERS: AYES NAYS ABSTAIN ABSENT 7 ESTRADA 8 LIEN 9 McGINNIS 10 SCHNETZ 11 DEVLIN 12 ANDERSON 13 MILLER 14 15 16 City Clerk 17 18 The foregoing Resolution is hereby approved this day of 11999. 19 20 Judith Valles, Mayor 21 City of San Bernardino 22 Approved as to form and 23 legal content: 24 JAMES F. PENMAN, City Attorney 25 26 By: Wiz, 27 28 Resolution(American Cable Trans to charter Comm.)[Cable.Res] 4 Mar-31 - �53 '02 : 17P Charter Communications 626 537 6156 P . 02 CHARTER (7 O ,%l :Vl I_' NI (_A_l- IONS. March 31, 1999 Mr. Frank Keller Via Fax and Mail Cable Commission City of San Bernardino 300 North D Street P.O. Box 1318 San Bernardino, CA 92402-0001 Dear Frank: This letter serves as Charter Communication's commitment to assume and abide by all terms and conditions of the existing franchise agreement upon closing of the transaction with American Cable Entertainment Company, LLC. Since ACEC will continue in existence under Charter Communications Entertainment II, LLC's ownership, this transaction will simply result in a transfer of control. In our recent phone conversation you asked for information regarding our upgrade plans for the system. While it is premature to provide detailed upgrade plans and a schedule, I can assure you that Charter intends to upgrade the system within the next three years to provide greater bandwidth and two-way capability. Our current system architecture of choice is hybrid fiber optic and coaxial cable with the fiber used to transmit signals to neighborhood service nodes of between 500 and 1000 homes. The upgraded bandwidth of the system is typically 750 or 860 MHz_ Upon completion of the upgrade, new services such as t 1hurter Pipeline high-speed Internet access can be offered as well as digital television and other data services. , -1 We look forward to serving your community in the months and years ahead. f� Sincerely, Melvin L. Matthews Director of Government and Community Relations - CHARTER COMMUNICATIONS,INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31,1997 AND 1996 TOGE'T'HER WITH AUDITORS REPORT n1Zi ril�1� n1�L�1✓l�Jcl�+ LLI REPORT OF IINDEPENDENT PUBLIC ACCOUNTANITS To the Board of Directors and Shareholders of Charter Communications,Inc.: We have audited the accompanying consolidated balance sheets of Charter Communications,Inc. (a Delaware corporation) and subsidiaries as of December 31, 1997 and 1996,and the related consolidated statements of operations,shareholders' investment and cash flows for each of the three years in the period ended December 31,1997. These consolidated financial statements and the supplementary consolidating information referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financiaf statements and supplementary consolidating information 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 financial statements referred to above present fairly,in all material respects,the financial position of Charter Communications,Inc.and subsidiaries as of December 31,1997 and 1996,and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997,in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The consolidating information included in Exhibits I and H is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position and results of , operations of the individual companies. This information has been subjected to the auditing procedures applied in our audits of the consolidated financial statements and,in our opinion,is fairly stated in all material respects in reLation to the consolidated financial statements taken as a whole. 7 St Lours,Missouri, February 6,1998 i i CHARTER COMMUNICATIONS,INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS-DECEMBER 31.1997 AND 1996 1997 1996 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,814,834 $ 1,165,519 Accounts receivable,net of allowance for doubtful accounts of$52,329 and$88,798,respectively 1,585,018 573,456 Prepaid expenses and other 4,131,537 720,467 Total current:assets 7,531,389 2,459,442 RECEIVABLES FROM CABLE TELEVISION SYSTEMS MANAGED BY CHARTER,net of allowance for doubtful accounts of$1,315,019 and $1,084,084,respectively 4,621,886 9,030,799 PROPERTY,PLANT A.ND EQUIPMENT,net 27,620,853 30,929,001 FRANCHISE COSTS,net of accumulated amortization of$3,828,546 and $2,836,570,respectively 28,195,268 41,973,754 OTHER ASSETS,net 1,014,952 1,505,748 INVESTMENTS IN UNCONSOLIDATED ENTITIES 11,912,525 9,107,085 $80,896,873 $95,005,829 LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Current maturities of long-term debt $ 3,659,167 $ 8,947,509 Accounts payable and accrued expenses 9,192,315 7,781,625 - 85,476 Subscriber deposits Total current liabilities 12,851,482 16,814,610 DEFERRED REVENUE 93,593 67,471 LONGTERM DEBT 56,812,496 68,600,319 DEFERRED COMFENSATION 4,447,051 1,970,675 LOSSES IN EXCESS OF INVESTMENTS IN UNCONSOLIDATED „ -,- - 255,324 EN'ITTIFS _ . CO AND CONTINGENCIES SHAREHOLDERS'INVESTMENT: 276 276 Common stock --- . Preferred stock __-- -._--. . - - Additional paid-in capital 18,998,210 17,999,739 Accumulated deficit (12,306,235) (10,702,585) Total shareholders'investment 6,692,251 7,297,430 $80,896,873 $$95- ��aamoec The accompanying notes are an integral part of these consolidated balance sheets. CHARTER COiv1IvIUNICATIONS,INC. AND S"JBSIDIARIES CONSOLIDATED STATEMEiv7S OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,1997,1996 AND 1995 199' 1996 1995 SERVICE REVENUES: Management services- Management fees 5 14,944,835 513,447,488 513,073,432 981,875 2,8ii,500 1,500,000 Acquisition fees 15,92 6,710 16,324,988 14,573,432 Cable television services 19,046,253 15,831,588 2,795,942 34,972,963 32,156,576 17,369,374 OPERATING EXPENSES: Operating,general and administrative 25,104,004 23,142,414 12,190,569 Depreciation and amortization 6,962,778 5,819,490 1,714,519 2,476,376 1,833,952 3,354,606 Deferred compensation 34,543,158 30,795,856 17,259,694 Income from operations 429,805 1,360,720 109,680 OTHER INCOME (E)C'ENSE): Interest income 111,545 111,791 288,728 Interest expense (5,752,176) (5,576,496) (2,197,903) Equity in income(loss)of investments in unconsolidated 4,944,858 2,794,246 (4,917,912) entities Other,net (1,337,682) 66,762 (51,654) (2,033,455) (2,603,697) (6,878,741) • Loss before provision for income taxes (1,603,650) (1,242,977) 6,769,061.._(. ) PROVISION FOR INCOME TAXES _ Net Ioss $ (1_603,650) $ (1,242,977) $ (6,769,061) The accompanying notes are an integral part of these consolidated statements. CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT FOR THE YEARS ENDED DECEMBER 31 1997,1996 AND 1995 Additional Total Common Preferred Paid-In Accumulated Shareholders' Stock Stock Capital Deficit Investment BALANCE,December 31,1994 $450 $ - $5,999,565 $ (2,690,547) $ 3,309,468 Common stock retired (29) - 29 Common stock issued 55 - 11,999,945 - 12,000,000 Net loss - - - (6,769,061) (6,769,061) BALANCE,December 31,1995 276 - 17,999,739 (9,459,608) 8,540,407 Net loss - " (1,242,977) (1,242,977) BALANCE,December 31,1996 276 - 17,999,739 (10,702,585) 7,297,430 Capital contribution - - 998,471 998,471 Net loss - - - (1,603,650) (1,603,650) BALANCE,December 31,1997 $276 $ $18, $(12,306,235) $—6,692,251 The accompanying notes are an integral part of these consolidated statements. CHARTER COMMUNICATIONS ItiC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,1997, 1996 AND 1995 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: 5 (1,603,650) S (1,242,977) $ (6,769,061) Net loss Adjustments to reconcile net loss to net cash provided by (used in) operating activities- Depreciation and amortization 6,962,778 5,819-490 1,714,519 Amortization of debt issuance costs 1�?,561 Equity in(income) loss of investments in unconsolidated entities (4,944,858) (2,794,246) 4,917,912 Loss on sale of cable television system 1,363,415 - Loss on sale of property,plant and equipment 129,973 - 51,654 Changes in assets and liabilities,net of effects from acquisitions- Accounts receivable,net (1,067,147) (572,576) 38,161 (3,315,060) 476,185 (1,086,165) Prepaid expenses and other Receivables from cable television systems managed by 3,690,707 (1,773,727) (3,172,068) Charter 1,595,911 2,105,12 1,583,282 Accounts payable and accrued expenses Deferred revenue 36,284 32,121 1 (999,126) 2,476,376 (1,383,931) 3,354=606 Deferred compensation Subscriber deposits (85,476) 85,476 Net cash provided by(used in)operating activities 5,361,814 750,942 (366,286) CASH FLOWS FROM INVESTING ACTIVTTIES: Proceeds from sale of cable television system 12,527,513 - - Purchases of property,plant and equipment (8,592,521) (6,687,905) (6,420,188) Distributions from investments in unconsolidated entities 7,640,994 10,186,677 611,925 Investments in unconsolidated entities (5,500,000) - (9,831,995) Payments for other assets (1,057) (282573) (166,953) 34,069,055 41,973,810 .._.. .Payments for acquisitions,net of cash acquired - (34,069,055) ( 3,109,547 Proceeds from sale of property,plant and equipment Y__:m M R T �r ;-„.--_.,---3,000,000 ercise of purchase option _ , _. -. ..,..,,, -.:_Decrease in restricted funds held in escrow - - 1,140,000 Other investing activities - 66,209 . -= -_ _ Net cash provided by(used in)investing activities 6,074,929 (30,786,647) (50,531,474) (Continued on following page) 2 _ 1997 1996 1995 CASH FLOWS FROM FINANCING ACTIVITIES. 15,800,000 42,630,094 45,392,110 Borrowings in long-term debt Repayments of long-term debt (26,541,165) (13,245,606) (3,781,493) 12,000,000 Issuance of common stock - - (46,263) (748,083) (498,004) Pavments of debt issuance costs Net cash provided by (used in) financing activities (10,787,428) 28,636,405 53,112,613 NET INCREASE (DECREASE) IN CASH AND CASH 649,315 (1,399,300) 2,214,853 EQUIVALENTS CASH AND CASH EQUIVALENTS,beginning of year 1,165,519 2,564,819 349,966 CASH AND CASH EQUIVALENTS,end of year $ 1,814,834 $ 1,165,519 $ 2,564,819 CASH PAID FOR INTEREST $ 3,869,502 $ 3,765,611 $ 1,781,737 CASH PAID FOR TAXES,net of refunds $ $ - $ The accompanying notes are an integral part of these consolidated statements. CHARTER COMMUNICATIONS.INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31 1997 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and Basis of Presentation The accompanying consolidated financial statements include the accounts of Charter Communications,Inc. (Charter) and its wholly owned subsidiaries,collectively referred to as the"Company" herein. