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HomeMy WebLinkAbout2006-03-21; City Council; 18489; Proposed Cable Franchise Transfer Highland/Adelphia to Time Warner NY Cable LLCCITY OF CARLSBAD - AGENDA BILL AB* 18.489 MTG. 3/21/06 DEPT. CM TITLE: CONSIDERATION OF PROPOSED CABLE FRANCHISE TRANSFER FROM HIGHLAND/ADELPHIA TO TIME WARNER NY CABLE LLC Q 111§cc 0.a. g o ozIDoo RECOMMENDED ACTION: City staff recommends that the Carlsbad City Council approve the proposed request to transfer the existing cable franchise from Highland to Time Warner by adopting Resolution No 2006-066 consenting to the transfer of the television cable franchise held by Highland Carlsbad Operating Subsidiary, Inc. and managed by Adelphia Communications Corporation (Adelphia) to Time Warner NY Cable LLC (TWNY). ITEM EXPLANATION: On July 15, 2005, the City of Carlsbad received a request to consider a proposed transfer (Form 394) of the cable franchise from Adelphia to Time Warner. This transfer is a result of the illegal dealings of the Rigas Family and subsequent bankruptcy of Adelphia. It is concurrent with and contingent upon the proposed buyout of Adelphia by Time Warner and Comcast Cable. The City and outside counsel have worked with the Time Warner staff for several months to develop the terms and conditions of an acceptable transfer of the cable system, keeping in mind the need to assure top quality cable services to the public and the responsibility of the cable provider to fulfill the terms of the existing cable TV franchise ordinance. Attached to this agenda bill is a Transfer Agreement that allows the transfer of the existing franchise from Highland Carlsbad, the existing franchise holder, to Time Warner NY Cable LLC (TWNY),. This agreement reaffirms the obligation of TWNY to comply with the provisions of the existing franchise ordinance. TWNY has represented to the City that after the transfer TWNY does not contemplate any changes that would negatively affect the quality of video programming, customer service or other aspects of the cable service operation in Carlsbad. This transfer recognizes that the current franchise term expires in November 2006, and does not seek to amend the existing timeframe. Prior to that date, the City will follow the appropriate franchise renewal process. The following is a summary of the key terms of the Transfer Agreement: • TWNY will be bound by all the commitments, duties, and obligations of the existing franchise. • The City reserves all rights with respect to TWNY's compliance with the terms of the franchise. • TWNY promises that the costs associated with this transaction will not result in an increase in subscriber rates • The City's approval of the transfer is conditioned on the successful completion of the sale and transfer of ownership of Highland Carlsbad/Adelphia prior to December 31 2006 PAGE 2 FISCAL IMPACT: Approval of the transfer of the existing franchise from Highland/Adelphia to TWNY does not have any fiscal impact in itself. However, the City receives approximately $1 million per year from franchise fees from cable television services. The transfer to TWNY maintains the continuity of these franchise fees to the City. There will be no change in the franchise fee rate of 5% of gross revenues, nor will there be a change in the computation of gross revenues as defined in the existing municipal code. EXHIBITS: 1. Resolution No 2006-066 , included in the Transfer Agreement as Exhibit A, consenting to the transfer of the television cable franchise held by Highland Carlsbad Operating Subsidiary, inc. and managed by Adelphia Communications Corporation to Time Warner NY Cable LLC, subject to the terms and conditions of a transfer agreement; (ii) authorizing the City of Carlsbad to enter into the transfer agreement; (iii) authorizing the city to enter into a settlement and mutual release agreement with highland Carlsbad operating subsidiary, inc. 2. Transfer Agreement between the City of Carlsbad, Highland Carlsbad, Adelphia Communications Corporation, Time Warner NY Cable LLC, and Time Warner Cable Inc. Staff Contact: Joe Garuba, City Manager's Office (760) 434-2820 2- 1 RESOLUTION NO.i 2006-066 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, CONSENTING TO THE 3 TRANSFER OF THE TELEVISION CABLE FRANCHISE HELD BY HIGHLAND CARLSBAD OPERATING SUBSIDIARY, INC. AND MANAGED BY ADELPHIA 5 COMMUNICATIONS CORPORATION TO TIME WARNER NY CABLE LLC, SUBJECT TO THE TERMS AND 6 CONDITIONS OF A TRANSFER AGREEMENT; (ii) AUTHORIZING THE CITY OF CARLSBAD TO ENTER INTO 7 THE TRANSFER AGREEMENT; (iii) AUTHORIZING THE CITY TO ENTER INTO A SETTLEMENT AND MUTUAL 8 RELEASE AGREEMENT WITH HIGHLAND CARLSBAD OPERATING SUBSIDIARY, INC. 10 1 1 Whereas, Daniels Cablevision, Inc ("Daniels") was previously the holder of a franchise 12 ("Franchise") to provide cable service in the City pursuant to Ordinance 6058 adopted on 13 October 18, 1977 granting franchises to Daniels Properties, Inc. and La Costa Community 14 Antenna System, Inc. and City Municipal Code, Chapter 5.28 (the "Franchise Ordinance") with 15 an expiration date of November 18, 2006. The Franchise was assigned to Daniels by resolution 16 of the City adopted on November 11, 1986. Highland Carlsbad Operating Subsidiary, Inc. 1 j ("Highland"), a corporation wholly owned by the Rigas family and presently managed by lg Adelphia Communication Corporation ("Adelphia") acquired the Franchise from Daniels 19 pursuant to Resolution 2001-59 adopted by the City on February 20, 2001. The Franchise and 2Q Franchise Ordinance are referred to collectively herein as the "Franchise Documents." 21 Whereas, Pursuant to an April 25, 2005 U.S. Government forfeiture agreement with the Rigas 22 family and an April 25, 2005 settlement agreement with Adelphia, any remaining Rigas family 23 ownership interest in Highland will be terminated and transferred by the U.S. Government to 24 Adelphia. 25 I 2<c Whereas, Adelphia and Time Warner Cable Inc. ("Time Warner Cable") have entered into an 27 agreement dated April 20, 2005 (the "Asset Purchase Agreement") whereby the Franchise and 20 cable system serving the City and operated by Highland will be acquired by Time Warner NY 1 Cable LLC ("TWNY"), an indirect subsidiary of Time Warner Cable (the "Transaction"). 2 Highland, Adelphia, Time Warner Cable and TWNY are referred to collectively as the 3 "Companies." 4 Whereas, On June 14, 2005, Adelphia and Time Warner Cable submitted FCC Form 394 with 5 the City, requesting approval of the Transaction (the "Transfer Application"); and 6 7 Whereas, The City's consent to the Transaction is required under Section 5.28.140(d) of the 8 Franchise Ordinance. Based on the past performance of Highland, among other things, the 9 information provided in the Transfer Application (or lack of information), as well as concerns 10 regarding the financial, technical and legal qualifications of the proposed transferee in light of 1 \ the same, the City believes that the requests for approval could be denied. The Companies 12 disagree that there is any basis for denying or conditioning the Transaction. 13 Whereas, under the Federal Cable Act, the City has 120 days after receiving a request for 14 approval of a transfer of a franchise accompanied by a FCC Form 394 to approve or deny the 15 transfer, unless the City and requesting party agree to an extension; and 16 17 Whereas, Adelphia, Time Warner Cable and the City agreed to extend the final date for the City 18 to approve or deny the transfer transaction described above until and through March 21,2006. 19 20 Whereas, the final day for the City to approve or deny the transfer before it is automatically 21 deemed approved is therefore March 21,2006. 22 23 Whereas, Time Warner Cable and TWNY have represented to the City that after the transfer 24 described above closes, TWNY does not contemplate or plan any reductions in local staffing or 25 other resources that would adversely affect the quality or quantity of video programming, 26 customer services or other aspects of the cable service operations in the City. 27 28 -2- 1 Whereas, after extensive negotiations between the parties, the City and Highland have agreed in 2 principle to the terms and conditions of a Settlement and Mutual Release Agreement 3 ("Settlement Agreement"). 