HomeMy WebLinkAbout10 - Transfer Agreement Relating to Time Warner & AdelphiaCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 10
June 27, 2006
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: City Manager's Office
Dave Kiff, Assistant City Manager
9491644 -3002 or dkiff @city.newport- beach.ca.us
SUBJECT: CABLE TELEVISION: RESOLUTION 2006 -_, MEMORANDUM OF
UNDERSTANDING, SETTLEMENT AND MUTUAL RELEASE
AGREEMENT, AND CONSENT TO TRANSFER AGREEMENT
RELATING TO TIME WARNER AND ADELPHIA
ISSUE:
Should the City accept a negotiated settlement agreement with Time Warner and
Adelphia and further consent to a transfer of the Adelphia cable television franchise to
Time Warner?
RECOMMENDATION:
1. Adopt Resolution 2006 - consenting to a transfer of a franchise for cable television
from Adelphia to Time Warner; and
2. Authorize the Mayor or the City Manager to execute any documents relating to the
transfer, including but not limited to a Memorandum of Understanding, a Settlement
and Mutual Release Agreement, and a Consent to Transfer Agreement.
DISCUSSION:
Adelphia has held a franchise to operate a cable system in about 60% of the community
for the past several years. Prior to Adelphia's arrival, Comcast held the franchise over
the same territory. Cox Communications holds a franchise for the roughly 40% of the
City not served by Adelphia. Recent data on how many subscribers each company has
in Newport Beach is on the next page.
In 2002, Adelphia filed for bankruptcy. In April of 2005, TWI and Comcast agreed to
acquire Adelphia for $17.6 billion through a deal with Adelphia's creditors. In June
2005, the FCC received a submittal by TWI and Comcast to jointly acquire (and transfer
associated licenses and documents from) Adelphia. Part of the FCC process involves
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 2
the companies' (in our case, TWI, because TWI will take over Adelphia's west coast
systems and Comcast will take its east coast systems) asking our consent to approve
the Application whereby TWI would takeover the Franchise that Adelphia holds.
# of homes passed in Franchise Area 31,123 13,900 •45,023
# of cable N subscribers 16,978 10,100 27,078
% of homes passed that subscribe to caole 55% 73% 60%
City Concerns in Late 2005 and Early 2006. To approve the Transfer, the applicant
must demonstrate, among other things, that it is a legally, technically, and financially
qualified applicant. To properly analyze the financial qualifications, it is important to
look at, among other things, the personal wealth of the Proposed Transferee, the
economic reasonableness of the transaction to determine whether the transaction will
impose unreasonable financial burdens upon the purchaser, the borrowing capacity of
the Proposed Transferee, and financal obligations of the Proposed Transferee. This is
important because if the applicant is unqualified, it could result in material rate increases
beyond that associated with normal operation of a cable system, reduction in service
quality based upon cost cutting and expense minimalization, a combination thereof, a
premature sale of the system, or financial insolvency.
As part of the City's analysis of the: proposed Transfer, the City tendered numerous
information requests to the parties submitting the Application (the "Applicants ") relating
to the legal, technical, and financial qualifications of the Proposed Transferee, and the
potential impact on rates and services. As a result of the City's concerns about not
receiving the material it requested, the City Council adopted Resolution 2006 -7 on
January 24, 2006 that rejected (and a separate resolution [2006 -8] that conditionally
approved) the Adelphia to Time Warner transfer. For more information about the
rejection decision, see the 1 -24 -2006 staff report associated with these two resolutions
(look for these on the City's website at www.city.newport- beach.ca.us).
-- 1999 (Calendar Year)
$
656,558
$
266,671
$
923,229
--2000
$
722,714
$
280,602
$
1,003,316
- -2001
$
705,709
$
395,824
$
1,101,533
--2002
$
714,762
$
394,732
$
1,109,494
- -2003
$
640,330
$
470,404
$
1,110,734
--2004
$
766,343
$
494,411
$
1,260,753
-- 2005 (to date, includes 4th Q'04)
$
411,480
$
402,014
$
813,494
City Concerns in Late 2005 and Early 2006. To approve the Transfer, the applicant
must demonstrate, among other things, that it is a legally, technically, and financially
qualified applicant. To properly analyze the financial qualifications, it is important to
look at, among other things, the personal wealth of the Proposed Transferee, the
economic reasonableness of the transaction to determine whether the transaction will
impose unreasonable financial burdens upon the purchaser, the borrowing capacity of
the Proposed Transferee, and financal obligations of the Proposed Transferee. This is
important because if the applicant is unqualified, it could result in material rate increases
beyond that associated with normal operation of a cable system, reduction in service
quality based upon cost cutting and expense minimalization, a combination thereof, a
premature sale of the system, or financial insolvency.
As part of the City's analysis of the: proposed Transfer, the City tendered numerous
information requests to the parties submitting the Application (the "Applicants ") relating
to the legal, technical, and financial qualifications of the Proposed Transferee, and the
potential impact on rates and services. As a result of the City's concerns about not
receiving the material it requested, the City Council adopted Resolution 2006 -7 on
January 24, 2006 that rejected (and a separate resolution [2006 -8] that conditionally
approved) the Adelphia to Time Warner transfer. For more information about the
rejection decision, see the 1 -24 -2006 staff report associated with these two resolutions
(look for these on the City's website at www.city.newport- beach.ca.us).
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 3
Negotiations & Result. After months of negotiations with Time Warner and Adelphia,
the City's special counsel on this issue, Bill Marticorena of Rutan and Tucker, now
recommends the City's approval of the transfer. The negotiations have resulted in:
1 — A Memorandum of Understanding (MOU) that would be binding on Time Warner
for ten years (until December 31, 2016) and that includes the following benefits for the
City and its residents:
• For support of Public, Educational, and Government (PEG) programming, an Ongoing
PEG Grant of $0.50 per subscriber per month (roughly $120,000 per year);
• An Initial PEG Access Grant of $28.00 per subscriber (roughly $476,000 on a one -time
basis); and
• Maintenance of current 5% franchise fee.
The MOU also directs that the City and Time Warner negotiate a new Franchise
Agreement with the goal of completing the Agreement by December 31, 2006.
2 — A Settlement and Mutual Release Agreement that settles all past claims the City
has against Adelphia and Time Warner, thus compensating the City $22,339.00.
3 - A Consent to Transfer Agreement that offers the City's consent to the transfer of the
current Adelphia cable television franchise to Time Warner. This Agreement is not a
new Franchise Agreement.
Each of these documents is attached to this staff report.
Committee Action: This item came to Council before staff had the opportunity to
convene the Media & Communications Committee, but we have discussed the
recommended actions with the Council Members who serve on the Committee.
Public Notice: This agenda item may be noticed according to the Brown Act (72 hours
in advance of the public meeting at which the City Council considers the item).
Submitted by:
Dave Ki
Assistant City Manager
Attachments: Resolution 2006-_, including the
• Consent to Transfer Agreement (this Agreement includes an Exhibit A [TW Guaranty] and an
Exhibit B — the Memorandum of Understanding)
• Settlement and Mutual Release Agreement (Exhibit C to this staff report)
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 4
RESOLUTION 2006-
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF NEWPORT BEACH, CALIFORNIA
CONSENTING TO THE TRANSFER OF A
FRANCHISE FOR CABLE TELEVISION TO TIME
WARNER CABLE
WHEREAS, the City Council of the City of Newport Beach, California granted a franchise
to a predecessor of Adelphia Cablevision of Newport Beach, LLC ( "Adelphia- Newport"), under
the ownership and control of Adelphia Communications Corporation ( "Adelphia "), to construct,
improve, operate and maintain a cable television system within the City (the "System ") pursuant
to a Franchise Agreement dated January 27, 1967 pursuant to Ordinance No. 1197 as amended
by Ordinance Nos. 1365, 86 -17 and 91.43 ( "Franchise Agreement ") and Chapter 5.44 of the
Municipal Code of Newport Beach ( "Ordinance'). The Franchise Agreement and Ordinance are
referred to collectively herein as the "Franchise;" and
WHEREAS, pursuant to an Exchange Agreement between Time Warner Cable Inc.