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in partnerships and limited liability companies for which Charter is the General Partner or holds limited partnership (member) interests are accounted for using the equity method. Under this method, the investments are originally recorded at cost and are subsequently adjusted to recognize Charter's share of net earnings or losses as they occur and distributions when received. Since Charter does not exercise significant influence and owns less than a 20% interest,its investments in CCA Holdings Corp. (CCA Holdings),CCT Holdings Corp. (CCT Holdings),Charter Communications Long Beach,Inc. (CC-LB),Worldgate Communications,Inc. (Worldgate) and TeleSynergy,Inc.are carried at cost. Charter provides management services to cable television systems which are owned directly and indirectly by the Company. Charter also receives acquisition fees for certain advisory services provided to entities managed by Charter that acquire existing cable television systems. As of December 31,1997,Charter Communications Properties,Inc. (CCP)provided cable television service to approximately 45,200 basic subscribers in Colorado,Georgia,Kansas,Montana,North Carolina and South Carolina. Cash Equivalents Cash equivalents consist primarily of repurchase agreements with original maturities of 90 days or less. r These investments are carried at cost which approximates market value. 1 Pro l&=,Plant and E ui ment Property,plant and equipment is recorded at cost,including all direct and certain indirect costs associated with the construction of cable transmission and distribution facilities,and the cost of new customer t ------installation. The costs of disconnecting customers are charged to expense in the period incurred_ Expenditures for repairs and maintenance are.charged to expense as incurred,and equipment replacement w:.costs and betterments are capitalized. Property,plant and equipment is depreciated on a straight-line basis over the estimated useful lives of the related assets as follows: Cable distribution systems stems 5-15 years _ - _ Buildings and leasehold improvements 5-15 years Premium subscription units 3-5 years Vehicles and equipment 3-5 years _ ? _ During 1997 and 1996, the Company shortened the estimated useful lives of certain property,plant and equipment for depreciation purposes. As a result, an additional 5658,000 and 5''71,000 of depreciation was recorded during 1997 and 1996, respectively. Franchise Costs Costs incurred in obtairung and renewing cable franchises are deferred and amortized over the lives of the franchises. Costs relating to unsuccessful franchise applications are charged to expense when it is determined that the efforts to obtain the franchise will not be successful. Franchise rights acquired through the purchase of cable television systems represent the excess of the cost of properties acquired over the amounts assigned to net tangible assets at the date of acquisition. Acquired franchise rights are amortized using the straight-line:method over 15 years. Other Assets Organizational costs are being amortized on a straight-line basis over five years. Debt issuance costs are being amortized over the term of the related debt. The covenant not to compete agreement was amortized on a straight-line basis over the five year term of the agreement. Impairment of Assets If the facts and circumstances suggest that a long-lived asset may be impaired,the carrying value is reviewed. If a review indicates that the carrying value of such asset is not recoverable as determined based on projected undiscounted cash flows related to the asset over its remaining life,the carrying value of such asset is reduced to its estimated fair value. Service Revenues Management fees,acquisition fees and cable service revenues are recorded when the related services are provided. Charter does not recognize revenues associated with deferred management fees for agreements entered into during 1995,1996 and.1997,because the cable systems managed by Charter are restricted from making payments due to provisions contained in their debt agreements. The deferred management fees will be recognized(if ever)when ultimately received. Installation service revenues are recognized to the extent of direct selling costs incurred. The remainder,if any,is deferred and amortized to income over the average estimated period that customers are expected to remain connected to the cable television system. No installation service revenue has been deferred as of December 31,1997 and 1996,and direct selling costs have exceeded installation service revenue. Fees collected from programmers to guarantee carriage are deferred and amortized to income over the life _of the contracts. Franchise fees collected from cable subscribers and paid to local franchises are reported as service revenues. r Interest Rate Hedge Aereements r The Company manages fluctuations in interest rags by using interest rate hedge agreements as required by certain of its debt agreements. The interest rate caps and collars are accounted for as hedges of debt obligations,and accordingly,the net settlement amounts are recorded as adjustments to interest expense in the period incurred. Premiums paid for interest rate caps are deferred,included in other assets and are amortized over the original term of the interest rage agreement as an adjustment to interest expense. J Interest rate caps and collars are entered into by the Company to reduce the impact of rising interest rates on floating rate debt. The Company's participation in interest rate hedging transactions involves instruments that have a close correlation with its debt, thereby managing its risk. Interest rate hedge agreements have been designed for hedging purposes and are not held or issued for speculative purposes. Income Taxes Income taxes are recorded in accordance with SFAS No. 109,"Accounting for Income Taxes." Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. ACQUISITIONS: Charter Acquisitions In January 1995,Charter acquired limited partnership interests in Cencom Cable Income Partners,L.P. (CCIP),Cencom Cable Income Partners U,L.P. (CCIP II) and Cencom Partners,L.P. (CPLP)and an option to purchase an equity interest in Cencom Cable Television,Inc. for approximately$12.6 million. During 1995, Charter exercised this option and thereafter sold its equity interest to a related party. CCP Acquisitions In 1995,CCP,a wholly owned subsidiary of Charter Communications Properties Holdings Corp. (CCP Holdings),a wholly owned subsidiary of Charter,acquired cable television systems for an aggregate purchase price,net of cash acquired,of approximately$29.4 million(including a$9.4 million unsecured seller note executed by CCP Holdings). The excess of the cost of properties acquired over the amounts assigned to net tangible assets at the date of acquisition was$18.4 million and is included in Franchise costs. In 1996,CCP acquired cable television systems in three separate transactions for an aggregate purchase price,net of cash acquired,of approximately$34.1 million. The excess of the cost of properties acquired over the amounts assigned to net tangible assets at the date of acquisition was$24.3 million and is included in Franchise costs. ± SALE OF CABLE TELEVISION SYSTEMS: In February 1997,CCF'sold the net assets of the Ft Hood system,which served approximately 5,900 basic subscribers in Texas,for an aggregate sale price of approximately$12.5 million. The sale of the Ft Hood system resulted in a loss of$1,363,415,which is included in Other,net in the accompanying statement of operations for the year ended December 31,1997. `a _ 1 _ 4. PROPERTY.PLANT AND EQUIPMENT, net: Property,plant and equipment,net consists of the following at December 31: 1997 1996 Cable distribution systems $26,143,984 $27,230,310 Land,buildings and leasehold improvements 925,286 1,208,421 Premium subscription units 2,916,942 2,947,066 Vehicles and equipment 5,002,595 3,926,413 34,988,807 35,312,210 Less- Accumulated depreciation (7,367,954) (4,383,209) $27,620,853 5 30,929,001 5. OTHER ASSETS,net:: Other assets,net consist:of the following at December 31: 1997 1996 Covenant not to compete,net of accumulated amortization of$-0-and$112,.658,respectively $ - $ 147,342 Organizational costs,net of accumulated amortization of $155,096 and$1,09,325,respectively 86,290 142,062 Debt issuance costs,net of accumulated amortization of $304,677 and$113,059,respectively 798,012 935,694 Long-term deposits 130,650 130,650 Other receivables - 150,000 $1,014,952 $1,505,748 6. INVESTMENTS IN UNCONSOLIDATED ENITI'IFS: Investments in unconsolidated entities consist of the following at December 31: 1997 1996 Carried on the Equity Method CCIP(limited partnership interest) _. _ _ $ 193,606 $ 193,606 CCIP II(limited partnership interest) - 300,584 " CPLP(limited partnership interest) 4 ,339 887,895 • CCIP(general partnership interest) - CPLP(general partnership interest) - - - - - 47,580 CharterComm,LL C - CharterComm II,LLC - Carried on the Cost Method CCA Holdings and CCT Holdings 7,700,000 7,700,000 CC-LB 3,000,000 - Worldgate 500,000 - TeleSynergy,Inc. 25,000 25,000 $11,912,525 $9,107,085 - J - Losses in excess of equity investments in partnerships consist of the following at December 31: 1997 1996 CCIP II (general partnership interest) $ - $ 64,521 CPLP(general partnership interest) - 190,803 $ - $255,324 CCA Holdings and C Holdings In 1995,Charter acquired 15°10 common stock equity interests in both CCA Holdings and CCI'Holdings for $7.7 million. CCA Holdings and CCT Holdings maintain indirect investments in limited partnerships providing cable television service to approximately 523,300 basic subscribers in California,Connecticut, Illinois, Massachusetts,Missouri and New Hampshire. CC-LB In 1997,Charter acquired a 15% common stock equity interest in CC-LB for$3.0 million. CC-LB maintains a direct investment in Long Beach Acquisition Corp. which provides cable television service to approximately 71,000 basic subscribers in southern California. CCIP In March 1996,CCIP liquidated its assets in accordance with its partnership agreement In connection therewith,the Company recorded distributions,including interest,of approximately$7.0 million for its limited partnership interests and$2.5 million for its general partnership interest The Company anticipates an additional distribution in the amount equal to its investment balance in CCIP. CCIP II and CPLP In accordance with the CCIP II partnership agreement,Cencom Properties II,Inc.