4 5 Whereas, after extensive negotiations between the parties, the City, Adelphia, Highland, Time 6 Warner Cable and TWNY have agreed in principle to the terms and conditions of a Transfer 7 Agreement (the "Transfer Agreement"), which is attached hereto as Exhibit 1. 8 9 Whereas, the Transfer Agreement establishes the terms and conditions under which TWNY, the 10 new Franchisee, will accept the Franchise and the City will approve of the transfer of the 11 Franchise, as described above and in the Transfer Agreement. 12 13 Whereas, in agreements attached to and made a part of the Transfer Agreement, Time Warner 14 Cable has agreed to guaranty TWNY's performance under the Franchise Documents. 15 16 Whereas, for the reasons stated in the staff report submitted to the City Council, the City is 17 willing to approve the transfer of the Franchise, as described in the staff report and the Transfer 18 Agreement, so long as the rights and interests of the public and the City are protected. 19 20 Whereas, the City finds that the rights and interests of the public and the City are protected 21 under the terms and conditions of the Settlement Agreement and the Transfer Agreement. 22 23 Whereas, Adelphia and certain of its affiliates (collectively, the "Debtors") currently are 24 operating as debtors-in-possession under Title 11 of the United States Code in the United States 25 Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). Highland 26 shortly will become one of the Debtors. 27.. Whereas, the Settlement Agreement described above requires approval of the Bankruptcy Court. 28 6 1 Now, therefore, be it resolved by the City Council of the City of Carlsbad as follows: 2 3 That the above recitals are true and correct 4 5 Section 1. The City Council approves the transfer of the Franchise in the City of 6 Carlsbad from Highland to TWNY subject to the following conditions: 7 8 (a) Adelphia, Highland, Time Warner Cable and TWNY (hereinafter 9 sometimes collectively referred to as the "Companies") shall execute and file with the 10 City the Transfer Agreement no later than March 28, 2006. 11 12 (b) Time Warner Cable, as guarantor, shall file with the City a Guarantee of 13 TWNY's performance under the Franchisee, executed by Time Warner Cable and 14 certified and sworn as to the legally binding act of Time Warner Cable, no later than 15 March 14, 2006. 16 17 (c) TWNY shall file with the City an Acceptance of the Franchise executed by 18 TWNY and certified and sworn as to the legally binding act of TWNY, no later than 19 March 28, 2006. 20 21 (d) The forfeiture and transfer of the ownership interest in Highland from the 22 Rigas family to Adelphia, provided in the April 25, 2005 U.S. Government forfeiture 23 agreement with the Rigas family and an April 25, 2005 settlement agreement with 24 Adelphia, shall be consummated no later than October 31, 2006. 25 26 (e) The Proposed Transaction shall be consummated on terms and conditions 27 that are not in any material respect different from those described in the Transfer 28 -4- Application and other related materials provided to the City, this Resolution, and the Transfer Agreement. 3 4 (f) Adelphia shall execute and file with the City the Settlement Agreement no 5 later than March 28,2006. 6 (g) The Settlement Agreement must be approved by the Bankruptcy Court no later than May 19,2006. 9 (h) The Proposed Transaction shall be consummated no later than October 31, 10 2006. 11 12 13 Section 2. 14 15 (a) If any of the conditions specified in Section 1 hereof, except for the 16 requirements of Section l(d) and l(g), are not agreed to and timely satisfied, then the 1' City's consent to the transfer of the Franchise from Highland to TWNY shall be deemed 18 denied as of March 28,2006, unless extended by written agreement of the City and the 19 Companies. 20 21 (b) If the conditions specified in Sections l(d) and l(g) are not agreed to and timely satisfied, then the City's consent to the transfer of the Franchise from Highland to 23 TWNY shall thereafter be voidable at the City's sole discretion, and deemed to be timely 24 denied as of March 14, 2005, upon written notice to the Companies. 26 27 28 -5- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Section 3. Any material misrepresentation in the Transfer Applications shall constitute a material violation of the Franchise and the Municipal Code, subject to all the remedies available to the County under the Franchise and the Municipal Code. Section 4. The City Manager is hereby authorized to execute the Settlement Agreement on behalf of the City. Section 5. The City Manager is hereby authorized to immediately execute the Transfer Agreement on behalf of the City as set forth in Exhibit 1 attached hereto and incorporated herein. This resolution shall be effective immediately upon adoption. PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 21st day of March , 2006, by the following vote: AYES: Council Members Lewis, Hall, Kulchin, Packard, Sigafoose NOES: ABSENT: LORRAINE M. WOOD, City Clerk (SEAL) -6- SETTLEMENT AND MUTUAL RELEASE AGREEMENT This Settlement and Mutual Release Agreement (the "Agreement") is made and entered into this 8N* day of March, 2006, by and between the City of Carlsbad, California ("City") and. Highland Carlsbad Operating Subsidiary, Inc. ("Highland"). A. Daniels Cablevision, Inc ("Daniels") was previously the holder of a franchise ("Franchise") to provide cable service in the City pursuant to Ordinance -605 8 adopted on October 18,1977 granting franchises to Daniels Properties, Inc. and La Costa Community Antenna System, Inc. and City Municipal Code, Chapter 5.28 (the "Franchise Ordinance"), with an expiration date of November 18, 2006. The Franchise was assigned to Daniels by resolution of the City adopted on November 11, 1986. Highland, a corporation wholly owned by the Rigas family and presently managed by Adelphia Communications Corporation ("Adelphia"), acquired the Franchise from Daniels pursuant to Resolution 2001-59 adopted by the City on February 20, 2001. The Franchise and Franchise Ordinance are referred to collectively herein as the Franchise Agreement. B. Pursuant to an April 25, 2005 U.S. Government forfeiture agreement with the Rigas family and an April 25,2005 settlement agreement with Adelphia, any remaining Rigas family ownership interest in Highland will be terminated and transferred by the U.S. Government to Adelphia. C. Adelphia and certain of its 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"). Highland shortly will become one of the Debtors. D. The City has filed proof of claim number 16224 against Adelphia in the Bankruptcy Court (the "Proof of Claim"). E. Adelphia and Time Warner Cable Inc. have entered into an agreement dated April 20, 2005 (the "Asset Purchase Agreement") whereby the Franchise and cable system serving the City and operated by Highland will be acquired by TWNY (the "Transfer"). E. The City has conducted an audit of fees owed by Highland through June 30, 2005 (the "Audit"). The City has also reviewed Highland's compliance with its commitments under the Franchise Agreement, (the "Compliance Review"). The Compliance Review identified certain areas of non-compliance. F. The City and Highland acknowledge that the Franchise Agreement is valid and shall remain in force and effect under the terms set forth therein and applicable law. G. The City and Highland (collectively, the "Parties") now desire to settle all existing claims related to the Audit and to Highland's alleged past non-compliance with the Franchise Agreement, including, but not limited to, the specific issues identified in the Compliance Review and the Audit (collectively, the "Franchise Review Claims"). The Parties now enter into this Agreement according to the terms set forth below: AGREEMENT 1. Payment to the City. Highland shall pay the City the sum of $176,973.00 (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 18 below). In the event the Settlement Amount is not timely paid to the City, this Agreement shall be null and void. 2. Assumption/Assignment of Franchises. 