('Time Warner Cable'), Adelphia and certain related entities, dated as of April 20, 2005,
Adelphia- Newport will assign the Franchise to Time Warner NY Cable LLC ( "TWNY" or
"Franchisee "), and TWNY will become an indirect subsidiary of, and will do business as, Time
Warner Cable (the 'Proposed Transaction "); and
WHEREAS, Adelphia- Newport and Time Warner Cable have filed FCC Form 394 (the
"Transfer Application ") describing the Prcposed Transaction; and
WHEREAS, the City and Adelphia- Newport have agreed to settle claims by the City
arising from the performance by Adelphia- Newport under the terms and conditions of the
Franchise pursuant to a Settlement and Mutual Release Agreement between the parties dated
as of June _, 2006 (the "Settlement Agreement "); and
WHEREAS, under the Federal Cable Act, the City has 120 days after receiving a request
for approval of a transfer of a franchise accompanied by an FCC Form 394 to approve or deny
the transfer, unless the City and requesting party agree to an extension; and
WHEREAS, Adelphia- Newport, Time Warner Cable and the City agreed to various
extensions to the City's action on approval or denial of the transfer request; and
WHEREAS, on January 24, 2006, the City adopted Resolution No. 2006 -7 rejecting and
denying without prejudice the Transfer Application relative to the transfer of the cable television
franchise for the reasons stated in Resolution No.2006 -7: and
WHEREAS, after extensive nE:gotiations between the parties, the City, Adelphia -
Newport, Adelphia, TWNY and Time Warner Cable have agreed in principle to the terms and
conditions of a Transfer Agreement (the 'Transfer Agreement "), which is attached hereto as
Exhibit A; a Memorandum of Understanding, dated as of June 27, 2006 (the "MOU ") attached
hereto as Exhibit B; and a Settlement and Mutual Release Agreement, dated as of June 27,
2006 (the "Settlement Agreement') (collectively, the "Transfer Documents "); and
Is
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 5
WHEREAS, the Transfer Documents establish the terms and conditions under which the
Franchisee will accept the Franchise Agreement and the City will approve the transfer of the
Franchise Agreement, as described above and in the Transfer Documents; and
WHEREAS, for the reasons stated in the staff report submitted to the City Council, the
City is willing to approve the Transfer Documents and the transfer of the Franchise Agreement,
so long as the rights and interests of the public and the City are protected; and
WHEREAS, the City finds that the rights and interests of the public and the City are
protected under the terms and conditions of the Transfer Documents.
NOW, THEREFORE, THE CITY COUNCIL DOES HEREBY RESOLVE AS FOLLOWS:
Section 1. The City Council does hereby consent, as said consent is contemplated
by the provisions of the Franchise, to the Proposed Transaction.
Section 2. The City Council does hereby approve the terms and conditions of that
certain "Agreement Relating to the Consent of the City of Newport Beach to the Transfer of the
Franchise Agreement held by Adelphia Cablevision of Newport County, LLC, to Time Warner
NY Cable LLC (the "Transfer Agreement ") attached as Exhibit A.
Section 3. The City Council does hereby approve the terms and conditions of the
Memorandum of Understanding, dated as of June 27, 2006, attached as Exhibit B.
Section 4. The City Council does hereby approve the terms and conditions of the
Settlement and Mutual Release Agreement, dated as of June 27, 2006,
Section 5. If the conditions set forth in Section 15 of the Transfer Agreement are not
satisfied within the times set forth therein, the approvals contained herein shall be voidable at
the sole discretion of the City. If the City Council voids the approvals contained herein based
upon the failure to timely satisfy the conditions in Section 15 of the Transfer Agreement, the
approvals shall be deemed void ab initio and the Transfer Application shall be deemed denied
as of January 24, 2006.
Section 6. To the extent that this Resolution conflicts with Resolution No. 2006 -7
passed on or about January 24, 2006, this Resolution is effective and supersedes Resolution
No. 2006 -7.
Section 7. The Mayor, the Mayor Pro Tem, the City Manager, the Assistant City
Manager, the City Attorney, and Special Counsel, or their designees, are hereby authorized and
instructed to deliver executed copies of the Transfer Documents, and each of them, to the
parties thereto, and to perform such other tasks and prepare such other documents as are
necessary to implement the Transfer Documents.
Section 8. If any one or combination of Adelphia, Adelphia- Newport, TWNY and /or
Time Warner Cable does not execute the Transfer Documents within thirty (30) days of the
adoption of this Resolution, the City's consent to the transfer of the Franchise, as contemplated
hereunder, is hereby deemed to be denied as of January 24, 2006.
Section 9. This Resolution shall take effect immediately.
Resolution Relating to Adelphia -rme Warner Transfer
June 27, 2006
Page 6
PASSED, ADOPTED, AND APPROVED this 27th day of June, 2006.
Don Webb
MAYOR OF THE CITY OF NEWPORT BEACH
ATTEST:
LaVonne Harkless
CITY CLERK OF THE CITY OF NEWPORT BEACH
APPROVED AS TO FORM:
Rutan & Tucker, LLP
William M. Marticorena, Special Counsel
STATE OF CALIFORNIA )
COUNTY OF ) SS
CITY OF NEWPORT BEACH )
I, LaVonne Harkless, City Clerk of the City of Newport Beach, California, DO HEREBY
CERTIFY that the forgoing resolution was adopted by the City Council of said City at a regular
meeting of said City Council held on the 27`h day of June, 2006, and that it was so adopted by
called vote as follows:
AYES:
NOES:
ABSENT:
City Clerk
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 7
EXHIBIT A
AGREEMENT RELATING TO THE CONSENT
OF THE CITY OF NEWPORT BEACH TO THE TRANSFER OF
THE FRANCHISE AGREEMENT HELD BY ADELPHIA CABLEVISION OF NEWPORT
BEACH, LLC TO TIME WARNER NY CABLE LLC
This Agreement (the 'Transfer Agreement') is entered into this 27`h day of June, 2006,
between and among the City of Newport Beach ( "City "), Adelphia Cablevision of Newport
Beach, LLC ( "Adelphia- Newport"), Adelphia Communications Corporation ( "Adelphia "), Time
Warner NY Cable LLC ( "TWNY" or "Franchisee ") and Time Warner Cable Inc. ( "Time Warner
Cable ").
WHEREAS, the City enacted Chapter 5.44 (the "Ordinance ") for the purpose of
establishing a procedure for the granting of franchises for cable television systems; and
WHEREAS, Warner Bros. TV Services, Inc. was granted a franchise dated January 27,
1967 by the City pursuant to Ordinance No. 1197, as amended by Ordinance Nos. 1365, 86 -17
and 91 -43, to construct, improve, operate and maintain a cable television system within the City
(the "System ") as more particularly defined therein (the "Franchise Agreement'); and
WHEREAS, the Franchise Agreement was transferred from Warner Bros. TV Services,
Inc. to Pacific Cable Services, Inc. pursuant to an Agreement dated April 22, 1968 and approved
by Resolution No. 6759; and
WHEREAS; the Franchise Agreement was transferred from Pacific Cable Services, Inc.
to Newport Beach Cablevision, Inc. pursuant to an Agreement dated March 10; 1969 and
approved by Resolution No. 6945: and
WHEREAS, the Franchise Agreement was transferred from Newport Beach Cablevision,
Inc. to Teleprompter Corp. pursuant to an Agreement dated March 8, 1971 and approved by
Resolution No. 7379; and
WHEREAS, the Franchise Agreement was transferred pursuant to the merger of
Teleprompter Corp. with a subsidiary of Westinghouse Electric Corp. pursuant to an Agreement
approved by Resolution No. 10019; and
WHEREAS, the Franchise Agreement was transferred pursuant to the reorganization of
Teleprompter Corp. into Group W Cable, Inc, pursuant to an Agreement dated April 12, 1982
and approved by Resolution No. 82 -51; and
WHEREAS, the Franchise Agreement was transferred pursuant to the reorganization of
Group W Cable; Inc. into Comcast Cable Communications, Inc. pursuant to an Agreement dated
March 24, 1986 and approved by Resolution No. 86 -22; and
WHEREAS, the Franchise Agreement was transferred pursuant to the sale of Group W
to Comcast Corp. with Comcast Cablevision of California as operator pursuant to an Agreement
dated April 14, 1986 and approved by Resolution No. 86 -25; and
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 8
WHEREAS, the Franchise Agreement was assigned from Comcast Cablevision of
California to Comcast Cablevision of Newport Beach, Inc., pursuant to an Agreement dated
November 12, 1991 and approved by Ordinance No.91 -43; and
WHEREAS, the Franchise Agreement was transferred from Comcast Cablevision of
Newport Beach, Inc. to Adel phia -Newpo t, an indirect subsidiary of Adelphia, pursuant to an
agreement dated October 31, 2000, whereby Comcast Cablevision of Newport Beach, Inc. was
converted to a limited liability corporation ( "LLC ") and its LLC interests were acquired by Ft.
