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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 33 Resolution Relating to Adelphia -Time Warner Transfer June 27, 2006 Page 34 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 34 Resolution Relating to Adelphia -Time Warner Transfer 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 35 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 36 Resolution Relating to Adelphia -Time Warner Transfer 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 37 Resolution Relating to Adelphia -Time Warner Transfer June 27, 2006 Page 38 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: 38 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: 39