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 Audit and for past performance under the Franchise Agreement and that any defaults identified by the Audit or under the Franchise Agreement shall be deemed cured under section 365(b) of the Bankruptcy Code. It is expressly understood and agreed that the payment and performance of the cure obligations as set forth herein shall not in any way reduce or restrict the going forward obligations assumed by the assignees of the Franchise Agreement after the closing of the Transfer. 3. Transfer. This Agreement shall not become effective until such time as the City adopts a resolution approving the Transfer in a form corresponding, in all material respects, to the draft transfer agreement and draft transfer resolution approving this Agreement, both of which are set forth in Attachment 1 attached hereto and made a part hereof (collectively the "Transfer Agreement"). 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 Highland and 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) arising after July 1, 2005 with respect to payment of any franchise fees due and owing after the date of the Audit to the closing of the Transfer, (c) to pay the Settlement Amount, (d) related to the duty to indemnify the City from third party claims, (e) related to the duty to restore property that is damaged, (f) related to required activities with respect to the public rights-of-way arising after the date hereof, or (g) for taxes (collectively, the "Preserved Claims"), regardless of when such claims arose. The Released Claims include, but are not limited to, claims arising from any and all alleged or actual breaches of the Franchise Agreement, claims set forth in the Audit, the Proof of Claim, Franchise Review Claims, 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, and the Proof of Claim shall be disallowed and expunged. 5. Release by the Debtors. Upon release of the City's claims against Highland and the Debtors as provided in Section 4 of this Agreement, Highland and the Debtors shall fully and forever waive and release all of their claims (as such term is Carlsbad Settlement Agreement 2.7.06 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 Agreement and the Audit, 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. Inapplicability of Civil Code §1542. 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." 7. 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. 8. 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 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. 9. Authority. Subject to paragraph 19 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. Carlsbad Settlement Agreement 2.7.06 10. 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. 11. 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. 12. 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. 13. 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. 14. 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 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. 15. 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. 16. 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. Carlsbad Settlement Agreement 2.7.06 17. 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. 18. Effective Date. This Agreement shall be effective upon the latest to occur of (i) Bankruptcy Court approval of this Agreement only if Highland is a Debtor at the time of execution of this Agreement; (ii) Highland's receipt of a fully executed copy of this Agreement and (iii) final approval of the Transfer Agreement by the City Council and Mayor of the City ("Effective Date"). 19. Bankruptcy Court Approval. In the event that Highland becomes a Debtor, this Agreement is subject to approval by the Bankruptcy Court presiding over the Debtors' bankruptcy cases. Such Bankruptcy Court approval may be obtained pursuant to settlement procedures previously approved by the Bankruptcy Court. If Highland is a Debtor at the time of execution of this Agreement, Highland 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 (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. 20. No Modification. Highland shall not request, nor will it agree, to modifications of this Agreement by the terms and conditions of any plan of reorganization. In the event of any conflict or inconsistency between the terms and conditions of a plan of reorganization and this Agreement, this Agreement will control. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the day and year first above written. CITY OF CARLSBAD a municipal corporation 5 Carlsbad Settlement Agreement 2.7.06 Approved as to form: City Attorney 5. £ f. of, HIGHLAND CARLSBAD OPERATING SUBSIDIARY, INC. By. \ Name: _ Lee A. Perron Its: _ Authorised Agent Carlsbad Settlement Agreement 2.7.06 ATTACHMENT 1 TRANSFER AGREEMENT PARTIES THIS AGREEMENT dated this^Fday of March, 2006 (the "Agreement"), is by and between: the City of Carlsbad, California, a municipal corporation ("City"); Highland Carlsbad Operating Subsidiary, Inc. ("Highland"), Adelphia Communications Corporation ("Adelphia"), Time Warner NY Cable LLC ("TWNY") and Time Warner Cable Inc. ("Time Warner Cable" and, together with Highland, Adelphia, and TWNY, the "Companies"). RECITALS A. Daniels Cablevision, Inc ("Daniels") was previously the holder of a franchise ("Franchise") to provide cable service in the City pursuant to Ordinance 6058 adopted on October 18, 1977 granting franchises to Daniels Properties, Inc. and La Costa Community Antenna System, Inc. and City Municipal Code, Chapter 5.28 (the "Franchise Ordinance"), with an expiration date of November 18, 2006. The Franchise was assigned to Daniels by resolution of the City adopted on November 11, 1986. Highland, a corporation wholly owned by the Rigas family and presently managed by Adelphia, acquired the Franchise from Daniels pursuant to Resolution 2001-59 adopted by the City on February 20, 2001. The Franchise and Franchise Ordinance are referred to collectively herein as the "Franchise Documents." B. Adelphia and certain of it affiliates (collectively, the "Debtors") currently are 7 Carlsbad Settlement Agreement 2.7.06 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"). Highland shortly will become one of the Debtors. C. Pursuant to an April 25, 2005 U.S. Government forfeiture agreement with the Rigas family and an April 25, 2005 settlement agreement with Adelphia, any remaining Rigas family ownership interest in Highland will be terminated and transferred by the U.S. Government to Adelphia (the "Government Proceedings"). D. Adelphia and Time Warner Cable have entered into an agreement dated April 20, 2005 (the "Asset Purchase Agreement") whereby the Franchise and cable system serving the City and operated by Highland will be acquired by TWNY (the "Transaction"). E. On June 14, 2005, Adelphia and Time Warner Cable submitted an FCC Form 394 with the City, requesting approval of the Transaction (the "Transfer Application"); and F. The City's consent to the Transaction is required under Section 5.28.140(d) of the Franchise Ordinance. Based on the past performance of Highland, among other things, the information provided in the Transfer Application (or lack of information), as well as concerns regarding the financial, technical and legal qualifications of the proposed transferee in light of the same, the City believes 8 Carlsbad Settlement Agreement 2.7.06 that the requests for approval could be denied. The Companies disagree that there is any basis for denying or conditioning the Transaction. G. The Companies have represented to the City that after the Transaction is closed, TWNY does not contemplate or plan any reductions in local staffing or other resources that would adversely affect the quality or quantity of video programming, customer services or other aspects of the cable service operations in the City; and H. Relying on the Companies' representations made in the Transfer Application and subsequent correspondence with the City, the City is willing to approve the Transaction, so long as all the interests of the public and of the City are protected and certain noncompliance issues are resolved. The Companies are also willing to resolve these disputes. To that end the City, Highland and Adelphia have agreed to enter into a separate Settlement and Mutual Release Agreement (the "2006 Settlement Agreement"). The Companies are willing to agree to conditions upon the transfer based upon the terms and conditions of the 2006 Settlement Agreement and this Agreement, as specified below. AGREEMENT NOW, THEREFORE, in consideration of City's approval of the Transaction and subject to the terms and conditions of this Agreement and of the City's Resolution granting consent to the Transaction, THE PARTIES DO HEREBY AGREE as follows: Carlsbad Settlement Agreement 2.7.06 1. DEFINITIONS 1.1 Closing: The closing of the Transaction in the manner and on the dates defined in the Asset Purchase Agreement. 