(Cencom Properties II), the general partner of CCIP II and a wholly owned subsidiary of CC II Holdings,is in the process of a complete and orderly dissolution of CLIP II which includes the disposition of CCIP Ts assets through the sale of its cable television systems. Concurrent with the disposition of CCIP II's assets,including its 84% ownership interest in CPLP,CPLP is disposing of its assets through the sale of its cable television systems to facilitate the liquidation of CCIP II. During 1997,CLIP II and CPLP sold a portion of their cable systems resulting in distributions to their limited partners. During 1997,Charter received distributions of approximately$548,200 related to its limited partnership interests in CCIP H. .,w,.�M"`r-a'n ..-T.a...,.. .,,.,•,.r..- .- .. ... _. <- ...-.-.. —. ._ ..-s--a-. .:.r,a...`Y.+1.—rr.:,or^�..�+rs.�w:«m•..:waM,»ws w,.'�±.+�.:.ou.r:�- - ..+.u'W During 1997,Charter received distributions of approximately$6,994,100 related to its limited partnership - - -interests in CPLP. — - In 1994,Charter purchased a 1% general partnership interest in CCIP II and a 1.5% general partnership interest in CPLP. During 1997,Charter recorded a net gain of approximately$64500 related to its general partnership interest in CCIP IL Charter received a distribution of approximately$98,800 and recorded a net gain of approximately$337,200 related to its general partnership interest in CPLP_ The losses in excess of equity investments in these partnerships on the Company's consolidated balance sheet at December 31, 1996,represent Charter's recognition of cumulative losses in excess of its equity contnbutions. - 6 - CharterComm, LLC and CharterComm II,LLC Charter has invested approximately 54,674,900 (including 52,256,900 during 1997) in CharterComm, LLC (CharterComm) and CharterComm II,LLC (CharterComm II), which together indirectly own approximately 81°0 of the interests in Charter Communications,L.P. and Charter Communications H,L.P., both limited partnerships which together provide cable television service to approximately 432,200 basic subscribers in Alabama,Georgia,Kentucky,Louisiana,North Carolina,South Carolina and Tennessee. At December 31,1997,Charter's investments in CharterComm and CharterComm H have been reduced to 5-0- to reflect cumulative losses through December 31,1997. 7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following at December 31: 1997 1996 Salary and related benefits $2,295,790 $2,087,349 Medical insurance claims reserve 806,5 ' 1,280,323 Accounts payable 583,142 308,427 Capital expenditures 561,501 1,646,342 Franchise fees 426,018 513,032 Accrued programming 398,084 389,442 Accrued interest 293,194 405,704 Other 3,828,064 1,151,006 $9,192,315 $7,781,625 8. LONGTERM DEBT: Long-term debt is as follows at December 31: 1997 1996 Revolving credit:agreement,variable interest rate(a) $41,500,000 $49,775,000 Promissory seller note,due September 30,2005,varying 13,089,541 11,283,650 interest rates(b) Revolving credit:agreement,dated December 1996, 3,200,000 5500,000 maturing June 1998,variable interest rate(c) Promissory note:,due upon sale of certain assets, noninterest bearing(d) - 3,255,000 Promissory note,due October 31,2004,interest increasing 3,080,000 --from 8% to 15% over period-of note(e) 4.,�,...-- - - 459,167 459,167 Promissory note,due on demand,noninterest bearing(f) - --- - Promissory note,due September 1,1997(g) 2,153,342 2,222,955 2,041,669 Promissory note(h) 60,471,663 77,547,828 Less- Current maturities of long-term debt 3,659,167 8,947,509 Long-germ debt $56,812,496 $68, __--__--_ _ 7 (a) CCP maintains a revolving credit agreement(the"CCP Credit Agreement")with a consortium of banks for borrowings up to$47,300,000, of which$41,500,000 was outstanding at December 31, 1997. In 1997, the Credit Agreement was amended to reflect the impact of the sale of a cable television system. The debt bears interest, at the Company's option,at rates based on the prime rate of the Bank of Montreal(the agent bank), or LIBOR,plus applicable margins based upon CCP's leverage ratio at the time of the borrowings. The variable interest rates ranged from 7.44 030 to 7.63°o and 7.38 1 o to 7.50°10 at December 31, 1997 and 1996,respectively. Borrowings under the CCP Credit Agreement are subject to certain financial and nonfinancial covenants and restrictions, the most restrictive of which requires the maintenance of a ratio of total debt to annualized operating cash flow of 5.5 to 1 at December 31,1997. Borrowings under the Credit Agreement are collateralized by the assets of CCP. In addition,CCP Holdings has pledged its equity interest in CCP as additional security to the Credit Agreement. A quarterly commitment fee of 0.375% per annum is payable on the unused portion of the CCP Credit Agreement. Commencing,June 30, 1998,and at the end of each calendar quarter thereafter, available borrowings under the CCP Credit Agreement shall be reduced on an annual basis by 4.7 0/0 in 1998, 10 d 6.5% in 1999,10.7% in 2000,13.4 n an . ° in 2002. Based upon the outstanding indebtedness at December 31,1997, and the schedule reductions in available borrowings detailed in the CCP Credit Agreement,aggregate future principal payments on the Credit Agreement at December 31,1997,are as follows: Year Amount 1998 $ - 1999 - 2000 - 2001 3,297,500 20,02 9,528,500 Thereafter 28,674,000 $41,500,000 (b) In connection.with a 1995 acquisition,CCP Holdings entered into a$9,447,390 promissory seller note with CCT Holdings. The promissory seller note bears interest at the following rates: Year Interest Rate Years 1-5 12% Year 6 15% -Year 7 ,.,_ � - r-.. ..17% Year 8 21% -- Year 9 - Year 10 23% Interest expense has been accrued based on an average rate of interest over the life of the promissory seller note,which approximates 15.43%. The balance at December 31,1997,includes , accrued it t .-est of$3,642,151. - - t - s - (c) In December 1996, Charter entered into a revolving credit agreement(the"Charter Credit Agreement")with a bank for borrowings up to 512,000,000. The Charter Credit Agreement is collateralized by the assets of the Company. Interest on the credit agreement is based on the lender's Corporate Base Rate plus .75;0 or the LIBOR rate plus 3.25"a when borrowings on the agreement are under$6,000,000. Interest is based on the lender's Corporate Base Rate plus 1.0°0 or the LIBOR rate plus 3.5°0 when the commitment is in excess of$6,000,000. Interest is payable quarterly in arrears. (d) The promissory note with a related party was settled in connection with the transaction discussed in Note 16. (e) The promissory seller note was assumed by CharterComm II in connection with the transaction discussed in Note 16. (f) This note represents one-half of Cencom Properties H's general partner capital contribution to CCIP II. This note is payable on demand to CCIP II. (g) In February 1996,in connection with a settlement agreement,Charter entered into a promissory note for which principal and interest was due and paid in full on September 1,1997(see Note 10). (h) In August 1996,in connection with two separate settlement agreements, Charter entered into two promissory notes for which principal and interest are payable in full as soon as permitted out of available funds of the Company within a period not to exceed 10 years from the date of the notes. The notes bear interest at 9.25°0. The interest rate on one of the promissory notes doubles after the fifth anniversary of this note. The balance at December 31,1997,includes accrued interest of $254,420 (see Note 10). Aggregate future principal payments required on outstanding debt at December 31,1997,are as follows: Year Amount 1998 $ 3,659,167 1999 _ 2000 2001 3,297,500 2002 9,528,500 Thereafter 43,986,496 $60,471,663 9 _ 9. SHAREHOLDERS' INVESTMENT: Common Stock Common stock consists of the following at December 31: 1997 1996 Class A Voting Common Stock,$.01 par value, 160,000 shares authorized,14,700 issued and outstanding $147 $147 Class B Voting Common Stock,$.01 par value, 20,000 shares authorized, 7,350 issued and outstanding 74 74 Class C Non-Voting Common Stock,$.01 par value, 5,000 shares authorized,16.079 shares issued and outstanding - Class D Non-Voting Common Stock,$-01 par value,20,000 shares authorized,0 shares issued and outstanding " Class E Non-Voting Common Stock,$.01 par value,20,000 shares authorized,5,495.921 shares issued and outstanding 55 35 Non-Voting Common Stock,$.01 par value, 0 shares authorized,issued - - and outstanding; $276 $276 Preferred Stock Preferred stock consist;;of the following at December 31: 1997 1996 Preferred stock,$.01 par value,20,000 shares authorized,0 issued and outstanding $ $ __ __ The Class B Voting Common Stock(Class B Common Stock)has certain preferential rights upon liquidation of Charter. Subject to the rights of the holders of any Preferred Stock,in the event of liquidation,dissolution or"winding up" of Charter,holders of Class B Common Stock are entitled to a preference of$680 per share. After such amount is paid,holders of Class A Voting Common Stock(Class A Common Stock),Class C Non-Voting Common Stock(Class C Common Stock),Class D Non-Voting Common Stock(Cuss D Common Stock)and Class E Non-Voting Common Stock(Gass E Common Stock)are entitled to receive $680 per share. Thereafter,all shareholders shall ratably receive the remaining proceeds. If upon liquidation,dissolution or"winding up"the assets of Charter are insufficient to permit payment to Gass B shareholders for their full preferential amounts,all assets of Charter shall then be distributed ratably. Furthermore,if the proceeds from liquidation are inadequate to pay Class A,C,D and E shareholders their full preferential amounts,the proceeds are to be distributed on a pro rata basis to these shareholders. ' Upon the occurrence of any Conversion Event(as defined within the Amended and Restated Certificate of Incorporation)Gass C and E shareholders may convert any or all of their outstanding shares into the same number of Class A shares. Furthermore,upon the occurrence of any Conversion Event,Charter may automatically convert:outstanding Class C shares into the same number of Gass A shares. Charter is restricted from paying cash dividends on its common stock by its revolving credit agreement - 10 - Preferred Stock Charter is authorized to issue 20,000 shares of Preferred Stock with par value of$.01. No Preferred Stock has been issued as of December 31, 1997. Warrants Charter has issued warrants to purchase Class D Common Stock. The warrants are exercisable upon sale of all the outstanding common stock of Charter,sale of substantially all of the assets of the Company,or public offering of Charter's common stock. Furthermore, the warrants shall not be exercisable until the aggregate common equity value of Charter exceeds$90 million,net of the value attributable to stock appreciation rights. The warrants are not exercisable as of December 31,1997. 