Myers Acquisition Limited Partnership, a wholly owned indirect subsidiary of Adelphia; and
WHEREAS, pursuant to an Asset Purchase Agreement dated April 20, 2005 between
Adelphia and TWNY, the System and the Franchise Agreement are to be transferred to TWNY,
an indirect subsidiary of Time Warner Cable (the "Proposed Transaction "); and
WHEREAS, on June 14, 2005, TWNY and Adelphia- Newport filed FCC Form 394 (the
"Application ") describing the Proposed Transaction; and
WHEREAS, the City Council of the City has reviewed the Proposed Transaction, as well
as all relevant documents, staff reports and recommendations, the operation of the System and
compliance with the Franchise Agreement and applicable law; and
WHEREAS, the Proposed Transaction with respect to the System cannot go forth
without written consent of the City; and
WHEREAS, the City has identified certain compliance issues and Adelphia- Newport has
indicated its willingness to resolve these ;ssues and therefore, Adelphia- Newport and the City
have entered into a separate Settlement and Mutual Release Agreement dated as of June 27,
2006 (the "Settlement Agreement'), and
WHEREAS, based upon the evidence presented to the City Council, it has determined
that it would be in the public interest to approve the Proposed Transaction,
NOW, THEREFORE, it is agreed by and between the parties as follows:
1. The City Council of the City hereby gives its consent and approval to the
Proposed Transaction whereby the Franchise Agreement and the System, including all of the
assets thereof, shall be acquired and held by the Franchisee with the performance of all
obligations pursuant to the Franchise Agreement, the Ordinance and this Transfer Agreement
guaranteed by Time Warner Cable upon closing of the Proposed Transaction.
2. The granting of the consent to the Proposed Transaction, or the consents
described in Paragraph 1 above, do not surrender or waive the right of the City to approve any
subsequent change not described herein in the ownership of the Franchise Agreement or the
ownership or control of the Franchisee, and the Franchisee agrees to comply with all
requirements in the Franchise Agreement governing any franchise transfers and any material
change, amendment, or modification of the ownership of the Franchisee and/or change in
control of the Franchisee.
3. By executing this Transfer Agreement, the City and the Franchisee agree and
acknowledge that this Transfer Agreement and consent resolution is not a new franchise
Resolution Relating to Adelphia -Time Wamer Transfer
June 27, 2006
Page 9
agreement, the granting of a franchise, or the renewal of the existing franchise, but rather is
exclusively an agreement to transfer the Franchise Agreement and this Transfer Agreement
neither affects nor prejudices in any way the City's rights nor the Franchisee's rights thereunder,
and that compliance with the Franchise Agreement as it exists as of the date of this Transfer
Agreement, and assuming the economic impact, or lack thereof, of federal, state and local
statutes and administrative regulations existing as of the date of this Transfer Agreement, is
neither commercially impracticable as the term is used in Section 625 of the Cable
Communications Policy Act of 1984 and /or the Cable Television Consumer Protection and
Competition Act of 1992 (collectively the "Cable Act ") nor economically infeasible upon closing
of the Proposed Transaction based upon (i) any and all debt service incurred, or to be incurred,
by the Franchisee, or any related entity, to directly or indirectly finance the Proposed
Transaction or (ii) any return on equity investment made, or to be made, by the Franchisee or
any related entity, based upon the equity portion of the financing provided for the Proposed
Transaction.
4. The Franchisee agrees and acknowledges that from and after the closing of the
Proposed Transaction, it accepts the Franchise Agreement, the Ordinance and this Transfer
Agreement, including the Memorandum of Understanding being entered into pursuant to this
Transfer Agreement (collectively, the "Legal Documents'), to be legally sufficient, valid, and
binding and agrees to accept and abide by the same without condition or reservation. To the
extent that the City or the Franchisee, or any related person or entity, challenges the validity or
interpretation, or seeks the enforcement, of said above - listed Legal Documents in the future in
any administrative proceeding or court of law, such a challenge or enforcement action shall be
subject to all defenses which would have been available to the City or the Franchisee had
Adel phia-Newport or Adelphia or any related person or entity, brought said challenge(s)
including, but not limited to, waiver, estoppel, consent, unclean hands and accord and
satisfaction, as well as any and all defenses independently available to the City or the
Franchisee.
5. Any material violation of this Transfer Agreement shall be deemed to be a
violation of the Franchise Agreement.
6. The City hereby gives notice that the Proposed Transaction may create a taxable
possessory interest upon which Franchisee may be liable for the payment of certain taxes. The
Franchisee acknowledges that this section constitutes valid notice for the purpose of Revenue
and Taxation Code Section 107.6.
7. By executing this Transfer Agreement, the Franchisee hereby accepts, from and
after the closing of the Proposed Transaction, all the terms and conditions of the City's Charter,
the Legal Documents, and any final non - appealable lawful orders or directives of any
administrative agency relating to the Franchise Agreement or the System including, but not
limited to, the Federal Communications Commission, and the Franchisee represents and
warrants that it has examined the requirements of the Charter and the Legal Documents, as well
as the applicable federal, state, or local laws or regulations, and agrees to abide by all the terms
and conditions thereof. The Franchisee shall, among other things, assume ail rate refund
obligations and franchise fee liability, both actual and contingent, relating to the System.
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 10
8. Franchisee represents and warrants that the current level of local operations as
required by the Legal Documents in the areas of customer service, maintenance, and PEG
support shall be maintained or exceeded.
9. This Transfer Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute one instrument. The
parties agree that this Transfer Agreement will be considered signed when the signature of a
party is delivered by facsimile transmission. Such facsimile signature shall be treated in all
respects as having the same effect as an original signature.
10. As an express condition of the effectiveness of the approvals contained herein,
Time Warner Cable shall guarantee the financial and operational performance of the Franchisee
pursuant to the Legal Documents pursuant to the written guaranty attached as Exhibit A (the
"Time Warner Guaranty ").
11. Subject to paragraph 17 herein below, this Transfer Agreement shall be deemed
effective upon execution by all parties (the "Effective Date ") so long as this Transfer Agreement
and the Time Warner Guaranty have been executed and returned to the City, and all payments
required by this Transfer Agreement have been made pursuant to paragraph 15 herein below. If
these conditions have not been satisfied as set forth herein, the approving resolution shall
become null and void, ab initio, and the shall be Proposed Transaction deemed disapproved for
good cause as of January 17, 2006.
12. Franchisee represents that any letter of credit, insurance and bonding required by
the Franchise Agreement and Ordinance, have been obtained, and that there will be no gaps in
required coverages or liabilities. Franchisee will continue to maintain any letter of credit and
bonds that it was required to maintain under the Franchise Agreement notwithstanding the
Proposed Transaction.
13. Franchisee agrees to defend, indemnify and hold the City harmless against any
loss, claim, damage, liability or expense (including, without limitation, reasonable attorney's
fees) arising out of this Transfer Agreement and /or incurred as a result of any representation or
warranty made by any party in the Application or in connection with the City's review of the
Proposed Transaction which proves to be untrue or inaccurate in any material respect. In the
event the City receives any such notice of a loss, claim, damage, liability or expense, the City
shall promptly notify the Franchisee which shall, at the sole discretion of the City, assume sole
and direct responsibility for defending against any such loss, claim, damage, liability or expense.