1.2 Companies: Highland, Adelphia, Time Warner Cable and TWNY, individually or collectively. 1.3 Franchisee: The entity holding the Franchise at any given time. Thus, prior to the approval of this Agreement by the City Council the Franchisee was Highland. After this Agreement is fully executed and approved by the City Council and after the Closing of the Transaction, the Franchisee will be TWNY. 1.4 Transaction: TWNY's acquisition of the cable system owned by Highland and managed by Adelphia, including the Franchise, pursuant to the Asset Purchase Agreement. 2. TRANSFER OF FRANCHISE 2.1 The City, upon approval of the City Council, consents to the transfer of the Franchise and the cable system in the City as specifically described in the Transfer Application. Upon the Closing of the Transaction, TWNY will be the new Franchisee having all of Highland's rights and obligations under the Franchise Documents from and after the Closing. TWNY is owned and controlled by Time Warner Cable. 2.2 The City reserves all rights and powers not contrary to the terms of this Agreement, including but not limited to, and without limitation, the following: 2.3 Neither this Agreement, the City's consent to the transfer of the ownership of the Franchise, nor any other action or omission by the City at or before the execution of this Agreement, shall be construed to constitute the City's consent to any future 10 Carlsbad Settlement Agreement 2.7.06 transfer and/or change in ownership and/or control of the Franchisee, the Franchise and/or Franchisee's cable system, other than the Government Proceedings, or to mean that the City's consent to any future transaction, is not required in accordance with the Franchise Documents. Likewise, the City's consent to the transfer of the Franchise shall not expand any rights beyond those contained in the Franchise Documents. 2.4 Any consent given by the City to the Transaction is made without prejudice to, or waiver of, the City's right to fully investigate and consider the financial, technical, and legal qualifications and other relevant facts related to Franchisee, and/or persons or entities owning or controlling or proposing to own or control Franchisee or the Franchise during any future Franchise renewal or transfer process. 2.5 This Agreement does not waive or affect any right with respect to the City's ability, at the time of the renewal of the franchise, to consider or raise claims after the closing of the Transaction based on any unremedied past non-monetary defaults, future defaults, failure to provide reasonable service in light of the community's needs, or failure to comply with the terms, conditions and provisions of the Franchise Documents and applicable law, except as the same would be barred by the 2006 Settlement Agreement.. 2.6 This Agreement does not waive or affect any right with respect to the Franchisee's future compliance with the terms, conditions, provisions, requirements and other obligations set forth in the Franchise Documents, including the City's right to regulate and to compel Franchisee to comply with the Franchise Documents. 2.7 The City's approval of the Transaction will in no way be deemed to be an admission that the Franchisee is presently in compliance with all of its obligations under 11 Carlsbad Settlement Agreement 2.7.06 the Franchise Documents, except to the extent set forth in the 2006 Settlement Agreement. TWNY shall not be responsible for Highlands' defaults prior to the Closing of the Transaction. 3. ACCEPTANCE OF FRANCHISE OBLIGATIONS 3.1 TWNY accepts the Franchise and accepts, acknowledges, and agrees that from and after the Closing of the Transaction, it will be bound by all the commitments, duties, and obligations, present, continuing and future, of the Franchisee embodied in the Franchise Documents and that the Transaction will have no effect on these obligations. 3.2 Contemporaneous with executing this Agreement, TWNY shall ex-ecute and submit to the City an Acceptance of Franchise in the form attached hereto as Exhibit B. 3.3 TWNY will assume responsibility and be liable for any acts and omissions, known and unknown, under the Franchise from and after the Closing of the Transaction. Notwithstanding the above, while TWNY will be required after the Closing of the Transaction to cure any existing or future defaults, whether known or unknown, it shall not be liable for any monetary defaults and/or damages, including liquidated damages, for any defaults that existed as of the Closing of the Transaction. 3.4 The Companies acknowledge and agree that, by entering into this Agreement, the City reserves all of its rights with respect to the new Franchisee's future compliance with the terms, conditions, requirements and obligations set forth in the Franchise Documents from and after the Closing of the Transaction. No delay or failure to enforce any provision of the Franchise Documents will operate against the City as an 12 Carlsbad Settlement Agreement 2.7.06 estoppel or waiver. 3.5 Nothing in this Agreement amends or alters the Franchise Documents or any requirements therein in any way, except as set for herein, and all provisions of the Franchise Documents remain in full force and effect and are enforceable in accordance with their terms and with applicable law. 3.6 TWNY agrees to provide a parent company Guaranty of Performance from Time Warner Cable (the "Guaranty") assuring compliance by TWNY with all the obligations of the Franchise Documents from and after the Closing of the Transaction. Contemporaneous with the execution of this Agreement, Time Warner Cable shall execute and submit to the City the Guaranty in the form attached hereto as Exhibit C. 4. ADDITIONAL CONDITIONS 4.1 Final approval of the City Council will be a condition precedent to this Agreement. The execution of this Agreement will in no way bind the City Council to approve the Transaction, and this Agreement will automatically become null and void if the Council does not approve the Transaction in the form attached as Exhibit A. 4.2 All necessary conditions to the effectiveness of this Agreement, as set forth in the Transfer Resolution, must be satisfied prior to any approval of this Agreement by the City Council, including the execution of the Acceptance of Performance and the Guaranty described above. If all such necessary conditions are not satisfied, of if the City fails to consent to the Transaction in the form of Exhibit A, then this Agreement will be voidable at the election of the City upon written notice to Adelphia and Time Warner Cable. 13 Carlsbad Settlement Agreement 2.7.06 4.3 If the Transaction closes on terms that are in any material respect different from the terms disclosed to the City in the Transfer Application, then any consent of the City to the Transaction will become voidable by the City upon written notice to Adelphia and Time Warner Cable, and the Transaction will be deemed to have been timely denied on March 7, 2006. 4.4 In the event that the City elects to void its consent to the Transaction, neither the City nor the Companies waives any rights they have under applicable federal law. Failure of the conditions contained in Section 4.1 herein shall not compromise the Companies' right to assert a claim of wrongful denial or any other claim. Furthermore, none of the Companies waive any rights or privileges under the Bankruptcy Code. 4.5 The Transaction must close by December 31, 2006. In the event the Transaction does not close by the date specified above, the City may revoke its approval upon written notice to Adelphia and Time Warner Cable and the Transaction will be deemed to have been timely denied on March 7, 2006. 4.6 The City and Highland must enter into the 2006 Settlement Agreement, which provides for the resolution of all outstanding past compliance issues, and the payments required thereunder must be made in accordance with Section 5.2 of this Agreement. 