10. RELATED-PARTY TRANSACTIONS: The Company provides management and other services under contracts to entities managed by Charter. The associated revenues recorded by the Company for the years ended December 31,1997,1996 and 1995, were$14,944,835,$13,447,488 and 513,073,432, respectively. Receivables from cable television systems managed by Charter primarily consist of management fees due under the related agreements. The Company received acquisition fees from entities managed by Charter of$981,875,$2,87/ ,500 7,500 and $1,500,000 during 1997,1996 and 1995,respectively, in connection with the search,investigation and negotiation of cable television systems acquired. In 1997 and 1996,Charter's National Data Center(the"National Data Center"),which performs certain subscriber billing services and provides computer network,hardware and software support to entities managed by Charter,allocated expenses of approximately$1,400,600 and$836,400,respectively. All costs incurred by the National Data Center are allocated to the entities managed by Charter based on the number of subscribers. In addiition,the National Data Center leases office space from Charter Communications Entertainment I,L1'. (CCE-I),an entity 15% indirectly owned and managed by Charter. Rent expense under this lease totaled approximately$212,700 and$141,800 for the years ended December 31,1997 and 1996,respectively. Charter and entities managed by Charter collectively utilize a combination of insurance coverage and self-insurance programs for medical,dental and workers'compensation claims. Charter performs certain administrative duties,including the allocation of such charges to the affiliated entities and funding of the disbursement account. The costs are allocated monthly based upon the total number of employees, historical claims and medical cost trend rates. During 1997,1996 and 1995,the Company expensed approximately$426,600,$454,300 and$236,100,respectively,relating to insurance allocations. During 1997,1996 and 1995,certain costs,otherwise chargeable to CPLP in connection with the operation of certain of its systems,were borne by Charter,resulting in additional expense of approximately$52,200, $122,000 and$125,000,respectively: Charter is not obligated to make such payments in the future. -- Severance In February 1996,Charter and other entities managed by Charter entered into a settlement agreement and mutual release with a former employee and an entity jointly owned by the former employee and indirectly by CharterComm. In accordance with this agreement,the former employee is entitled to a severance package from Charter comprised of a cash payment of$1,250,000,an 18-month promissory note for $1,999,000(see Note 8),and forgiveness of$126,000 in debt outstanding under a promissory note. In August 1996,Charter entered into separate settlement agreements with two former employees. In accordance with these agreements,the former employees are entitled to receive$1,968535 of principal and interest pursuant to promissory notes issued by Charter(see Note 8). 11. COINiN1I'TMENTS AND CONTINGENCIES: Leases The Company leases certain facilities and equipment under noncancelable operating leases. Rent expense incurred under these leases during 1997,1996 and 1995 was approximately$1,354,200,$908,000 and $415,000,respectively. Future minimum lease payments are as follows: 1998 $1,427,200 1999 1,366,900 2000 1,085,000 2001 838,600 2002 870,100 Thereafter 242,000 The Company rents utility poles in its operations. Generally, pole rental agreements are short-term,but the Company anticipates that such rentals will recur. Rent expense incurred for pole attachments for the years ended December 31,1997,1996 and 1995,were approximately 5271,000,$175,100 and$2,600,respectively. Litigation Charter is a named defendant in a purported class action lawsuit(the"Action")filed in October 1995 on behalf of the CCIP limited partners. The Action named as defendants the general partner of CCIP,the purchasers of all the systems previously owned by CCIP(which includes certain entities managed by Charter)and certain individuals,including the directors and executive officers of the general partner of CCIP. On February 1;5,1996,all of the plaintiffs claims for injunctive relief were dismissed(including that which sought to prevent the consummation of cable television sales by CCIP);the plaintiffs claims for money damages which may have resulted from sale by CCIP of its assets remain pending. Based upon, among other things,the advice of Counsel,each of the defendants to the Action believes the Action to be without merit and is contesting it vigorously. In October 1996,the plaintiff filed a Consolidated Amended Class Action Complaint(the"Amended Complaint"). The general partner of CCIP believes that portions of the Amended Complaint are legally inadequate and in January 1997,filed a motion for summary judgment to dismiss all remaining claims in the Action. In October 1997,the court granted in part and denied in part defendants motion for summary judgment,the effect of which narrowed the remaining issues significantly. The plaintiff filed a motion to alter or amend the court's order which was denied.There can be no assurance,however,that the plaintiff will not be awarded damages in connection with the Action,some or all of which may be payable by Charter. Charter and certain of its subsidiaries are named defendants in two actions involving an affiliate of Charter, CCIP II,a public limited partnership. In April 1997,a complaint was filed,and two amended complaints subsequently filed,by plaintiffs who are limited partners of CCIP II against Cencom Properties II,Inc.,the general partner of CCIP II,Cencom Partners Inc.,the general partner of C PL.P,an entity in which CCIP II invested,certain named brokerage firms involved in the original sale of the limited partnership units and certain other affiliates of Charter. The plaintiffs allege that the defendants breached fiduciary duties and the terms of the CCIP,II partnership agreement in connection with the investment in C PLP,the management of certain CCIP II assets and the sale of certain CCIP II assets. The plaintiffs seek recovery of the consideration paid for their partnership units,restitution of all profits received by the defendants in connection with the C. II transaction and punitive damages. In June 1997,a purported class action was - - filed on behalf of the limited partners of CCIP 11 against Cencom Properties II,Charter,certain other - 12 - affiliates of Charter and certain individuals,including officers of Charter or Cencom Properties II. The plaintiffs allege that the defendants breached fiduciary duties and the terms of the CCIP E partnership agreement in connection with the investment in CPLP, the management of certain CCIP 11 assets and the sale of certain CCIP II assets. The damages claimed by the plaintiffs are as yet unspecified. Charter believes that it has meritorious defenses in both actions and intends to defend the actions vigorously. Charter is not able to project the expenses which will be associated with the actions or to predict any potential outcome or financial impact. Charter is also a party to lawsuits which are generally incidental to its business. In the opinion of management,after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the Company's financial position or results of operations. 12. RATE REGULATION IN THE CABLE TELEVISION INDUSTRY: The cable television industry is subject to extensive regulation at the federal, local and,in some instances, state levels. In addition,recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. Congress enacted the Cable Television Consumer Protection and Competition Act of 1992(the"1992 Cable Act"),which became effective on December 4,1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition,nearly all cable systems in the United States are subject to rate regulation of basic cable services,provided the local franchising authority becomes certified to regulate basic service rates. The 1992 Cable Act and the Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act have generally increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local franchise authorities. While management believes that the Company has complied in all material respects with the rate provisions of the 1992 Cable Act,in jurisdictions that have not yet chosen to certify,refunds covering a one-year period on basic services may be ordered upon future certification if the Company is unable to justify its rates through a benchmark or cost-of-service filing or small system cost-of-service filing pursuant to FCC rules. Management is unable to estimate at this time the amount of refunds,if any,that may be payable by the Company in the event certain of its rates are successfully challenged by franchising authorities or found to be unreasonable by the FCC. Management does not believe that the amount of any such refunds would have a material adverse effect on the consolidated financial position or results of operations of the Company. During 1996,Congress passed and the President signed into law the Telecommunications Act of 1996 (the "Telecommunications Act")which alters federal,state,and local laws and regulations pertaining to cable television,telecommunications and other services. Under the Telecommunications Act,telephone companies can compete directly with cable operators in the provision of video programming. This new legislation recognizes several multiple entry options for telephone companies to provide competitive video `programming. �-»w,+ ..�a;r. .r-.-.,..wc �...-,X..•�. . ,. _ .__ Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by the Company. Although the new legislation may substantially lessen regulatory burdens,the cable television industry may be subject to additional competition as a result thereof. There are numerous rule-makings to be undertaken by the FCC which will interpret and implement the Telecommunications Act's provisions. In addition,certain provisions of the Telecommunications Act(such as the deregulation of cable programming rates)are not immediately effective. Further,certain of the Telecommunications Act's provisions have been and are likely to be subject to judicial challenges. Management is unable at this time to predict the outcome of such rule-makings or litigation or the substantive effect of the new legislation and the rule-makings on the consolidated financial position or results of operations of the Company. - 13 - 13. FAIR VALUE OF FNANCIAL INSTRUNIENI TS: A summary of debt and the related interest rate hedge agreements at December 31,1997,is as follows: Carrying Notional Fair Value Amount Value Debt CCE Credit Agreement 5 41,500,000 $ - $41,500,000 Charter Credit Agreement 3,200,000 - 31200,000 Interest Rate Hedge Agreements Caps - 15,000,000 648 Collars - 20,000,000 (73,539) As the Credit Agreement bears interest at current market rates,its carrying amount approximates fair market value at December 31,1997. The weighted average interest rate for interest rate cap agreements was 8.45% at December 31, 1997. The weighted average interest rates for interest rate collar agreements were 8.63°o and 7.21% for the cap and floor components,respectively,at December 31,1997. The notional amounts of interest rate hedge agreements do not represent amounts exchanged by the parties and, thus,are not a measure of the Company's exposure through its use of interest rate hedge agreements. The amounts exchanged are determined by reference to the notional amount and the other terms of the contracts. The fair value of interest rate hedge agreements generally reflects the estimated amounts that the Company would receive or pay(excluding accrued interest)to terminate the contracts on the reporting date,thereby taking into account the current unrealized gains or losses of open contracts. Dealer quotations are available for the Company's interest rate hedge agreements. Management believes that the sellers of the interest rate hedge agreements will be able to meet their obligations under the agreements. The Company has policies regarding the financial stability and credit standing of major counterparties. Nonperformance by the counterparties is not anticipated nor would it have a material adverse effect on the results of operations or the financial position of the Company. 14. EMPLOYEE BENEFIT PLANS: Stock Appreciation Rights Plan Certain employees of the Company participate in the 1995 Charter-Communications,Inc.Stock -- - Appreciation Rights Plan(the"SAR Plan"). The SAR Plan permits the Company to grant 1,500,000 units to certain key employees,of which 1,251,500 were outstanding at December 31,1997. Units received by an ; employee vest at a rate of 20% per year,unless otherwise provided.in the participartfs Stock Appreciation Rights Unit Agreement. The stock appreciation rights entitle the participants to receive payment,upon termination or change in control of the Company,of the excess of the unit value over the base value , (defined as the appreciation value)for each vested unit. The unit value is based on the Company's adjusted equity,as defined in the SAR Plan. Deferred compensation expense recorded by the Company is based on the appreciation value since the grant date and is being amortized over the vesting period. - 14 - 401(kl Plan The Company maintains the Charter Communications Inc.401(k) Plan(the"401(k)Plan") for the benefit of its employees. All employees who have attained age 21 and completed two months of employment are eligible to participate in the 401(k) Plan. The 401(k)Plan is a tax-qualified retirement savings plan to which employees may elect to make pretax contributions up to the lessor of 10°0 of their compensation or dollar thresholds established under the Internal Revenue Code. The Company contributes an amount equal to 50 1/0 of the first 5°0 contributed by each employee. During 1997,1996 and 1995, the Company contributed approximately$164,300,$164,500 and$75,000,respectively. 15. INCOME TAXES: Under the liability method specified by SFAS No. 109,a deferred tax liability or asset is determined based on the temporary differences between the financial reporting and tax basis of assets and liabilities as measured by the enacted tax rates which are expected to be in effect when these differences reverse. A valuation allowance must be established for any portion of a deferred tax asset for which it is more likely than not that a tax benefit will not be realized. Charter files a consolidated tax return with its wholly owned subsidiaries. Certain income and expense items are accounted for differently for financial reporting purposes and income tax purposes. Significant components of the Company's deferred tax assets and liabilities at December 31,1997 and 1996,consist primarily of investments in affiliates, accrued expenses and net operating loss carryforwards,resulting in a net deferred tax asset. A valuation allowance has been recorded in an amount equal to the net deferred tax asset as of December 31,1997 and 1996. The Company has net operating loss carryforwards of approximately$8,000,000 for federal income tax purposes at December 31,1997. The net operating loss carryforwards are available to offset future taxable income and expire from 2000 through 2012. Utilization of the net operating loss carryforwards is subject to certain limitations. 16. SIGNIFICANT NONCASH TRANSACTIONS: In February 1997,Charter contributed the net assets of the cable television system to CharterComm II for an additional interest in CharterComm II. Charter exchanged this interest in CharterComm H in settlement of its$3,225,000 promissory note with a related party. 17. SUBSEQUENT EVENT: During 1997,the Company signed a purchase agreement to acquire cable television systems serving approximately 117,000 basic subscribers in California and Utah from Sonic Communications,Inc. Management believes that the acquisition will take place in the second quarter of 1998. �..+. .. ..j.yw•.o.rr.rawi.rvn.n.r.'.-,... .y..r.wa,w-i _rw--4: .x._ a- ... '-'`� .i - 4 ..t r N O N o w I w A .D A U U I Iwu I I w u .. w w U N � ^ m � II Q'a ^I N II � I fq II C N ..I .o a a m m I m u Vy w I w 0 ='! V z ' n n ZI .z U y i 1 p Y H Zl U T O N N a d uppi'C m If1 In 0 N v zl lu' m N U E HU a o In O m < M. zz z O O a Z o 1 'o IL C.Q • V z G Z O C C Z O s •i m G O X �: 9 °+ ma x o G v' 3E �� .°. �° D a o Z pec� A ix U a G �` 0 U to C _ _�'.� T [� tr: ' � n m m [� C'1 Y Ifl h �G i N r; •I II t�?�I R m d I fJ I .r(V � v7 I � � j r N� [� I nl I •-r1 � `^ II i 'll ct ^ ^ Y U H I I I v l V H u it � H I I ri I ry N I I ` H aI _� tD i I N N IN it V�11 ct uNi N 1 I M tl I T W ' ' I M I C A U Z V VI 1 r I I o0 O I N I I I I H A H i Z C G L C z a `' O C � N as °i co. o II"n n a IA I ' n 4- �a�i.11 e ; r FT r NA. -T m r't vo III " A O ( 4ft H A u Q w. C a R . pj C a c u < c Z ri 0 u a x tQj Y , S Y I c 0 o c ju do a ri boo c Z 6 = W P77i d i G G G j E m y d 2 wj �faU OOf�f c c�gp z C4 Federal Communications Commission Approved by OMB 3060-0573 Washington, D.C. 20554 FCC 394 APPLICATION FOR FRANCHISE AUTHORITY CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL OF CABLE TELEVISION FRANCHISE FOR FRANCHISE AUTHORITY USE ONLY SECTION I. GENERAL INFORMATION DATE 1. Community Unit Identification Number. March 1, 1999 CA0108 2. Application for ❑ Assignment of Franchise Q Transfer of Control 3. Franchising authority: San Bemardino City 4. Identify community where the system/franchise that is the subject of the assignment or transfer of control is located: San Bemardino, CA 5. Date system was acquired or(for system's constructed by the transferor/assignor)the date on which 9/30/98 service was provided to the first subscriber in the franchise area: 6. Proposed effective date of closing of the transaction assigning or transfemng ownership of the 6130/99 system to transferee/assignee: 7. Attach as an Exhibit a schedule of any and all additional information or material filed with this application that is Exhibit No. identified in the franchise as required to be provided to the franchising authority when requesting its approval of See Tab C the type of transaction that is the subject of this application. PARTI-TRANSFEROR/ASSIGNOR 1. Indicate the name,mailing address,and telephone number of the transferor/assignor. Legal name of Transferor/Assignor(if individual,list last name first) ACEC Holding Company, LLC Assumed name used for doing business(if any) American Cable Entertainment Mailing street address or P.O.Box Four Landmark Square, Ste 302 City glace ZIP Code Telephone No.(include area code) Stamford CT 06901 203-323-1100 2(a) Attach as an Exhibit a copy of the contract or agreement that provides for the assignment or transfer of control (including any exhibits or schedules thereto necessary in order to understand the terms thereof). If there is only _ an oral agreement, reduce the terms to writing and attach. (Confidential trade, business, pricing:or marketing"""°"""�"°`"' information,or other information not otherwise publicly available,may be redacted.) _ _ Exhibit No. See §5 (b) Does the contract submitted in response to (a) above embody the full and complete agreement between the transferor/assignor and transferee/assignee? ..- :. _._..❑ Yes Q No If No,explain in an Exhibit Exhibit No. See Tab D j:�americanI394transfer1394APP.doc _ September 1996 Page 1 PART II-TRANSFEREE/ASSIGNEE 1.