14. Any consent given by thE? City in this Transfer Agreement and in any resolution
approving the Proposed Transaction is not an affirmation that Adelphia- Newport or any
predecessor in interest is in compliance with, or previously complied with the Franchise
Agreement. Nothing herein shall limit or prevent the City from utilizing any material breaches or
defaults committed prior to the Effective Date if discovered after the Effective Date in any
renewal proceeding or other proceeding relating to the Franchise Agreement if such material
breaches or defaults are not cured by Franchisee within a reasonable time after receipt of notice
thereof from the City. Any consent is made without prejudice to, or waiver of, the City's right to
obtain full remedy for any past non - compliance. Any consent given by the City in this Transfer
Agreement and any resolution approving this Transfer Agreement is not a finding that after the
Proposed Transaction the Franchisee will be financially, technically or legally qualified, and no
10
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 11
inference will be drawn, positively or negatively, as a result of the absence of a finding on this
issue. Any consent is therefore made without prejudice to, or waiver of, the City's right to fully
investigate and consider the cable operator's financial, technical and legal qualifications and any
other relevant considerations during any proceeding including by way of example and not
limitation, any future transfer or renewal proceeding. Without limiting the foregoing, any
approval of the Proposed Transaction is not a finding, representation, or commitment,
expressed or implied, that any statutory renewal rights exist in relation to the Franchise
Agreement; that the renewal application filed by any prior franchisee survives the Proposed
Transaction; that the Franchise Agreement will be renewed or extended (and approval shall not
create an obligation to renew or extend the Franchise Agreement); that the Franchisee is
"financially, technically or legally' qualified to hold a renewed franchise; or that any other
renewal issue that may arise with respect to Franchisee's past performance or future cable -
related needs and interests will be resolved in a manner favorable to the Franchisee. The
provisions of this paragraph shall not be modified or limited by the provisions of the Settlement
Agreement
15. Within ten (10) business days of the latest to occur of: (i) final approval of the
Proposed Transaction by the City Council; (ii) approval of the Settlement Agreement by the
Bankruptcy Court presiding over Adelphia's pending bankruptcy cases; or (iii) Adelphia-
Newport's receipt of a fully executed copy of the Settlement Agreement, Adelphia- Newport, or
its designee, shall pay to the City the amount of $22,339 (the "Payment "), but, in any event, no
more than ninety (90) days from the date of final approval by the City Council, provided
Adel phia-Newport has received a fully executed copy of this Transfer Agreement and the
Settlement Agreement no later than ten (10) business days prior to the end of such ninety (90)
day period. The Payment is paid in, and only in, complete satisfaction of all matters addressed
in the Settlement Agreement. The City hereby delegates to the Office of the City Attorney all
necessary authority to finalize the Settlement Agreement. in regard to said Payment, the parties
expressly agree and covenant as follows:
A. The Payment is within the exclusions from the term "franchise fee" set
forth in 47 U.S.C. § 542(g)(2); and
B. The Payment shall not be deemed to be in the nature of a tax, and shall
be in addition to any and all taxes of general applicability or other fees or charges which the
Franchisee shall be required to pay to the City or to any state or federal agency or authority; and
C. The Franchisee shall not have or make any claim or any deduction or
other credit of all or any part of the amount of the Payment to be made pursuant to this Transfer
Agreement from or against any City or other governmental taxes of general applicability
(including any such tax, fee, or assessment imposed on both utilities and cable operators or
their services but not including a tax, fee, or assessment which is unduly discriminatory against
cable operators or cable subscribers or income taxes) or other fees or charges which the
Franchisee is required to pay to the City or other governmental agency; and
D. The Franchisee shall not apply or seek to apply all or any part of the
amount of the Payment to be made pursuant to this Transfer Agreement as a deduction or other
credit from or against any City or other government taxes of general applicability (other than
income taxes) or other fees or charges; and
11
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 12
E. The Franchisee shall not apply or seek to apply all or any part of the
amount of any City or other government taxes or other fees or charges of general applicability
(including any such tax, fee, or assessment imposed on both utilities and cable operators or
their services) as a deduction or other credit from or against the Payment to be made pursuant
to this Transfer Agreement; and
F. In regard to the Payment made to the City pursuant to this Transfer
Agreement, the Franchisee, or any affiliated party, will not pass through, externalize, or
otherwise attempt to add the costs of the Payment to any regulated rate.
16. The City and Franchisee shall enter into a Memorandum of Understanding
( "MOU ") in the form attached hereto as Exhibit B. In the event the Proposed Transaction does
not close by December 31, 2006, then ':he MOU shall be void and of no force or effect, this
Transfer Agreement shall also be void ab initio and of no force or effect, and the consent to the
Proposed Transactions shall be deemed disapproved for good cause as of January 24, 2006.
CITY OF NEWPORT BEACH, a municipal
Corporation
ADELPHIA CABLEVISION OF NEWPORT BEACH,
LLC
a Delaware limited liability company
By: Ft. Myers Cablevision, LLC.,
a Delaware limited liability company,
Its Sole Member,
By: Ft. Myers Acquisition Limited Partnership,
a Delaware limited partnership
Its Sole Member,
By: Olympus Communications, L.P.,
a Delaware limited partnership,
Its General Partner,
By: ACC Operations, Inc.
a Delaware corporation
Its Managing General Partner
12
APPROVED AS TO FORM:
By
Its:
Resolution Relating to Adelphia- Time Warner Transfer
June 27, 2006
Page 13
ADELPHIA COMMUNICATIONS CORPORATION
al
TIME WARNER NY CABLE LLC
0
Its:
TIME WARNER CABLE INC.
0
Its:
13
_J
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 14
EXHIBIT A (to Exhibit Al
TIME WARNER CABLE INC. GUARANTY
GUARANTY, dated as of , made by TIME WARNER CABLE INC., a
Delaware corporation ( "Time Warner Cable" or "Guarantor "), in favor of the City of
Newport Beach, California ( "Beneficiary ").
WHEREAS, in accordance with the relevant provisions of the City of Newport
Beach Municipal Code, the Beneficiary, pursuant to action by the City Council on June
27, 2006, has approved the assignment of the Franchise (the "Franchise ") granted by
Ordinance No. 1197 (the "Franchise Agreement ") from Adelphia Cablevision of Newport
Beach, LLC ( "Adelphia- Newport") to Time Warner NY Cable LLC ( "TWNY" or
"Transferee "), an indirect subsidiary of Time Warner Cable.
WHEREAS, the City's approval was conditioned, among other things, on
Guarantor unconditionally guaranteeing the performance of TWNY under the Franchise
Agreement, the "Agreement Relating to the Consent of the City of Newport Beach to the
Transfer of the Franchise Agreement held by Adelphia Cablevision of Newport Beach,
LLC to Time Warner NY Cable LLC" (the "2006 Transfer Agreement "), and the
Memorandum of Understanding ente,ed into pursuant to the 2006 Transfer Agreement
(collectively, the "Legal Documents "); and
WHEREAS, upon closing of the transaction approved by the 2006 Transfer
Agreement, Guarantor will have a substantial interest in the cable system and the
Franchise, as well as in the management and control of TWNY and in the Legal
Documents.
14
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 15
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and to induce Beneficiary to consent to
the transfer of the Franchise Agreement issued by Beneficiary and currently held by
Adelphia- Newport to TWNY, in accordance with the Federal Communications
Commission Form 394 filed by TWNY, Guarantor agrees as follows:
1. Interpretive Provisions.
(a) The words "hereof," "herein" and "hereunder" and words of similar Import,
when used in this Guaranty, shall refer to this Guaranty as a whole and not to any particular provision of
this Guaranty, and section and paragraph references are to this Guaranty unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
2. Guaran .
(a) From and after the close of the transfer, Guarantor
unconditionally and irrevocably guarantees to Beneficiary the timely and complete
performance of all obligations of the Transferee under the Legal Documents (the
"Guaranteed Obligations "). The Guaranty is an irrevocable, absolute, continuing
guarantee of payment and performance, and not a guarantee of collection. If the
Transferee fails to pay any of its monetary Guaranteed Obligations in full when due in
accordance with the terms of the Legal Documents, Guarantor will promptly pay the
same to Beneficiary or procure payment of same to Beneficiary. Anything herein to the
contrary notwithstanding, Guarantor shall be entitled to assert as a defense hereunder
any defense that is or would be available to the Transferee under the Legal Documents
or otherwise.
(b) This Guaranty shall remain in full force and effect for so long
as the Transferee, or its successors or assigns, are providing services over the cable
system in the City under the Franchise Agreement; provided, however, that this
1s
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 16
Guaranty shall terminate upon the earliest to occur of: (i) performance in full of all
Guaranteed Obligations at a time when no additional Guaranteed Obligations remain
outstanding or will accrue to the Transferee under the Franchise Agreement, or (ii) any
direct or indirect transfer of the Franchise from Transferee to, or direct or indirect
acquisition (whether pursuant to a sale of assets or stock or other equity interests,
merger or otherwise) of Transferee or any successor thereto by any other person or
entity, a majority of whose equity and voting interests are not beneficially owned and
controlled, directly or indirectly, by Guarantor, provided that any such direct or indirect
transfer is subject to any terms and conditions as may be imposed by the City in
connection with the transfer approval process required by the Legal Documents. Upon
termination of this Guaranty in accordance with this Section 2(b), all contingent liability
of Guarantor in respect hereof shall cease and Guarantor shall remain liable solely for
Guaranteed Obligations accrued prior to the date of such termination.
3. Waiver. Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Guaranteed Obligations and notice of or proof of
reliance by Beneficiary upon this Guaranty or acceptance of this Guaranty. Guarantor
waives diligence, presentment, protest and demand for payment to the Transferee or
Guarantor with respect to the Guaranteed Obligations; provided, however, that
Guarantor shall be furnished with a copy of any notice of or relating to default under the
Franchise to which the Transferee is entitled or which is served upon the Transferee at
the same time such notice is sent to or served upon the Transferee.