4.7 The Companies hereby waive any and all claims that any action by the City voiding its consent to the Transfer Application under Sections 4.2, 4.3 or 4.5 of this Agreement fails to satisfy the deadlines established by 47 U.S.C. § 537, as amended. 5. PAYMENTS TO THE CITY 14 Carlsbad Settlement Agreement 2.7.06 5.1 Highland agrees to pay the City certain amounts under the terms set forth in the 2006 Settlement Agreement. The City shall not seek from the Companies any additional amounts for expenses incurred in connection with the Transaction and the settlement contemplated in this Agreement. This provision shall not be construed to waive or estop either the City or the Companies with respect to their positions regarding any such reimbursement that may be required by the Franchise Documents. Payment will be made by check delivered to the City or through wired funds as instructed by the City. 5.2 Highland shall pay the City the amounts required under the 2006 Settlement Agreement, which is subject to and shall be effective upon approval by the Bankruptcy Court presiding over Adelphia's pending and Highland's anticipated bankruptcy case if Highland becomes a Debtor under such case. Such approval may be obtained pursuant to settlement procedures previously approved by the Bankruptcy Court. If Highland is a Debtor at the time payment is due, Highland shall not be obligated to pay amounts due under the 2006 Settlement Agreement unless and until the Bankruptcy Court approves the 2006 Settlement Agreement. In the event that the Bankruptcy Court does not approve the 2006 Settlement Agreement, (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) the 2006 Settlement Agreement shall be null and void, and all rights of the parties prior to this Agreement and the 2006 Settlement Agreement shall be preserved. Highland shall pay amounts due under the 2006 Settlement Agreement within ten (10) business days following approval of the Bankruptcy County, provided that the City has granted its final approval to the Transaction in the form of Exhibit A prior to such date. 15 Carlsbad Settlement Agreement 2.7.06 5.3 .The Companies agree that no payments, expenditure, or other consideration provided pursuant to or arising from this Agreement,, the 2006 Settlement Agreement, or any other settlement amount previously paid by Highland to the City shall be treated as a cost arising from a condition of the Franchise pursuant to 47 C.F.R. § 76.925 and will not be passed through to subscribers. Such payments, expenditure, or other consideration are in addition to and will not affect the Franchisee's obligation to pay franchise fees in full as required by the Franchise Documents and in accordance with past practices. 5.4 This Agreement and the 2006 Settlement Agreement are intended to settle and resolve and the City and the Companies hereby release any and all claims and causes of action which were or could have been asserted with regard to the Franchisee's compliance with the terms and conditions of the Franchise and the Companies' closing of the Transaction, except to the extent otherwise specifically provided in this Agreement or the 2006 Settlement Agreement. As provided above, nothing in this Section 5 is intended to release the new Franchisee from its obligations to cure any defaults under the Franchise Documents from and after the Closing of the Transaction as provided in Section 3.3, herein. 6. RATES 6.1 The Companies covenant, promise, warrant and represent that the costs associated with the Transaction itself will not result in any increase in subscriber rates. 6.2 The Companies agree that any payment, expenditure, or other consideration provided pursuant to or arising from this Agreement, the 2006 Settlement Agreement or any other settlement amounts previously paid by Highland to the City are paid in 1-6 Carlsbad Settlement Agreement 2.7.06 settlement of claims which were or could have been asserted against the Franchisee and/or the Companies, and that such payment, -expenditure, or other consideration shall not be treated as a cost arising from a condition of the Franchise pursuant to 47 C.F.R. § 76.925, and will not be passed through to subscribers on future bills issued after the effective date of this Agreement and the 2006 Settlement Agreement. This provision shall not be construed to prevent Franchisee from setting unregulated rates at any level, at its discretion, nor to prevent Franchisee from recovering and itemizing any future payments made for franchise fees, utility user taxes or payments for public, education and government access from subscribers to the extent such recovery and itemization is authorized by applicable law. 6.3 Nothing in this Agreement, the Guaranty or the City's consent shall restrict the authority of the Companies to establish rates in accordance with FCC regulation. 7. DISPUTES REGARDING THIS AGREEMENT 7.1 Any material breach of this Agreement will be deemed a material breach of the Franchise Documents and will be subject to all remedies available for a breach of the Franchise Documents. The remedies set forth in this Section will be in addition to, and not exclusive of, any other remedies the City may have under this Agreement or the Franchise Documents and at law or equity. 7.2 Any material misrepresentation in the Transfer Application shall constitute a material violation of the Franchise Documents and the applicable Companies shall be subject to all the remedies available to the City under the Franchise Documents. 17 Carlsbad Settlement Agreement 2.7.06 8. REPRESENTATIONS AND WARRANTIES 8.1 Each of the Companies hereby covenant, represent and warrant that at the time of the execution of this Agreement: (a) it is a corporation, limited liability company or partnership duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (b) the Franchise Documents and, assuming due execution hereof by the other parties hereto, this Agreement, constitute legal, valid and binding obligations of such Company enforceable in accordance with their terms; (c) the execution and delivery of, and performance by such Company under this Agreement and the Franchise Documents, where applicable, except as otherwise provided by the Bankruptcy Code, are within such Company's power and authority without the joinder or consent of any other party and have been duly authorized by all requisite corporate or partnership action on the part of such Company and are not in contravention of such Company's partnership agreement, charter, bylaws, and/or other organizational documents; and (d) the execution and delivery of this Agreement and attached documents do not contravene, result in a breach of, or constitute a default under any contract or agreement to which any of them is a party or by which any of them or any of their properties may be bound (nor would such execution and delivery constitute such a default with the passage of time or the giving of notice or both), and do not violate or contravene any law, order, decree, rule, regulation or restriction to which any of them is subject. 8.2 The Companies covenant, represent and warrant that the Transaction will not adversely affect the financial position of the new Franchisee or limit the funds available to the new Franchisee. 8.3 The Companies agree that from and after the Closing, they will not take 18 Carlsbad Settlement Agreement 2.7.06 any action or fail to take any action which will cause the Franchisee to fail to fully comply with the terms of the Franchise Documents and this Agreement and applicable law. To the extent that any provisions of any document associated with the Transaction, or any other contract, conflicts with the Franchise Documents, this Agreement or applicable federal, state or local laws, the parties agree that any such provision will be of no force or effect as between any of the Companies and the City. 8.4 The Companies acknowledge and agree that the City's consent to the Transaction is made in reliance upon the covenants, representations, warranties, documents, and information provided by the Companies in connection with the Transfer Application, including the related correspondence from the Companies to the City regarding the Transfer Application. Each Company represents and warrants that each representation made by it is true and accurate, and that no material information has been omitted. Each Company will be liable for the representations and warranties made by it and relied upon by the City. 8.5 Each Company agrees to indemnify and hold the City harmless against any loss, claim, damage, liability or expense (including, without limitation, all associated costs and expenses) caused directly or indirectly by any representation or warranty made by the Company which proves to be untrue, incomplete or inaccurate in any material respect. 