(a) Indicate the name, mailing address, and telephone number of the transferee/assignee it name of Transferee/Assignee(if individual, list last name first) Charter Communications Entertainment II, LLC _sumed name used for doing business(if any) Charter Communications Mailing street address or P.O. Box 12444 Powerscourt Drive, Ste. 400 City State ZIP Code Telephone No. (include area code) St. Louis Missouri 63131-3660 314-965-0555 (b) Indicate the name. mailing address, and telephone number of the person to contact, if other than the transferee/assignee. Name of contact person(list last name first) Joe Camicia Firm or company name(if any) Charter Communications Mailing street address or P.O. Box 2215 W. Mission Road City State ZIP Code Telephone No. (include area code) Alhambra CA 91803 626-537-6100 (c) Attach as an Exhibit the name,mailing address,and telephone number of each additional person Exhibit No. who should be contacted,if any. See Tab E Indicate the address where the system's records will be maintained. otreet address 12444 Powerscourt Drive, Ste 100 City State ZIP Code St. Louis MO 63131 2. Indicate on an attached Exhibit any plans to change the current terms and conditions of service Exhibit No. and operations of the system as a consequence of the transaction for which approval is sought N/A j:\american%394transfer1394APP.doC . Paget SECTION II. TRANSFEREE'S/ASSIGNEE'S LEGAL QUALIFICATIONS 1. Transferee/Assignee is: Corporation a. Jurisdiction of incorporation: d. Name and address of registered agent in jurisdiction b. Date of incorporation: c. For profit or non-for-profit: Limited Partnership a. Jurisdiction in which formed: c. Name and address of registered agent in jurisdiction: b: Date of formation: ❑ General Partnership a. Jurisdiction whose laws govern formation: b. Date of formation: F7Individual 17Other-Describe in an exhibit Exhibit No. X F List the transfereelassignee, and, if the transferee/assignee is not a natural person, each of Its officers, directors, stockholders beneficially holding more than 5%of the outstanding voting shares,general partners,and limited partners holding an equity interest of more than 5%. Use only one column for each individual or entity. Attach additional pages if necessary. (Read carefully -the lettered Items below refer to corresponding lines in the following table.) (a) Name, residence, occupation or principal business,and principal place of business. (If other than an Individual,also show name, address and citizenship of natural person authorized to vote the voting securities of the applicant that it holds.) List the applicant first,officers next,then directors and,thereafter,remaining stockholders and/or partners. (b) Citizenship. (c) Relationship to the transfereelassignee(e.g.,officer,director,etc.) (d) Number of shares or nature of partnership interest (e) Number of votes. (f) Percentage of votes. (a) See Tab G (b) M (d) (e) /f1 j:\american\394transfer\394APP.doc Page 3 3. if the applicant is a corporation or a limited partnership, is the transferee/assignee formed under the laws of,or duly qualified to transact business in,the State or other jurisdiction in which the system operates? 0 Yes ❑ No If the answer is No,explain in an Exhibit Exhibit No. See §2 4. Has the transferee/assignee had any interest in or in connection with an application which has been dismissed or denied by any franchise authority? Yes ❑ No If the answer is Yes,describe circumstances in an Exhibit Exhibit No See Tab H 5. Has an adverse finding been made or an adverse final action been taken by any court or administrative body with respect to the transferee/assignee in a civil, criminal or administrative proceeding, brought under the provisions of any law or regulation related to the following: any felony; revocation,suspension or involuntary transfer of any authority (including cable franchises) to provide video programming services; mass media related antitrust or unfair competition; fraudulent statements to another governmental unit;or employment discrimination? ❑ Yes No If the answer is Yes, attach as an Exhibit a full description of the persons and matters) involved, including an identification of any court or administrative body and any proceeding (by dates and file Exhibit No. numbers,if applicable),and the disposition of such proceeding. N/A 6. Are there any documents, instruments, contracts or understandings relating to ownership or future ownership rights with respect to any attributable interest as described in Question 2(including, but not limited to, non-voting stock interests, beneficial stock ownership interests, options, warrants, debentures)? ❑ Yes 0 No If Yes,provide particulars in an Exhibit - Exhibit No. N/A T. Do documents, instruments, agreements or understandings for the pledge of stock of the transfereeiassignee,as security for loans or contractual performance, provide that (a)voting rights will remain with the applicant,even in the event of default on the obligation; (b) in the event of default,there will be either a private or public sale of the stock;and(c)prior to the exercise of any ownership rights by a purchaser at a sale described In(b),any prior consent of the FCC and/or of the franchising authority,if required pursuant to federal,state or local law or pursuant to the terms of the franchise agreement will be obtained? © Yes ❑ No If No,attach as an Exhibit a full explanation_ Exhibit No. N/A SECTION III-TRANSFEREE'S/ASSIGNEE'S FINANCIAL QUALIFICATIONS 1. The transferee/assignee certifies that It has sufficient net liquid assets on hand or available from ' committed resources to consummate the transaction and operate the facilities for three months. _ Q Yes ❑ No t 2. Attach as an Exhibit the most recent financial statements, prepared In accordance with generally accepted accounting principles,including a balance sheet and income statement for at least one full year, _ -.for the transferaelassignee or parent entity that has been prepared in the ordinary course of business,if any such financial statements are routinely prepared. Such statements, If not otherwise publicly ' available, may be marked CONFIDENTIAL and will be maintained as confidential by the franchise i authority and its agents to the extent permissible under local law. Exhibit No. See §3 J:\american\394transfer1394APP.doc i Page 4 _ SECTION IV -TRANSFEREE'S/ASSIGNEE'S TECHNICAL QUALIFICATIONS Set forth in an Exhibit a narrative account of the transferee's/assignee's technical qualifications, experience and expertise regarding cable television systems, including, but not limited to, summary information about appropriate management ,)nnel that will be involved in the system's management and operations. The transferee/assignee may, but need not, presentative sample of cable systems currently or formerly owned or operated. Exhibit No. See §4 SECTION V- CERTIFICATIONS PART 1 -Transferor/Assignor All the statements made in the application and attached Exhibits are considered material representations,and all the Exhibits are a material part hereof and are incorporated herein as if set out in full in the application. I CERTIFY that the statements in this application are true, complete Signature and'correct to the best of my knowledge and belief and are made in < �J ` J\ good faith. cyl WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE Date PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S.CODE,TITLE March 1, 1999 18,SECTION 1001. Print full name By: Day L. Patterson Sr. Vice President and General Counsel Check appropriate classification: ❑ Individual ❑ General Partner � Officer ❑ Other.Explain: (Indicate Title) °T 11-Transferee/Assignee a statements made in the application and attached Exhibits are considered material representations,and all the Exhibits are a material part hereof aria are incorporated herein as if set out in full in the application. The transfereelassignee certified that he/she: (a) Has a current copy of the FCC's Rules governing cable television systems. (b) Has a current copy of the franchise that is the subject of this application, and of any applicable state laws or local ordinances and related regulations. (c) Will use its best efforts to comply with the terms of the franchise and applicable state laws or local ordinances and related regulations, and to effect changes,as promptly as practicable,in the operation of the system,if any changes are necessary to cure any violations thereof or defaults thereunder presently in effect or ongoing. 1 CERTIFY that the statements in this application are true, complete Signatures and correct to the best of my knowledge and belief and are made In good faith. .:.- ., Y ,..V_._�. ..- ,,.__> . �r..b�. ....._� .n �... ., .�.... AL i WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE Date = . y PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S.CODE,TITLE ` -� March 1, 199 18,SECTION 1001. Printfull name By: Trudi McCollum Foushee Vice President and Senior Counsel Check appropriate classification: - Q ❑ Individual ❑ General Partner Officer ❑Other.Explain: (indicate Title) j:lamerican1394transfer%394APP.doc September 1996 Page 5 i3CHARTER. A Wired World Company- CHARTER COMMUNICATIONS, INC. The management team of Charter communications, Inc. ("Charter") has built charter into one of the most highly respected Multiple Systems Operators ("MSO's") in the United States. The team's collective experience in the cable and telecommunications industry, their receptivity to new ideas, creative thinking and willingness to change, as well as their financial acumen, has proven a successful combination. Charter recognized the importance of rebuilding and reinforcing infrastructure and invested heavily in strengthening its core business and upgrading plant in its service areas. New video services, new modems and high speed services were introduced to consumers and schools. By operating with an intrepreneurial spirit, the management team at Charter set themselves apart with solid commitments not only to technology, but to serving our customers, investing in education and showing a strong interest in our communities. Charter's management team saw to it that millions of dollars were invested in construction of its cable plant fiber optics infrastructure. More than $200 million was spent in 1998. In 1997, Charter introduced Charter PipelineTm, high speed Internet service to customers in California. The company was the first MSO to commercially launch WoridGateTm universal Internet access and e-mail service over cable television in St. Louis, Missouri in the spring of 1998. The cable systems are geographically clustered and are divided into five regions. The clustering contributes to operational and marketing efficiencies as well as improved employee morale and greater responsiveness to communities served by Charter. Overseeing the regions are senior vice presidents to whom broad operational authority is delegated. Senior vice presidents are in daily contact with system managers, and together, they have significant decision-making authority. Charter believes that the best results are achieved when operating decisions are made as close to the customer as possible. - Charter ranks at the top of the cable industry-in all key performance standards and has achieve_ d customer