4. Representations and Warranties. Each of Guarantor and Beneficiary
represents and warrants that: (i) the execution, delivery and performance by it of this
16
Resolution Relating to Adelphia- Time Warner Transfer
June 27, 2006
Page 17
Guaranty is within its corporate, limited liability company or other powers, have been
duly authorized by all necessary corporate, limited liability company or other action, and
do not contravene any law, order, decree or other governmental restriction binding on or
affecting it, and (ii) no authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the due
execution, delivery and performance by it of this Guaranty, except as may have been
obtained or made, other than, in the case of clauses (i) and (ii), contraventions or lack of
authorization, approval, notice, filing or other action that would not, individually or in the
aggregate, impair or delay in any material respect such party's ability to perform its
obligations hereunder.
5. Binding Effect. This Guaranty, when executed and delivered by both
Beneficiary and Guarantor, will constitute a valid and legally binding obligation of
Guarantor, enforceable against it in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency or other similar laws
applicable to creditors' rights generally and by equitable principles (whether
enforcement is sought in equity or at law).
6. Notices. All notices, requests, demands, approvals, consents and other
communications hereunder shall be in writing and shall be deemed to have been duly
given and made if served by personal delivery upon the party for whom it is intended or
delivered by registered or certified mail, return receipt requested, or if sent by telecopier,
provided that the telecopy is promptly confirmed by telephone confirmation thereof, to
the party at the address set forth below, or such other address as may be designated in
writing hereafter, in the same manner, by such party:
17
ii
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 18
To Guarantor and Transferee:
Time Warner Cable Inc.
290 Harbor Drive
Stamford, CT 06902 -6732
Telephone: (20,-;) 328 -0631
Telecopy: (203) :328 -4094
Attention: General Counsel
To Beneficiary:
City of Newport Beach
Newport Beach City Hall
3300 Newport Boulevard
Newport Beach, California 92663
Telecopy: 949 -6,14 -3020
Attention: City Manager
With Copy to:
City of Newport Beach
Newport Beach City Hall
3300 Newport Boulevard
Newport Beach, California 92663
Telecopy: 949 -644 -3139
Attention: City Attorney
7. Integration. This Guaranty represents the agreement of Guarantor with
respect to the subject matter hereof and there are no promises or representations by
Guarantor or Beneficiary relative to the subject matter hereof other than those expressly
set forth herein.
8. Amendments in Writing. None of the terms or provisions of this Guaranty
may be waived, amended, supplemented or otherwise modified except by a written
instrument executed by Guarantor and Beneficiary, provided that any right, power or
privilege of Beneficiary arising under this Guaranty may be waived by Beneficiary in a
letter or agreement executed by Beneficiary.
ii
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 19
9. Section Headings. The section headings used in this Guaranty are for
convenience of reference only and are not to affect the construction hereof or be taken
into consideration in the interpretation hereof.
10. No Assignment or Benefit to Third Parties. This Agreement shall be
binding upon and inure to the benefit of the parties hereto. Nothing in this Agreement,
express or implied, is intended to confer upon anyone other than Guarantor and
Beneficiary and their respective permitted assigns, any rights or remedies under or by
reason of this Guaranty.
11. Expenses. All costs and expenses incurred in connection with this
Guaranty and the transactions contemplated hereby shall be borne by the party
incurring such costs and expenses.
12. Counterparts. This Guaranty may be executed by Guarantor and
Beneficiary on separate counterparts (including by facsimile transmission), and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
13. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
19
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 20
IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to
be duly executed and delivered by its (July authorized officer as of the day and year first
above written.
TIME WARNER CABLE INC.
!-
Name:
Title:
CITY OF NEWPORT BEACH, a municipal
corporation
Its:
WE
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 21
EXHIBIT B (to Exhibit A)
MEMORANDUM OF UNDERSTANDING BETWEEN THE CITY OF
NEWPORT BEACH, CALIFORNIA AND TIME WARNER NY
CABLE LLC RELATING TO THE TERMS AND CONDITIONS
UPON WHICH THE EXISTING CABLE TELEVISION FRANCHISE
WILL BE RENEWED
This Memorandum of Understanding (the "MOU ") constitutes a valid and binding
contractual agreement between the City of Newport Beach, California (the "City "), a California
municipal corporation organized and existing under the State of California, on the one hand, and
Time Warner NY Cable LLC ( "Franchisee "), on the other, upon acquisition of the franchise
currently held by Adelphia Cablevision of Newport Beach, LLC (the "Franchise "), and is dated as
of June _, 2006. The MOU shall constitute a valid and binding obligation of the parties,
enforceable through the laws of contract, and is hereby deemed by the parties to be consistent
and enforceable under all relevant provisions of federal and state law. The parties agree and
acknowledge that the City has accepted and relied upon the Franchisee's voluntary execution of
this MOU in partial consideration of its approval of the Proposed Transactions, as that term is
defined in the Transfer Agreement Relating to the Consent of the City of Newport Beach to the
Transfer of the Franchise Agreement Held by Adelphia Cablevision of Newport Beach, LLC to
Time Warner NY Cable LLC ( "Transfer Agreement ").
Section 1. Franchise Term.
Franchise term of ten (10) years to terminate December 31, 2016; such term to
commence December 31, 2006 unless the parties hereto agree in writing otherwise.
Section 2. PEG Support.
The Franchisee shall provide funding for public, educational and governmental ( "PEG ")
access as follows:
21
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 22
(a) The Franchisee shall pay the City an initial PEG Access grant ( "Initial
PEG Access Grant ") by no later than January 31, 2007, the sum of which shall equal the number
of Franchisee's cable television subscribers who pay for the basic service tier ( "BST ") of cable
television service residing in the City ( "Subscriber') as of December 31, 2006 multiplied by
$28.00. By way of example, if there are 1500 such Subscribers on December 31, 2006, the
payment would be $42,000 ($28 x 1500). The obligations incurred pursuant to this Section (a)
shall be deemed to be incurred on December 31, 2006, unless the parties hereto agree in
writing otherwise.
(b) Commencing January 1, 2007, Franchisee shall provide a monthly PEG
grant (the "Ongoing PEG Grant ") of $.50 per Subscriber per month. With respect to bulk
accounts, Franchisee shall pay such $.50 based on an equivalent subscriber account (total bulk
revenues divided by the published BST rate). The Ongoing PEG Grant set forth herein is in lieu
of and replaces any PEG Access Support (as such term is defined hereinbelow) obligations in
the Franchise or otherwise as of January 1, 2007.
(c) Upon request, the City shall provide Franchisee with an annual
accounting of the expenditures of both the Initial PEG Access Grant and the Ongoing PEG
Grant (collectively, the "PEG Grants ") provided for herein to ensure such grants are used for
PEG access capital and non - capital purposes. If Franchisee believes the City has failed to
demonstrate compliance with the foregoing requirement, Franchisee shall provide the City,
within thirty (30) days of receipt of an annual accounting, notice of its objections to the use of the
PEG Grants, or either of them. The parties shall thereafter meet at the reasonable request of
either party to address the objections identified by Franchisee. If Franchisee reasonably
concludes that the City has expended the PEG Grants, or either of them, in a manner
inconsistent with the limitations imposed herein, the Franchisee may, after thirty (30) days notice
22
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 23
to the City advise the City of its intention to implement a credit on its next regularly scheduled
franchise fee payment in the amount of any expenditure inconsistent with PEG access
purposes. If the City disputes Franchisee's allegation(s) and the City commences a franchise
violation against Franchisee, then Franchisee shall pay the City the disputed amounts and the
City shall hold the disputed monies in a separate interest bearing account until a final order is
issued by a court of competent jurisdiction and all appeals are exhausted. Any monies,
including interest on such monies, so held by the City shall be distributed in accordance with
such final order (after exhaustion of any and all appeals) or as the City and Franchisee may
agree.
(d) The Ongoing PEG Grant shall continue throughout the duration of the
Franchise unless otherwise directed in writing by the City. Subject to the provisions of
paragraph (c) hereof, the Initial PEG Grant and the Ongoing PEG Grant may be used for
equipment, facilities, and ongoing staffing and non - capital support for both one -way video PEG
access services and two -way interactive PEG access services (collectively, "PEG Access
Support"), at the City's sole discretion without offset or recoupment to the franchise fee or any
other payment due the City. The Ongoing PEG Grant shall be paid to the City on a quarterly
basis.
(e) The Franchisee agrees that the commitments indicated in this Section 2
shall not be charged against any franchise fees due the City during the term of the Franchise.
The Franchisee agrees to meet all of the commitments of Section 2 through the term of the
Franchise.