9. MISCELLANEOUS PROVISIONS 9.1 This Agreement will be effective and binding upon execution and final approval by the City Council in the form of Exhibit A. 19 Carlsbad Settlement Agreement 2.7.06 9.2 Entire Agreement: This Agreement constitutes the entire agreement and understanding of the parties with respect to the Transfer Application and the City's consent to the Transaction. No statements, promises or inducements not consistent with this Agreement made by any party will be valid or binding, unless in writing and executed by all parties. This Agreement may only be modified by written amendments signed by all parties hereto. 9.3 Binding Acceptance: This Agreement will bind and benefit the parties hereto and their respective heirs, beneficiaries, administrators, executors, receivers, trustees, successors and assigns. Any purported assignment of this Agreement is void without the express written consent of each signatory. 9.4 Voluntary Agreement: This Agreement is freely and voluntarily given by each party, without any duress or coercion, and after each party has consulted with its counsel. Each party has carefully and completely read all of the terms and provisions of this Agreement. 9.5 Counterparts: This Agreement may be executed in several counterparts, each of which when so executed will be deemed to be an original copy, and all of which together will constitute one agreement binding upon all parties hereto, notwithstanding that all parties will not have signed the same counterpart. 9.6 Governing Law: This Agreement will be governed in all respects by the law of the State of California, except as to matters that are governed solely by federal law or regulation. 9.7 Time is of Essence: In determining whether a party has substantially complied with any term, condition or provision of this Agreement, the parties agree and 20 Carlsbad Settlement Agreement 2.7.06 understand that time is of the essence. 9.8 Captions and References: The captions and headings of sections throughout this Agreement are intended solely to facilitate reading and reference to the sections and provisions of this Agreement. Such captions will not affect the meaning or interpretation of this Agreement. 9.9 Severability: Except as provided in Section 4.1, if any term, condition, or provision of this Agreement, shall, to any extent, be held to be invalid, preempted or unenforceable, the remainder hereof shall be valid in all other respects and continue to be effective. IN WITNESS WHEREOF the Parties hereto have executed this contract on the day and year first hereinabove written. CITY OF CARLSBAD, CALIFORNIA City Manager ADELPHIA COMMUNICATIONS CORPORATION /- HIGHLAND CARLSBAD OPERATING SUBSIDIARY, INC. Carlsbad Settlement Agreement 2.7.06 21 Draft - City March 31 2006 Redline TIME WARNER CABLE INC.TIME WARNER NY CABLE LLC APPROVED AS TO FORM: City Attorney ATTEST: 22 Carlsbad Settlement Agreement 2.7.06 EXHIBIT A FORM OF CONSENT RESOLUTION RESOLUTION NO. -_ RESOLUTION CONSENTING TO THE TRANSFER OF THE TELEVISION CABLE FRANCHISE HELD BY HIGHLAND CARLSBAD OPERATING SUBSIDIARY, INC. AND MANAGED BY ADELPHIA COMMUNICATIONS CORPORATION TO TIME WARNER NY CABLE LLC, SUBJECT TO THE TERMS AND CONDITIONS OF A TRANSFER AGREEMENT; (ii) AUTHORIZING THE CITY OF CARLSBAD TO ENTER INTO THE TRANSFER AGREEMENT; (iii) AUTHORIZING THE CITY TO ENTER INTO A SETTLEMENT AND MUTUAL RELEASE AGREEMENT WITH HIGHLAND CARLSBAD OPERATING SUBSIDIARY, INC. Whereas, Daniels Cablevision, Inc ("Daniels") was previously the holder of a franchise ("Franchise") to provide cable service in the City pursuant to Ordinance 6058 adopted on October 18, 1977 granting franchises to Daniels Properties, Inc. and La Costa Community Antenna System, Inc. and City Municipal Code, Chapter 5.28 (the "Franchise Ordinance") with an expiration date of November 18, 2006. The Franchise was assigned to Daniels by resolution of the City adopted on November 11, 1986. Highland Carlsbad Operating Subsidiary, Inc. ("Highland"), a corporation wholly owned by the Rigas family and presently managed by Adelphia Communication Corporation ("Adelphia") acquired the Franchise from Daniels pursuant to Resolution 2001-59 adopted by the City on February 20, 2001. The Franchise and Franchise Ordinance are referred to collectively herein as the "Franchise Documents." Whereas, Pursuant to an April 25, 2005 U.S. Government forfeiture agreement with the Rigas family and an April 25, 2005 settlement agreement with Adelphia, any remaining Rigas family ownership interest in Highland will be terminated and transferred by the U.S. Government to Adelphia. Whereas, Adelphia and Time Warner Cable Inc. ("Time Warner Cable") have entered into an agreement dated April 20, 2005 (the "Asset Purchase Agreement") whereby the Franchise and cable system serving the City and operated by Highland will be acquired by Time Warner NY Cable LLC ("TWNY"), an indirect subsidiary of Time Warner Cable (the "Transaction"). Highland, Adelphia, Time Warner Cable and TWNY are referred to collectively as the "Companies." Whereas, On June 14, 2005, Adelphia and Time Warner Cable submitted FCC Form 394 with the City, requesting approval of the Transaction (the "Transfer Application"); and Whereas, The City's consent to the Transaction is required under Section 5.28.140(d) of the Franchise Ordinance. Based on the past performance of Highland, among other things, the information provided in the Transfer Application (or lack of information), as well as concerns regarding the financial, technical and legal qualifications of the 23 Carlsbad Settlement Agreement 2.7.06 proposed transferee in light of the same, the City believes that the requests for approval could be denied. The Companies disagree that there is any basis for denying or conditioning the Transaction. 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 a FCC Form 394 to approve or deny the transfer, unless the City and requesting party agree to an extension; and Whereas, Adelphia, Time Warner Cable and the City agreed to extend the final date for the City to approve or deny the transfer transaction described above until and through March 14, 2006. Whereas, the final day for the City to approve or deny the transfer before it is automatically deemed approved is therefore March 14, 2006. Whereas, Time Warner Cable and TWNY have represented to the City that after the transfer described above closes, TWNY does not contemplate or plan any reductions in local staffing or other resources that would adversely affect the quality or quantity of video programming, customer services or other aspects of the cable service operations in the City. Whereas, after extensive negotiations between the parties, the City and Highland have agreed in principle to the terms and conditions of a Settlement and Mutual Release Agreement ("Settlement Agreement"). Whereas, after extensive negotiations between the parties, the City, Adelphia, Highland, Time Warner Cable and TWNY have agreed in principle to the terms and conditions of a Transfer Agreement (the "Transfer Agreement"), which is attached hereto as Exhibit 1. Whereas, the Transfer Agreement establishes the terms and conditions under which TWNY, the new Franchisee, will accept the Franchise and the City will approve of the transfer of the Franchise, as described above and in the Transfer Agreement. Whereas, in agreements attached to and made a part of the Transfer Agreement, Time Warner Cable has agreed to guaranty TWNY's performance under the Franchise Documents. Whereas, for the reasons stated in the staff report submitted to the City Council, the City is willing to approve the transfer of the Franchise, as described in the staff report and the Transfer Agreement, so long as the rights and interests of the public and the City are protected. Whereas, the City finds that the rights