growth that is twice_ the industry average. In five years, Charter. acquired 22 cable systems and..successfully assimilated employees into Charter's culture to provide service that exceeds the customers' expectations. Charter has been honored many times for its fast growth and management received the 1997 Ernst & Young Entrepreneur of the Year award in the category of Communications/Entertainment. - - -- - - - j:4mericanVmnagementdoc ® WART ER A Wired World Company- Charter provides more than 2,800 public and private schools in the communities we serve with fee monthly service as part of the Cable in the Classroom program. Charter committed to equip one site in every consenting elementary and secondary school passed in its service area with Charter PipelineTM' and WorldGateTM' service. Charter's commitment to its communities means hundreds of thousands of dollars in support each year for national charities and local civic and charitable organizations. Charter maintains a special focus on our communities' future leaders — the children — recognizing that television plays an enormous role in influencing the lives and dreams of young people. j%anxvican%managementdoc OCHARER M . T _T 10 A Wired World Company- Jerald L. Kent President & Chief Executive Officer Charter Communications, Inc. Jerald L. Kent is a co-founder, President and Chief Executive Officer of Charter Communications, Inc. and a Managing Partner of Charter Communications Group. Prior to founding Charter, Mr. Kent was an executive officer of Cencom Cable Associates, Inc. He is charged with running the day-to-day activities of the company by directing the operations, MIS, accounting, acquisition and finance activities of Charter. His accomplishments include the engineering of nearly $3 billion of acquisitions during Charter's five year history. Currently Charter serves more than 1.2 million customers. Mr. Kent served as Executive Vice President and Chief Financial Officer of Cencom Cable Associates, Inc., and was responsible for locating, acquiring and financing cable television properties, in addition to overseeing the accounting, finance, management information systems and investor relations departments of the company. Mr. Kent was also responsible for Cencom's California operations. He served Cencom Cable Associates, Inc. as Senior Vice President of Finance from May 1987, Senior Vice President of Acquisitions and Finance from July 1988, and Senior Vice President and Chief Financial Officer from January 1989, and Executive Vice President and Chief Financial Officer in March 1990. He joined Cencom Cable Associates, Inc. in 1983 as Senior Vice President of Corporate Development, to lead the company's acquisition program. During his tenure, Cencom Cable Associates, Inc. grew to a company providing service to over 550,000 subscribers. In connection therewith, he directed acquisitions and related financings totaling over $1 billion. During this time, Cencom was included among Inc. Magazine's list of 500 fastest growing private companies in the United States. From 1979 to 1983, Mr. Kent served with Arthur Andersen & Co., certified public accountants, where he attained the position of tax manager. His duties included consulting on _the^ analysis and structuring of limited partnerships with a major emphasis in sery ing -the media industry. In particular, Mr. Kent developed an expertise in structuring partnership and joint venture agreements. His clients . included Telcom Engineering, Inc.,- T.C. Industries, Inc. and Cencom Cable Associates, Inc. Mr. Kent, a certified public accountant, received his undergraduate and MBA degrees with honors from Washington University, St. Louis, MO. He serves on the Board of Directors of Charter Communications, Inc., CCA Acquisition Corp., CCT Holdings Corp. and CCA Holdings Corp. He served on the board of CableMaxx, Inc. Mr. Kent was honored in the SL Louis Business Joumal's 40 Under 40 edition k3CHARTER_ A Wired World Company_- as one of the St. Louis area's outstanding business leaders under the age of 40. He and Charter co-founders Barry Babcock and Howard Wood were honored as 1997 Regional Entrepreneurs of the Year in Telecommunications and Entertainment. Mr. Kent is a member of the Young Presidents Organizations. He serves on the board of directors of The Magic House, and is chairman of the finance committee of Incarnate Word Church. He serves on the Alumni Association Executive Committee at Washington University. - i 1 j 7 i3CHARTER. A Wired World Company- Barry L. Babcock Chairman of the Board Charter Communications Barry Babcock began his career in the cable industry more than twenty years ago. He is a co-founder and Chairman of the Board Charter Communications, Inc., headquartered in St. Louis, Missouri. Prior to founding Charter, Mr. Babcock was associated with Cencom Cable Associates, Inc. Mr. Babcock was among the founders of Cencom Cable Associates in 1982, serving as Executive Vice President and Chief Operating Officer. He managed the company's in-house legal work, contracts, governmental relations and business matters in the decade from its inception to its sale to Crown Media in 1992. Mr. Babcock joined the cable industry in 1979 when he became Vice President of Telcom Engineering, Inc. of St. Louis, directing Teicom's cable television governmental consulting activities and preparing franchise agreements for numerous municipalities. Prior to that, Mr. Babcock served as Assistant Municipal Counselor in Oklahoma City, Oklahoma. Throughout his -career in the cable television industry, Mr. Babcock has been involved in leadership roles with national telecommunications organizations. He is currently Chairman of the Board of Directors of the Cable Telecommunications Association (CATA). He serves on the board of directors of the National Cable Television Association (NCTA), C-SPAN and is a member of the board of directors of the Cable Advertising Bureau (CAB) and Cable in the Classroom. Mr. Babcock and Charter co-founders Jerald Kent and Howard Wood were honored as 1997 Regional Entrepreneurs of the Year in Telecommunications and Entertainment. He is active in many civic endeavors in the St Louis metropolitan area as a member of the Board of Directors of-the Missouri Historical Society and the St. Louis Civic Entrepreneurs Organization. He also serves on the boards of directors of Mercantile Bank-St Louis and Charter Communications, Inc and various affiliates. is a frequent speaker on topics related to the cable industry. .�� . . .. Mr. Babcock, an attorney, received his undergraduate and Juris Doctorate degrees -- from the University of Oklahoma. He served four years as a line officer in the United States Navy. LICHARTER. A Wired World Company- Kent D. Kalkwarf Senior Vice President & Chief Financial Officer Charter Communications Mr. Kalkwarf joined Charter Communications, Inc. in July 1995 as Vice President, Finance & Acquisitions and was promoted to Senior Vice President of Mergers & Acquisitions in 1996. He was named Senior Vice President & Chief Financial Officer in 1997. He has been instrumental in Charter's acquisition of more than 1.2 million customers. Prior to joining Charter, Mr. Kalkwarf was a senior tax manager for Arthur Andersen, certified public accountants. With Arthur Andersen, Mr. Kalkwarf was primarily involved in the consumer products and telecommunications service lines. Throughout his career, his duties included extensive experience in the mergers and acquisitions area. Mr. Kalkwarf has experience in the formation of partnerships, both in the cable and real estate industries. Mr. Kalkwarf also headed the international tax practice for Arthur Andersen in St. Louis, Missouri where he was involved with international acquisitions and divestitures, along with significant foreign tax credit planning. Mr. Kalkwarf, a certified public accountant, received his undergraduate degree, with honors, from Illinois Wesleyan University. FI i UCHARiER C0,1�IUNICATIO\5' F A Wired World Company- Curtis S. Shaw Senior Vice President, General Counsel & Secretary Charter Communications Curtis S. Shaw joined the Company in February 1997 as Senior Vice President, General Counsel and Secretary, and is responsible for all legal aspects of Charter's business, including major transactions and the duties of the corporate secretary. Prior to joining Charter, Mr. Shaw served as corporate Counsel to NYNEX since 1988. From 1983 until 1988 Mr. Shaw served as Associate General Counsel for Occidental Chemical Corporation, and, from 1986 until 1988, also as Vice President and General Counsel of its largest operating division. Mr. Shaw has 24 years of experience as a corporate lawyer, specializing in mergers and acquisitions, joint ventures, public offerings, financings, and federal securities and antitrust law. Mr. Shaw received a BA with honors from Trinity College and a JD from Columbia University School of Law. ,.-.._:.::r-.:-».....ye..,..w....ter- .--..-:_-,was...a..»- ...,ua?=-v-ac °"w....+f'c�.e...iw+w+.m.<s_aaa. -a ...,:-...>.,:.::.-,-., .. ._ -• . . ,.