(f) The City specifically reserves the right to grant, at any time, such
additional franchises for a cable television system or authorizations which include the right to
transmit video programming over closed transmission paths in the City ( "Additional Franchise "),
23
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 24
as it deems appropriate, subject to applicable state and federal law, provided that if the City
grants an Additional Franchise, then, Unless expressly prohibited by law, such Additional
Franchise shall, when taken as a whole, contain no more favorable or less burdensome terms
and conditions than those contained herein; provided, however, all franchises, including an
Additional Franchise, shall be subject to the same material financial obligations (i.e., franchise
fee payments and PEG Access Support obligations). Upfront PEG access capital grant
obligations will be calculated on a pro -rata basis based on the term of the new franchise
compared to that term granted hereunder. Monthly per customer PEG access grant payments
will be based on the Franchisee's current obligation at the time that any additional franchise is
awarded.
In the event the City elects to grant an Additional Franchise as
provided in paragraph (f) hereof, the City will notify Franchisee in writing at least sixty (60) days
in advance of granting such Additional Franchise, with a copy of the proposed Additional
Franchise.
2. Within thirty (30) days after receipt, Franchisee may give written
notice to the City that the proposed Additional Franchise is inconsistent with (f) above ( "Notice of
Inconsistency ").
3. In the event Franchisee provides the City with a Notice of
Inconsistency, the City shall, prior to granting the Additional Franchise, notify Franchisee of the
City's determination related to Franchisee's Notice of Inconsistency.
4. If the City determines that the terms of an Additional Franchise are
more favorable or less burdensome thar those imposed upon Franchisee, then the City shall:
(a) Make such modifications as it deems necessary to ensure
that the terms of the Additional Franchise are no more favorable or less burdensome than those
imposed upon Franchisee; or
24
Resolution Relating to Adelphia- Time Warner Transfer
June 27, 2006
Page 25
(b) Modify the terms and requirements of Franchisee's
Franchise as mutually agreed to by the parties.
Section 3. Franchise Renewal Agreement.
(a) The parties shall negotiate in good faith for the purposes of development
and mutual execution of a franchise renewal agreement (the "Renewal Agreement ") including
the terms and conditions hereof. The parties shall meet and confer as appropriate and
necessary for the purposes of achieving this result.
(b) If the parties are not able to mutually agree to a Renewal Agreement
containing terms and conditions acceptable to all parties on or before December 31, 2006 (the
"Negotiation Period "), the Franchise shall be, as of December 31, 2006, reinstated if expired and
extended as modified by the terms and conditions of this MOU for a period specified in Section 1
hereof (the "Franchise Extension "). If the Franchise Extension occurs, the existing terms and
conditions of the Franchise shall remain in effect except those terms and conditions of the
Franchise shall be deemed amended and superseded to the extent inconsistent with the terms
and conditions of this MOU. In the event of any conflict between the express provisions of the
Franchise and this MOU, the MOU shall govern. In the event of any ambiguity regarding the
joint interpretation of the Franchise and the MOU, the Franchise shall be interpreted in such a
manner as to effectuate the terms and conditions of the MOU to the maximum extent possible.
All provisions of the Franchise which are not affected by the MOU shall remain in full force and
effect.
(c) This MOU shall be effective upon its approval by the City Council;
provided, however, if the Proposed Transaction (as that term is defined in the Transfer
25
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 26
Agreement) does not close by December 31, 2006, then this MOU shall be void and of no
further force or effect.
TIME WARNER NY CABLE LLC CITY OF NEWPORT BEACH,
CALIFORNIA
By: By:
Its: Its:
Dated: Dated:
IN
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 27
EXHIBIT B
MEMORANDUM OF UNDERSTANDING BETWEEN THE CITY OF
NEWPORT BEACH, CALIFORNIA AND TIME WARNER NY
CABLE LLC RELATING TO THE TERMS AND CONDITIONS
UPON WHICH THE EXISTING CABLE TELEVISION FRANCHISE
WILL BE RENEWED
This Memorandum of Understanding (the WOU ") constitutes a valid and binding
contractual agreement between the City of Newport Beach, California (the "City "), a California
municipal corporation organized and existing under the State of California, on the one hand, and
Time Warner NY Cable LLC ( "Franchisee "), on the other, upon acquisition of the franchise
currently held by Adelphia Cablevision of Newport Beach, LLC (the "Franchise "), and is dated as
of June _, 2006. The MOU shall constitute a valid and binding obligation of the parties,
enforceable through the laws of contract, and is hereby deemed by the parties to be consistent
and enforceable under all relevant provisions of federal and state law. The parties agree and
acknowledge that the City has accepted and relied upon the Franchisee's voluntary execution of
this MOU in partial consideration of its approval of the Proposed Transactions, as that term is
defined in the Transfer Agreement Relating to the Consent of the City of Newport Beach to the
Transfer of the Franchise Agreement Held by Adelphia Cablevision of Newport Beach, LLC to
Time Warner NY Cable LLC ( "Transfer Agreement ").
Section 1. Franchise Term.
Franchise term of ten (10) years to terminate December 31, 2016; such term to
commence December 31, 2006 unless the parties hereto agree in writing otherwise.
Section 2. PEG Support.
The Franchisee shall provide funding for public, educational and governmental ( "PEG ")
access as follows:
27
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 28
(g) The Franchisee shall pay the City an initial PEG Access grant ( "Initial
PEG Access Grant ") by no later than January 31, 2007, the sum of which shall equal the number
of Franchisee's cable television subscribers who pay for the basic service tier ( "BST ") of cable
television service residing in the City ( "Subscriber') as of December 31, 2006 multiplied by
$28.00. By way of example, if there are 1500 such Subscribers on December 31, 2006, the
payment would be $42,000 ($28 x 1500). The obligations incurred pursuant to this Section (a)
shall be deemed to be incurred on December 31, 2006, unless the parties hereto agree in
writing otherwise.
(h) Commencing January 1, 2007, Franchisee shall provide a monthly PEG
grant (the "Ongoing PEG Grant ") of $.50 per Subscriber per month. With respect to bulk
accounts, Franchisee shall pay such $.50 based on an equivalent subscriber account (total bulk
revenues divided by the published BST rate). The Ongoing PEG Grant set forth herein is in lieu
of and replaces any PEG Access Support (as such term is defined hereinbelow) obligations in
the Franchise or otherwise as of January 1, 2007.
(i) Upon request, the City shall provide Franchisee with an annual
accounting of the expenditures of both the Initial PEG Access Grant and the Ongoing PEG
Grant (collectively, the "PEG Grants ") provided for herein to ensure such grants are used for
PEG access capital and non - capital pLrposes. If Franchisee believes the City has failed to
demonstrate compliance with the foregoing requirement, Franchisee shall provide the City,
within thirty (30) days of receipt of an annual accounting, notice of its objections to the use of the
PEG Grants, or either of them. The parties shall thereafter meet at the reasonable request of
either party to address the objection= identified by Franchisee. If Franchisee reasonably
concludes that the City has expended the PEG Grants, or either of them, in a manner
inconsistent with the limitations imposed herein, the Franchisee may, after thirty (30) days notice
W.
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 29
to the City advise the City of its intention to implement a credit on its next regularly scheduled
franchise fee payment in the amount of any expenditure inconsistent with PEG access
purposes. If the City disputes Franchisee's allegation(s) and the City commences a franchise
violation against Franchisee, then Franchisee shall pay the City the disputed amounts and the
City shall hold the disputed monies in a separate interest bearing account until a final order is
issued by a court of competent jurisdiction and all appeals are exhausted. Any monies,
including interest on such monies, so held by the City shall be distributed in accordance with
such final order (after exhaustion of any and all appeals) or as the City and Franchisee may
agree.
Q) The Ongoing PEG Grant shall continue throughout the duration of the
Franchise unless otherwise directed in writing by the City. Subject to the provisions of
paragraph (c) hereof, the Initial PEG Grant and the Ongoing PEG Grant may be used for
equipment, facilities, and ongoing staffing and non - capital support for both one -way video PEG
access services and two -way interactive PEG access services (collectively, "PEG Access
Support"), at the City's sole discretion without offset or recoupment to the franchise fee or any
other payment due the City. The Ongoing PEG Grant shall be paid to the City on a quarterly
basis.
(k) The Franchisee agrees that the commitments indicated in this Section 2
shall not be charged against any franchise fees due the City during the term of the Franchise.
The Franchisee agrees to meet all of the commitments of Section 2 through the term of the
Franchise.
(1) The City specifically reserves the right to grant, at any time, such
additional franchises for a cable television system or authorizations which include the right to
transmit video programming over closed transmission paths in the City ( "Additional Franchise "),
29
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 30
as it deems appropriate, subject to applicable state and federal law, provided that if the City
grants an Additional Franchise, then, unless expressly prohibited by law, such Additional
Franchise shall, when taken as a whole, contain no more favorable or less burdensome terms
and conditions than those contained herein; provided, however, all franchises, including an
Additional Franchise, shall be subject to the same material financial obligations (i.e., franchise
fee payments and PEG Access Support obligations). Upfront PEG access capital grant
obligations will be calculated on a pro -rata basis based on the term of the new franchise
compared to that term granted hereunder. Monthly per customer PEG access grant payments
will be based on the Franchisee's current obligation at the time that any additional franchise is
awarded.