and interests of the public and the City are protected under the terms and conditions of the Settlement Agreement and the Transfer Agreement. Whereas, Adelphia and certain of its affiliates (collectively, the "Debtors") currently are 24 Carlsbad Settlement Agreement 2.7.06 operating as debtors-in-possession under Title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). Highland shortly will become one of the Debtors. Whereas, the Settlement Agreement described above requires approval of the Bankruptcy Court. Now, therefore, be it resolved by the City Council of the City of Carlsbad as follows: Section 1. The City Council approves the transfer of the Franchise in the City of Carlsbad from Highland to TWNY subject to the following conditions: (a) Adelphia, Highland, Time Warner Cable and TWNY (hereinafter sometimes collectively referred to as the "Companies") shall execute and file with the City the Transfer Agreement no later than March 28, 2006. (b) Time Warner Cable, as guarantor, shall file with the City a Guarantee of TWNY's performance under the Franchisee, executed by Time Warner Cable and certified and sworn as to the legally binding act of Time Warner Cable, no later than March 14, 2006. (c) TWNY shall file with the City an Acceptance of the Franchise executed by TWNY and certified and sworn as to the legally binding act of TWNY, no later than March 28, 2006. (d) The forfeiture and transfer of the ownership interest in Highland from the Rigas family to Adelphia, provided in the April 25,2005 U.S. Government forfeiture agreement with the Rigas family and an April 25,2005 settlement agreement with Adelphia, shall be consummated no later than October 31,2006. (e) The Proposed Transaction shall be consummated on terms and conditions that are not in any material respect different from those described in the Transfer Application and other related materials provided to the City, this Resolution, and the Transfer Agreement. (f) Adelphia shall execute and file with the City the Settlement Agreement no later than March 28,2006. (g) The Settlement Agreement must be approved by the Bankruptcy Court no later than May 19, 2006. (h) The Proposed Transaction shall be consummated no later than October 31,2006. Section 2. 25 Carlsbad Settlement Agreement 2.7.06 (a) If any of the conditions specified in Section 1 hereof, except for the requirements of Section l(d) and l(g), are not agreed to and timely satisfied, then the City's consent to the transfer of the Franchise from Highland to TWNY shall be deemed denied as of March 28, 2006, unless extended by written agreement of the City and the Companies. (b) If the conditions specified in Sections l(d) and l(g) are not agreed to and timely satisfied, then the City's consent to the transfer of the Franchise from Highland to TWNY shall thereafter be voidable at the City's sole discretion, and deemed to be timely denied as of March 14,2005, upon written notice to the Companies. Section 3. Any material misrepresentation in the Transfer Applications shall constitute a material violation of the Franchise and the Municipal Code, subject to all the remedies available to the County under the Franchise and the Municipal Code. Section 4. The City Manager is hereby authorized to execute the Settlement Agreement on behalf of the City. Section 5. The City Manager is hereby authorized to immediately execute the Transfer Agreement on behalf of the City as set forth in Exhibit 1 attached hereto and incorporated herein. This resolution shall be effective immediately upon adoption. Past and adopted this 21stday of March, 2006 26 Carlsbad Settlement Agreement 2.7.06 EXHIBIT B ACCEPTANCE OF FRANCHISE - TIME WARNER NY CABLE LLC Time Warner NY Cable, LLC ("TWNY") hereby accepts and agrees as of the Closing of the Transaction, as defined in that certain Transfer Agreement dated March £,1 ,2006, to be bound by the terms of a franchise ("Franchise") with the City of Carlsbad (the "City") pursuant to City Ordinance 6058 adopted on October 18, 1977 granting franchises to Daniels Properties, Inc. and La Costa Community Antenna System, Inc. and City Municipal Code, Chapter 5.28 (the "Franchise Ordinance"), and acquired by Highland Carlsbad Operating Subsidiary, Inc., with an expiration date of November 18, 2006. The Franchise and the Franchise Ordinance, as they may be or may have been amended from time to time, shall collectively be referred to as the Franchise Documents. By accepting the Franchise and agreeing to be bound by the Franchise Documents, TWNY further: (1) acknowledges and accepts the City's legal right to issue and enforce the Franchise; (2) agrees that it will not oppose the City's intervention in any proceeding affecting its Franchise or obligations thereunder; (3) accepts and agrees to comply with each and every provision of the Franchise Documents; and (4) agrees that the Franchise was granted pursuant to processes and procedures consistent with applicable law, and that it will not raise any claim to the contrary. TWNY declares that it has carefully read all of the terms and conditions of the Franchise Documents, and accepts and agrees to abide by the same. 27 Carlsbad Settlement Agreement 2.7.06 Draft - City March 31 2006 Redline TWNY is bound to maintain and operate a cable system under the terms, conditions, provisions and limitations set forth in the Franchise Documents and other applicable law. Time Warner NY Cable LLC On this the r3) day of ft}(Mf]r\ ,3a&, before me, the undersigned officer, personally appeared ~~&fiuJ j dL £ O'l-\ta^^, known to me to be the person whose name is subscribed to the above instrument, and acknowledged that he executed the same for the purposes therein contained. In witness whereof I hereunto set my hand. Notary Public 0 ANITA R. _KATZ My Commission Expires * 28 Carlsbad Settlement Agreement 2.7.06 EXHIBIT C GUARANTEE OF PERFORMANCE - TIME WARNER CABLE INC GUARANTEE, dated as of HafCmade by TIME WARNER CABLE^ ' ^ v INC., a Delaware corporation ("Guarantor"), in favor of the City of Carlsbad, California ("Beneficiary"). WHEREAS, in accordance with the relevant provisions of the City of Carlsbad Municipal Code, the Beneficiary, pursuant to Resolution NorD6-(3(g of the City Council dated March ^|, 2006 (the "Transfer Resolution") has approved the assignment of the Franchise granted by Ordinance No. 6058 (the "Franchise Agreement") and Chapter 5.28 of the Carlsbad Municipal Code (The "Franchise Ordinance") held by Highland Carlsbad Operating Subsidiary, Inc. ("Highland"), which is presently managed by Adelphia Communications Corporation (Adelphia") and operates and maintains a cable system in the City of Carlsbad, to Time Warner NY Cable LLC ("TWNY" or "Transferee"), which upon the close of a transaction as described in the Transfer Resolution (the "Transaction"), will result in TWNY operating the cable system in the City. WHEREAS, pursuant to that certain Transfer Agreement ("Transfer Agreement") attached as Exhibit 1 to the Transfer Resolution the City's approval was conditioned, among other things, on Guarantor unconditionally guaranteeing the performance of TWNY under the Franchise Agreement, the Franchise Ordinance and the Transfer Agreement. WHEREAS, Guarantor is the indirect parent of TWNY and, upon the closing of 29 Carlsbad Settlement Agreement 2.7.06 the Transaction, Guarantor will have a substantial interest in the cable system and the Franchise, as well as in the management and control of TWNY; 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 issued by Beneficiary and currently held by Highland to TWNY, in accordance with the Federal Communications Commission Form 394 filed by Guarantor and Adelphia, Guarantor agrees as follows: 1. Interpretive Provisions. (a) The words "hereof," "herein" and "hereunder" and words of similar import, when used in this Guarantee, shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and paragraph references are to this Guarantee 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. Guarantee. (a) From and after the close of the Transaction, Guarantor unconditionally and irrevocably guarantees to Beneficiary the timely and complete performance of all obligations of the Transferee under the Franchise Agreement, the Franchise Ordinance and the Transfer Agreement (the "Guaranteed Obligations"). The