- - - JOCHARTER. A Wired World Company- David G. Barford Senior Vice President, Operations Urban Regions Charter Communications David Barford is Senior Vice President-Operations, Urban Regions for Charter Communications. Mr. Barford is the senior operating officer for Charter's systems in California and St. Louis overseeing all facets of operations in those cities. He has been with the company since July 1995. Prior to joining Charter, Mr. Barford served in several senior marketing and operation roles at Comcast Cablevision for eight years. His last position at Comcast was Vice President of Operations in the International Division in Mexico, South America, and new Business Development in Europe. During his eighteen year career in the cable industry, Mr. Barford has been involved in leadership roles with various telecommunications organizations. He has served as board member and president of the Southern California Cable & Telecommunications Association and board member of the Southern California Cable Television Marketing Council. Mr. Barford is a graduate of California State University, Fullerton, where he earned his B.A. in Communications. He also holds an MBA from National University. ® . A Wired World Company- Mary Pat Blake Senior Vice President Marketing Charter Communications Mary Pat Blake joined Charter Communications as Senior Vice President of Marketing in August 1995. Prior to joining Charter, Ms. Blake created and operated, then sold Dakota Coffee & Bakery Company. She was president of Blake & Associates, a marketing consulting firm. Her 20 years' experience includes senior management positions in marketing, sales, finance, systems and general management with companies such as General Mills, Pepsico (Taco Bell), Brown Group, and the West Coast Group, strategic marketing consultants. Ms. Blake earned a B.S. degree in Business Administration from the University of Minnesota, an M.B.A. from Harvard Business School and earned election to Phi Beta Kappa. O oHART E R. A Wired World Company' Ralph G. Kelly Senior Vice President, Treasurer Charter Communications Ralph Kelly joined Charter Communications, Inc. in March 1993 as Vice President, Finance, a position he held until April 1994 when he became Chief Financial Officer of CableMaxx, Inc., a wireless cable television operator. Mr. Kelly returned to Charter as Senior Vice President, Treasurer. His present responsibilities include cash management financial reporting. He also assists with Charter's finance and acquisition efforts. Ralph Kelly has worked in the cable industry since 1984 when he joined Cencom Cable Associates, Inc., as Controller. As Controller, Mr. Kelly was responsible for all aspects of accounting and financial reporting for the cable company. Later he served Cencom as Treasurer and was responsible for cash management, loan compliance, budget administration, supervision of internal audit and filing SEC reports. Mr. Kelly also assisted with projects relating to government relations, franchise renewals, acquisitions and equity repurchases. He has served on the accounting Committee of the Board of Directors for National Cable Television Association. He is a certified public accountant. Mr. Kelly was in the audit division of Arthur Andersen & Co. from 1979 until 1984. His clients included privately held businesses, telephone clients and extractive industries. Mr. Kelly received his undergraduate degree in accounting from the University of Missouri-Columbia and his MBA degree from Saint Louis University. J � . T . A Wired World Company- John C. Pietri Senior Vice President, Engineering Charter Communications John C. Pietri joined Charter Communications in November 1998 as Senior Vice President, Engineering. Mr. Pietri has more than 22 years' experience in the cable industry. Throughout his career he has held a variety of technical management positions. Prior to joining Charter, Mr. Pietri was with Marcus Cable in Dallas, TX for eight years, most recently as Senior Vice President and Chief Technical Officer. He was responsible for the technical operations and standards for all of the company's cable systems including; new construction and rebuild/upgrade projects; routine maintenance and installation practices; capital control, purchasing; and regulatory compliance and reporting. Prior to Marcus, he served as Regional Technical Operations Manager for WestMarc Communications headquartered in Denver, CO. He was responsible for managing technical operations, budgeting and purchasing for the company's cable systems in Minnesota, Iowa, North Dakota, and South Dakota. WestMarc served 550,000 customers. Before that, Mr. Pietri served as Operations Manager with Minnesota Utility Contracting. Mr. Pieth is a member of Society of Cable Television Engineers (SCTE) and Cable Television Association for Marketers (CTAM). He has served on the National Cable and Telecommunicantions Association committee for the past two years. Mr. Pietri received his Bachelor of Arts degree in philosophy and mathematics from the University of Wisconsin - Oshkosh. J . A Wired World Companv- Thomas R. Schaeffer Senior Vice President, Operations Western Region Charter Communications Thomas R. Schaeffer joined Charter Communications in September 1997 as Senior Vice President, Operations. He is responsible for all system operations for Charter's Western Region which serves nearly 370,000 customers in the communities of Alhambra, Azusa, Duarte, Long Beach, Norwalk, Pasadena, West Covina and Riverside. Mr. Schaeffer has nearly twenty-five years of experience in the cable industry. Prior to joining Charter, he served as Vice President/General Manager for MEDIAONE (formally Continental Cablevision) in Los Angeles, California. He was responsible for complete profit and loss and capital expenditure for a 350,000 customer base. Prior to MEDIAONE, Mr. Schaeffer served as Regional Vice President, Southern California for CABLEVISION Industries, Chatsworth, CA. He was responsible for CVI's two largest systems, West Valley and Long Beach, serving 180,000 customers with annual cash flow of more than $40 million dollars. He was actively involved in upgrading both operations; increasing channel capacity and plant capability. Mr. Schaeffer earned his undergraduate degree in Marketing from Nichols College, Dudley, Massachusetts and Masters of Business Administration from Claremont College, Claremont, California. J . A Wired World Companv- Trudi McCollum Foushee Vice President and Senior Counsel Charter Communications Trudi M. Foushee has been practicing law in the telecommunications industry for the past eight years. As a partner with Green and Foushee of St. Louis and Washington, D.C., Ms. Foushee served as consultant and regulatory legal advisor to Charter Communications before joining the company in 1996. From 1993 to 1995, Ms. Foushee served as Vice President - Law and Regulatory Affairs for Crown Media, Inc., Dallas, Texas, a division of Hallmark Cards, Inc. Ms. Foushee was responsible for company compliance with the Consumer Protection & Competition Act of 1992 which entailed a massive overhaul of all aspects of the cable business. Ms. Foushee served as lead in-house counsel for Crown Media following the acquisition and consolidation of Crown Media and Cencom Cable Associates corporate headquarters in St. Louis, MO to Crown's headquarters in Dallas, Texas from October 1992 to May 1993. She served as Counsel and Assistant Secretary to Cencom Cable Associates, Inc. of St. Louis, Missouri from May 1990 to September 1992 providing legal.support for human resources, operations, government relations, accounting, customer service and engineering for the INC 500 company. Ms. Foushee was an attorney with Union Electric Company of St. Louis, Missouri from 1987 until 1990. She was a Litigation Associate with Danna, Soraghan, Stockenberg & Shaw of St. Louis from 1986 to 1987 and an Associate with Miller, Loewinger&Associates Chartered of Washington, D.C. from 1982 until 1985. LICHARTER.CAT A Wired World Company- M. Celeste Vossmeyer Vice President, Government Relations Charter Communications M. Celeste Vossmeyer joined Charter Communications in 1995 as Legal Counsel. She was promoted to Vice President and Senior Counsel in January 1997 and to Vice President-Government Relations in October 1998. As Vice President- Government Relations, Ms. Vossmeyer is responsible for local, state and federal issues affecting operations and the cable industry generally. Prior to joining Charter, Ms. Vossmeyer practiced law with Peper, Martin, Jensen, Maichel and Hetlege for six years. She specialized in corporate and municipal law. From 1986 to 1989 she worked as a political consultant specializing in issues related to municipal and state government regulation. Her clients included developers, small business owners, and the St. Louis Homebuilders Association. From 1983 to 1986 she worked as a legislative representative for the St. Louis Homebuilders Association. Ms. Vossmeyer takes an active role in the community and is a member of the St. Louis University Law School Dean's Advisory Committee, a precinct captain for the 28`h Ward of the City of St. Louis, and serves on a number of nonprofit boards, including as legal counsel for the St. Louis Art Museum. Ms. Vossmeyer earned her A.B. (with honors) in political science from Washington University and JD from Saint Louis University. OCHARTER_ A Wired World Comoanv- Joseph A. Camicia Director, Government Relations —Western Region Charter Communications Joseph A. Camicia joined Charter Communications, Inc. in November 1998 as Director, Government Relations. Mr. Camicia has more than 18 years' experience in the cable industry. Prior to joining Charter, Mr. Camicia served as Director, Corporate Government and Public Relations for Marcus Cable. He was responsible for all facets of government and public relations including oversight of corporate communications, franchise renewals, franchise transfers and advocacy at the state and federal levels of government. Prior to Marcus, Mr. Camicia served as Director Government Relations with Crown Media, Inc. Prior to that, he was appointed Senior Consultant to the Assembly Rules Committee of the California Legislature. His responsibilities included development and distribution of Cal-SPAN, a statewide cable-delivered service not unlike C-SPAN. During this time Mr. Camicia also produced the Assembly's first- ever, statewide, interactive video legislative hearings. Mr. Camicia takes an active role in the cable industry and serves on three different government or telephony related committees of the National Cable Telecommunications Association (NCTA). He has been a speaker and panelist on cable television issues at meetings of the National League of Cities, National Association of Broadcasters, Cable Television Administration and Marketing Society. Mr. Camicia holds a BA degree in broadcasting from San Francisco State University. L3CHARTER. A Wired World Company- Rob Schwietz Vice President, Operations-Long Beach, CA Charter Communications Robert Schwietz joined Charter Communications in September 1991 as Marketing Manager. He has also held the positions of Director, Marketing and Vice President, Marketing before being named Vice President, Operations. Mr. Schweitz is responsible for managing operations for the company's Long Beach office which serves more than 76,000 customers. Mr. Schweitz has more than 14 years' experience working in the cable industry. Prior to joining Charter, Mr. Schweitz was with Continental Cablevision for four years, most recently as Direct Sales Supervisor. Prior to Continental, he was with Copley/Colony for four years, most recently as Marketing Manager. Mr. Schweitz holds a degree in communications from University of Minnesota. A