1. In the evens the City elects to grant an Additional Franchise as
provided in paragraph (f) hereof, the City will notify Franchisee in writing at least sixty (60) days
in advance of granting such Additional Franchise, with a copy of the proposed Additional
Franchise.
2. Within thirty (30) days after receipt, Franchisee may give written
notice to the City that the proposed Additional Franchise is inconsistent with (f) above ( "Notice of
Inconsistency').
3. In the evert Franchisee provides the City with a Notice of
Inconsistency, the City shall, prior to granting the Additional Franchise, notify Franchisee of the
City's determination related to Franchisee's Notice of Inconsistency.
4. If the City determines that the terms of an Additional Franchise are
more favorable or less burdensome than those imposed upon Franchisee, then the City shall:
(a) Make such modifications as it deems necessary to ensure
that the terms of the Additional Franchise are no more favorable or less burdensome than those
imposed upon Franchisee; or
30
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 31
(b) Modify the terms and requirements of Franchisee's
Franchise as mutually agreed to by the parties.
Section 3. Franchise Renewal Agreement.
(d) The parties shall negotiate in good faith for the purposes of development
and mutual execution of a franchise renewal agreement (the "Renewal Agreement ") including
the terms and conditions hereof. The parties shall meet and confer as appropriate and
necessary for the purposes of achieving this result.
(e) If the parties are not able to mutually agree to a Renewal Agreement
containing terms and conditions acceptable to all parties on or before December 31, 2006 (the
"Negotiation Period "), the Franchise shall be, as of December 31, 2006, reinstated if expired and
extended as modified by the terms and conditions of this MOU for a period specified in Section 1
hereof (the "Franchise Extension "). If the Franchise Extension occurs, the existing terms and
conditions of the Franchise shall remain in effect except those terms and conditions of the
Franchise shall be deemed amended and superseded to the extent inconsistent with the terms
and conditions of this MOU. In the event of any conflict between the express provisions of the
Franchise and this MOU, the MOU shall govern. In the event of any ambiguity regarding the
joint interpretation of the Franchise and the MOU, the Franchise shall be interpreted in such a
manner as to effectuate the terms and conditions of the MOU to the maximum extent possible.
All provisions of the Franchise which are not affected by the MOU shall remain in full force and
effect.
(f}
This
MOU shall
be effective upon its approval by the
City
Council;
provided, however,
if the
Proposed
Transaction (as that term is defined in
the
Transfer
31
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 32
Agreement) does not close by December 31, 2006, then this MOU shall be void and of no
further force or effect.
TIME WARNER NY CABLE LLC CITY OF NEWPORT BEACH,
CALIFORNIA
By: By:
Its: Its:
Dated: Dated:
32
Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 33
EXHIBIT C
SETTLEMENT AND MUTUAL RELEASE AGREEMENT
This Settlement and Mutual Release Agreement (the "Agreement ") is made and
entered into this 27th day of June, 2006, by and between the City of Newport Beach,
California ( "City ") and Adelphia Cablevision of Newport Beach, LLC, a Delaware limited
liability company ( "Adelphia- Newport").
A. The City Council of the City of Newport Beach, California granted a
franchise to a predecessor of Adelphia- Newport, under the ownership and control of
Adelphia Communications Corporation ( "ACC "), to construct, improve, operate and
maintain a cable television system within the City (the "System ") pursuant to a Franchise
Agreement dated January 27, 1967 and Ordinance No. 1197, as amended by
Ordinance Nos. 1365, 86 -17 and 91 -43 ( "Franchise Agreement ") and Chapter 5.44 of
the Municipal Code of Newport Beach ( "Ordinance "). The Franchise Agreement and
Ordinance are referred to collectively herein as the "Franchise ".
B. ACC, Adelphia- Orange and certain of their affiliates (collectively, the
"Debtors ") are debtors in possession under title 11 of the United States Code (the
"Bankruptcy Code "). The Debtors' chapter 11 cases are being jointly administered under
case number 02 -41729 (REG) and are pending in the United States Bankruptcy Court
of the Southern District of New York (the "Bankruptcy Court").
C. Pursuant to an Asset Purchase Agreement dated April 20, 2005 between
ACC and Time Warner NY Cable LLC ( "TWNY "), the System and the Franchise
Agreement are to be transferred to TWNY, an indirect subsidiary of Time Warner Cable
(the "Transfer ").
D. The Debtors served a Notice of Proposed Retention, Assumption and /or
Assignment of Agreements and Proposed Cure Amounts on the City on December 15,
2005 (the "Cure Notice ") and the City filed its objection to such notice on January 13,
2006 (the "Objection ").
E. The City has reviewed Adelphia- Newport's compliance with its
commitments under the Franchise (the "Compliance Review "). The Compliance Review
identified certain areas of alleged non - compliance.
F. The City has filed duplicate proofs of claim, Claim Numbers 4003 and
18276, against the Debtors in the Bankruptcy Court in the amount of $7,339.25 each
(the "Proofs of Claim ").
G. Both parties reserve all rights they may have with respect to the validity
and enforceability of the Franchise.
H. The City and the Debtors (collectively, the "Parties ") now desire to settle
all existing claims related to Adelphia- Newport's alleged past non - compliance with the
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June 27, 2006
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Franchise, including, but not limited to, the
Review (the "Franchise Review Claims ").
according to the terms set forth below.
specific issues identified in the Compliance
The Parties now enter into this Agreement
AGREEMENT
1. Payment to the City. Adelphia- Newport shall pay the City the sum of
Twenty Two Thousand Three Hundred Thirty -Nine Dollars ($22,339.00) (the "Settlement
Amount") on or before the date that is ten (10) business days after the Effective Date (as
that term is defined in Section 19 below), provided Adelphia- Newport has received a
fully executed copy of this Agreement and the Transfer Agreement (as defined in
Section 3 below). In the event the Settlement Amount is not timely paid to the City, this
Agreement shall be null and void.
2. Assumption /Assignment A Franchise. The City agrees that timely payment
of the Settlement Amount shall be deemed to satisfy any claims the City may have
against the Debtors, including, but not limited to, claims for amounts owed pursuant to
the Compliance Review, claims asserted in the Objection, amounts asserted as owing in
the Proofs of Claim, claims related to and arising under the Franchise, and that any
defaults identified by the Compliance Review, asserted in the Objection or arising under
the Franchise, and arising as of the (late hereof, shall be deemed cured under section
365(b) of the Bankruptcy Code.
3. Transfer. If the City fails to adopt an Agreement approving the Transfer of
the Franchise Agreement, in a form corresponding, in all material respects, to the draft
Transfer Agreement attached as Exhibit A (the "Transfer Agreement "), neither the City
nor Adelphia- Newport is bound by this Agreement and it shall have no operative force
and effect.
4. Release by the City. Upon receipt of the Settlement Amount, the City shall
fully and forever waive and release all of its claims (as such term is defined in section
101(5) of title 11 of the United States Code) against the Debtors, their affiliates, officers,
directors, shareholders, partners, agents, contractors, employees, attorneys,
predecessors, sureties, successors and assigns, whether known or unknown, monetary
or non - monetary, as they may exist on the date hereof (the "Released Claims');
provided, however, that the releases set forth in this section 4 shall not apply to any
claims (a) arising after the date hereof, (b) to pay the Settlement Amount, (c) related to
the duty to indemnify the City from third party claims, (d) related to the duty to restore
property that is damaged, (e) relating to required activities with respect to the public
rights -of -way arising after the date hereof, or (f) for taxes (collectively, the "Preserved
Claims "), regardless of when such claims arose, but in no event shall such claims be
allowed or paid if contrary to an orde of the Bankruptcy Court in the Debtors' chapter 11
cases. The Released Claims include, but are not limited to, claims arising from any and
all alleged or actual breaches of the Franchise, the Franchise Review Claims, or claims
identified in the Objection and any and all related regulatory costs, including all legal,
accounting, technical, and inspection costs arising prior to the date hereof. Upon
payment of the Settlement Amount, all Released Claims shall be automatically
released, deemed disallowed and expunged, the Objection shall be deemed withdrawn
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June 27, 2006
Page 35
and the Proofs of Claims shall be deemed disallowed and expunged. The treatment of
the Proofs of Claim described herein shall be set forth in a proposed order to be
presented to the Bankruptcy Court for approval.