Guarantee is an irrevocable, absolute, continuing guarantee of payment and performance, and not a guarantee of collection. If any Transferee fails to pay any of its monetary Guaranteed Obligations in full when due in accordance with the terms of the Franchise Agreement, Guarantor will promptly pay the same to Beneficiary or procure payment of 30 Carlsbad Settlement Agreement 2.7.06 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 a Transferee under the Franchise Agreement, the Franchise Ordinance or otherwise. (b) This Guarantee shall remain in full force and effect for so long as the Transferee, or its successors or assigns, are providing services over cable systems under the Franchise Agreement; provided, however, that this Guarantee 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 Franchise Ordinance, or (ii) any direct or indirect transfer of the Franchise from Transferee to (or direct or indirect acquisition of Transferee or any successor thereto by (whether pursuant to a sale of assets or stock or other equity interests, merger or otherwise)) any other person or entity a majority of whose equity and voting interests are not beneficially owned and controlled, directly or indirectly, by Guarantor. Upon termination of this Guarantee 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 Guarantee or acceptance of this Guarantee. Guarantor waives diligence, presentment, protest and demand for payment to a 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 31 Carlsbad Settlement Agreement 2.7.06 the Franchise Agreement, the Franchise Ordinance or the Transfer Agreement to which a Transferee is entitled or which is served upon a Transferee at the same time such notice is sent to or served upon a Transferee. 4. Representations and Warranties. Each of Guarantor and Beneficiary represents and warrants that: (i) the execution, delivery and performance by it of this Guarantee 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 Guarantee, 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 Guarantee, when executed and delivered by Beneficiary, 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 32 Carlsbad Settlement Agreement 2.7.06 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: To Guarantor and Transferee: Time Warner Cable Inc. 290 Harbor Drive Stamford, CT 06902-6732 Telephone: (203)328-0631 Telecopy: (203) 328-4094 Attention: General Counsel To Beneficiary: City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008-1989 Telephone: Telecopy: Attention: City Manager 7. Integration. This Guarantee 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 Guarantee 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 Guarantee may be waived by Beneficiary in a letter or agreement executed by Beneficiary. 33 Carlsbad Settlement Agreement 2.7.06 9. Section Headings. The section headings used in this Guarantee 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 Guarantee. 11. Expenses. All costs and expenses incurred in connection with this Guarantee and the transaction contemplated hereby shall be borne by the party incurring such costs and expenses. 12. Counterparts. This Guarantee 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 GUARANTEE 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. IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written. TIME WARNER CABLE INC. 34 Carlsbad Settlement Agreement 2.7.06 Draft - City March 31 2006 Redline CITY OF CARLSBAD, CALIFORNIA Name: Raymond Patchett Title: city Manager Carlsbad Settlement Agreement 2.7.06 35 CABLE RATES COMPARISON ADELPHIA v. TIME WARNER All Recefre-Agenda Item # ; For die Wonnatfon of the: CITY COUNCIL AasL CbLJ^LCA. fCC *-^ Adelphia Service Description Cable Service: Broadcast Basic - 33 Channels Exoanded Basic - 39 Channels Adelphia Classic Cable Advantage (Classic Cable/Digital Basic/Internet) Total Advantage (Classic Cable/Digital Basic/Internet/Movie Prem.) Diqital Service: Digital Basic - 46 Channels Equipment: Digital/Addressable Converter HDTV Receiver DVR (HD or SD Receiver) Connection Fees (one-time charge}: Unwired Home Installation Additional Outlet @ Installation Trip Charge (after installation) Monthly Charge $ 21.50 $ 25.20 $ 46.70 $ 82.35 $ 105.35 $ 13.92 $ 4.25 $ 7.70 $ 7.70 $ 39.95 $ 19.95 $ 25.00 $Per Channel $ 0.65 $ 0.65 $ 0.65 $ 0.30 Time Warner Service Description Local Basic - 21 Channels Expanded Cable - 54 Channels Advantage (Basic + Expanded) (No comparable package) (No comparable package) Digital Cable - 33 Channels Digital/Addressable Converter HDTV Receiver DVR (HD or SD Receiver) Primary Outlet (Unwired) Additional Outlet @ Installation Truck Trip (after installation) Monthly Charge $ 11.70 $ 36.25 $ 47.95 $ 11.00 $ 7.00 $ 7.00 $ 7.00 $ 36.00 $ 15.00 $ 10.00 $Per Channel $ 0.56 $ 0.67 $ 0.64 $ 0.33 MAR 2 0 2006 CITY OF CARLSBAD CITY CLERK'S OFFICE 07/28/2005 Cable Franchise Transfer Cable Franchise Transfer from Highland/Adelphia from Highland/Adelphia to Time Warner NY to Time Warner NY Cable LLCCable LLC Cable Franchise TransferCable Franchise Transfer„„Consider approval of the transfer of the existing Consider approval of the transfer of the existing cable TV franchise from Highland/Adelphia to cable TV franchise from Highland/Adelphia to Time Warner NYTime Warner NY„„Staff has resolved all outstanding issuesStaff has resolved all outstanding issues„„Completion of an Audit of Franchise Fees Completion of an Audit of Franchise Fees ––2001 2001 through mid 2005 through mid 2005 ––Adelphia has agreed to pay all Adelphia has agreed to pay all outstanding fees outstanding fees --$215,000$215,000„„Time Warner Cable has agreed to guarantee the Time Warner Cable has agreed to guarantee the performance of TWNYperformance of TWNY Cable Franchise TransferCable Franchise Transfer„„TWNY will be bound by the existing franchise TWNY will be bound by the existing franchise ordinanceordinance„„Including payment of franchise fees and public Including payment of franchise fees and public access supportaccess support„„TWNY has agreed that the costs associated with TWNY has agreed that the costs associated with this transfer will not result in a rate increase to this transfer will not result in a rate increase to subscriberssubscribers„„Rates may change, but not due to the costs related to Rates may change, but not due to the costs related to the acquisition of Adelphiathe acquisition of Adelphia Cable Franchise TransferCable Franchise Transfer„„CouncilCouncil’’s approval is conditional on a number s approval is conditional on a number of events:of events:„„Receipt of several signed documents (Documents Receipt of several signed documents (Documents received in fax or electronic form, originals to be received in fax or electronic form, originals to be received via mail)received via mail)„„Completion of the transfer of ownership by October Completion of the transfer of ownership by October 31, 200631, 2006„„Adelphia franchise fee settlement agreement Adelphia franchise fee settlement agreement approval by Bankruptcy court by May 19, 2006approval by Bankruptcy court by May 19, 2006 Cable Franchise TransferCable Franchise Transfer„„Staff recommends that Council adopt Resolution No Staff recommends that Council adopt Resolution No 20062006--066:066:„„Consenting to the transfer of the Television Cable Franchise Consenting to the transfer of the Television Cable Franchise held by Highland Carlsbad Operating Subsidiary, Inc. and held by Highland Carlsbad Operating Subsidiary, Inc. and managed by Adelphia Communications Corporation to Time managed by Adelphia Communications Corporation to Time Warner NY Cable LLC, subject to the terms and conditions Warner NY Cable LLC, subject to the terms and conditions of a transfer agreement; authorizing the City of Carlsbad to of a transfer agreement; authorizing the City of Carlsbad to enter into the transfer agreement; authorizing the City to enter into the transfer agreement; authorizing the City to enter into a settlement and mutual release agreement with enter into a settlement and mutual release agreement with Highland Carlsbad Operating Subsidiary, Inc.Highland Carlsbad Operating Subsidiary, Inc.„„City Attorney to adjust the dates in the agreement to reflect City Attorney to adjust the dates in the agreement to reflect the date of approval.the date of approval.