5. Release by the Debtors. Upon release of the City's claims against the
Debtors as provided in Section 4 of this Agreement, the Debtors shall fully and forever
waive and release all of their claims (as such term is defined in section 101(5) of the
Bankruptcy Code) against the City and its representatives, officers, agents, and
employees and their predecessors, successors and assigns, which are related to, or
arising from the Franchise and the Compliance Review, whether known or unknown,
monetary or non - monetary, as they may exist on the date hereof; provided, however,
that the releases set forth in this section 5 shall not apply to any Preserved Claims or
other claims arising after the date hereof.
6. Effect on Franchise Renewal. This agreement neither expands nor
contracts the rights of Adelphia- Newport under 47 U.S.C. § 546(a) -(g).
7. Inapplicability of Civil Code §11542. Each of the Parties to this Agreement
acknowledges and agrees that the releases contained in this Agreement are special
releases and that § 1542 of the Civil Code of the State of California is not applicable. If
and to the extent it should be determined that the releases contained in this Agreement
are not special releases, contrary to the Parties' acknowledged intention and
agreement, each Party specifically waives the benefit of the provisions of §1542 of the
Civil Code of the State of California, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN
HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
8. No Admission of Liability. Each Party acknowledges and agrees that this
Agreement accomplishes the compromise of disputed claims and is not intended to
constitute an admission of liability, wrongdoing or error on the part of any Party or their
respective employees, agents, attorneys, representatives, or parent, subsidiary or
affiliated companies. Any liability, wrongdoing or error is expressly denied by each Party
to this Agreement.
9. Waiver of Unknown Claims. Each Party hereby acknowledges that such
Party is aware that such Party may later discover facts in addition to or different from
those which such Party now knows or believes to be true with respect to the subject
matter of this Agreement and that it is such Party's intention, notwithstanding, to fully,
finally and forever, settle and release all of the claims released by this Agreement,
known or unknown, suspected or unsuspected, which now exist, may exist or
previously existed between the Parties. In furtherance of such intention, the releases
given in this Agreement shall be and shall remain in effect as a full and complete
release with respect to the claims identified above, notwithstanding the discovery or
existence of any such additional or different facts. The Parties further accept and
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Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 36
assume the risk that such facts may turn out to be different from the facts now known or
believed to be true by the Parties and agree that the releases given in this Agreement
shall remain in all respects effective and shall not be subject to termination or rescission
by reason of any such difference in fact.
10. Authority. Subject to paragraph 20 of this Agreement, each person
executing this Agreement on behalf of a corporation or other legal entity warrants that
he or she holds the position indicated beneath his or her signature and that he or she
has been duly authorized by said corporation or other legal entity to execute this
Agreement on its behalf.
11. Independent Advice. Each Party to this Agreement acknowledges and
agrees that such Party has been represented throughout the negotiation and
documentation of this Agreement by attorneys of the Party's choice and has been
advised by such attorneys with respect to this Agreement and the effect of the releases
given in this Agreement. Each Party to this Agreement further acknowledges and
agrees that such Party has read this .Agreement, knows the contents of this Agreement
and, in executing this Agreement, has relied solely on the Party's own judgment, belief
and knowledge, and the advice and recommendations of the Party's attorneys
concerning this Agreement, and has not been induced to enter into this Agreement by
any representation or statement of any other party not expressly contained in this
Agreement.
12. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the Parties to this Agreement and their respective affiliates, agents,
representatives, successors and assigns.
13. Integration. This Agreement and the Transfer Agreement set forth the
entire agreement between the Parties with respect to the settlement and release of
claims specified herein. All agreements, covenants, representations and warranties,
express or implied, oral or written, of the Parties with regard to the subject matter
addressed herein are contained in this Agreement and the agreements referred to
herein, including the Transfer Agreement. In the event of a conflict between the terms
of this Agreement and the terms of the Transfer Agreement, the terms of this
Agreement shall control. No other agreements, covenants, representations or
warranties, express or implied, oral or written, have been made by any Party to any
other Party. All prior and contemporaneous conversations, negotiations, possible and
alleged agreements, representations, covenants and warranties with respect to the
subject matter hereof are waived, merged in this Agreement and superseded by it,
14. Additional Agreement. In addition to the Agreement to be delivered as
provided in this Agreement, each of the Parties agrees to execute and deliver such
additional agreements and take such other action as may be reasonably required to
carry out the terms of this Agreement.
15. Waiver. No breach of any provision of this Agreement can be waived
unless in writing and mutually agreed upon by the affected Parties. Waiver of any one
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June 27, 2006
Page 37
breach of this Agreement shall not be deemed to be a waiver of any other breach of that
or any other provision of this Agreement.
16. Modification and Amendment. No modification or amendment of any of
the terms or provisions of this Agreement shall be binding upon any Party to this
Agreement unless made in writing and signed by all Parties or by a duly authorized
representative or agent of such Parties.
17. No Construction. No Party to this Agreement or such Party's attorney
shall be deemed to be the drafter of this Agreement for purposes of interpreting or
construing any of the provisions of this Agreement. This Agreement shall be interpreted
in accordance with the fair meaning of its language and not strictly for or against any of
the Parties to this Agreement.
18. Execution in Counterparts. This Agreement may be executed in any
number of copies by the Parties to this Agreement on separate counterparts and will
become effective upon signature by all Parties upon one or more of such identical
counterparts.
19. Effective Date. This Agreement shall be effective upon the latest to occur
of: (a) Bankruptcy Court approval of this Agreement; (b) Debtors' receipt of a fully
executed copy of this Agreement; and (c) final approval of the Transfer Agreement by
the City Council and Mayor of the City ( "Effective Date ").
20. Bankruptcy Court Approval. This Agreement is subject to approval by the
Bankruptcy Court presiding over the Debtors' pending bankruptcy cases. Such
Bankruptcy Court approval may be obtained pursuant to settlement procedures
previously approved by the Bankruptcy Court. The Debtors shall not be obligated to pay
the Settlement Amount unless and until the Bankruptcy Court approves this Agreement.
In the event that the Bankruptcy Court does not approve this Agreement within forty -five
(45) days of final approval by the City Council: (a) nothing contained herein shall be
deemed to be a waiver of any claims or an admission of liability by any Party hereto; and
(b) this Agreement shall be null and void, and all rights of the Parties prior to this
Agreement shall be preserved.
21. Payment. As to any and all payments made to the City pursuant to this
Agreement (collectively, the "Payment "), the parties agree as follows:
A. The Payment is within the exclusions from the term "franchise fee"
set forth in Section 622(g) (2) of the Cable Act (47 U.S.C. section 542(g) (2)); and
B. The Payment shall not be deemed to be in the nature of a tax, and
shall be in addition to any and all taxes of general applicability or other fees or charges
which Adelphia- Newport shall be required to pay to the City or to any state or federal
agency or authority; and
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Resolution Relating to Adelphia -Time Warner Transfer
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C. Adel phia-Newport shall not have or make any claim or any
deduction or other credit of all or any part of the amount of the Payment to be made
pursuant to this Agreement from or against any City or other governmental taxes of
general applicability (including any such tax, fee, or assessment imposed on both
utilities and cable operators or their services but not including a tax, fee, or assessment
which is unduly discriminatory against cable operators or cable subscribers or income
taxes) or other fees or charges which Adelphia- Newport is required to pay to the City or
other governmental agency; and
D. Adelphia - Newport: shall not apply or seek to apply all or any part of
the amount of the Payment to be made pursuant to this Agreement as a deduction or
other credit from or against any City or other government taxes of general applicability
(other than income taxes) or other fees or charges; and
E. Adelphia- Newport shall not apply or seek to apply all or any part of
the amount of any City or other government taxes or other fees or charges of general
applicability (including any such tax, fee, or assessment imposed on both utilities and
cable operators or their services) as a deduction or other credit from or against the
Payment to be made pursuant to this ,Agreement; and
F. Adel phia-Newport or any affiliated party will not pass through,
externalize, or otherwise attempt to add the costs of the Payment to any regulated rate.
Adel phia-Newport shall bear the full economic burden of the Payment.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first above written.
CITY OF NEWPORT BEACH
A municipal corporation
A
Its:
APPROVED AS TO FORM:
I ts:
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Resolution Relating to Adelphia -Time Warner Transfer
June 27, 2006
Page 39
ADELPHIA CABLEVISION OF NEWPORT BEACH, LLC,
a Delaware limited liability company,
By: Ft. Myers Cablevision, LLC,
a Delaware limited liability company,
Its Sole Member,
By: Ft. Myers Acquisition Limited Partnership,
a Delaware limited partnership,
Its Sole Member,
By: Olympus Communications, L.P.,
a Delaware limited partnership,
Its General Partner,
By: ACC Operations, Inc.
a Delaware corporation,
Its Managing General Partner,
0
Its:
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