CC Resolution 2000-102RESOLUTION NO. 2000-102
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA QUINTA,
CALIFORNIA CONDITIONALLY APPROVING THE TRANSFER OF
CONTROL OF A CABLE TELEVISION FRANCHISE GRANTED TO SUMMIT
CABLE SERVICES OF GEORGIA TO AOL TIME WARNER, INC.
WHEREAS, the City Council of the City of La Quinta (the "City") adopted an
Ordinance establishing regulations for granting and operating cable television systems
(hereafter referred to as the "Ordinance"); and
WHEREAS, pursuant to the Ordinance, the City entered into a Franchise
Agreement with Summit Cable Services of Georgia, Inc. (hereinafter referred to as the
"Franchisee"), (hereinafter referred to as the "Franchise Agreement"). The Ordinance
and the Franchise Agreement constitute, and will be hereinafter referred to as the
"Franchise;" and
WHEREAS, the Ordinance requires City Council consent to any transfer or
change of control of the Franchise or the Franchisee; and
WHEREAS, FCC Regulations (47 CFR Section 76.5020)(1) require that in order
for a cable operator to obtain approval of a transfer or change in control of the
Franchise or the Franchisee, it must submit an FCC Form 394 and any other
information as may be required by the City; and
WHEREAS, the Franchisee has requested the consent of the City to transfer
control of the Franchise and Franchisee to AOL Time Warner, Inc. (the "Transferee");
and
WHEREAS, the Transferee has filed an FCC Form 394 with the City requesting
City Council approval of the transfer of control of the Franchise to the Transferee
(hereinafter referred to as the "Transfer"); and
WHEREAS, in support of its Form 394 Application, the Franchisee and the
Transferee have submitted to the City certain documents which are on file with the
City Clerk, and are collectively referred to as the "Transfer Documents;" and
WHEREAS, the City, through its attorneys and consultants, submitted an
Information Request to the Franchisee and Transferee on or about February 15, 2000
(the "Information Request"); and
WHEREAS, the Franchisee and Transferee have not fully and completely
responded to the Information Request; and
Resolution No. 2000-102
Conditional Approval of Transfer
Summit Cable Svcs. To AOL Time Warner
Adopted: August 15, 2000
Page 2
WHEREAS, the City Council has determined that the combination of Time
Warner, Inc. ("TWI") and America Online, Inc. ("AOL") into the Transferee could
reduce competition for both video programming and the provision of Internet Service
Provider ("ISP") services over the cable system of the Franchisee and potentially
subject subscribers to a loss or lack of choice in terms of the selection of both video
programming sources and/or the selection of an appropriate ISP; and
WHEREAS, TWI and AOL have entered into and executed a Memorandum of
Understanding dated February 29, 2000, regarding Open Access business practices
(the "MOU"); and
WHEREAS, the City Council expressly finds that the parties to the MOU entered
into and executed the MOU, at least in part, to induce the Federal Communications
Commission (the "Commission") and local franchising authorities to approve the
Transfer; and
WHEREAS, the Franchisee's compliance with the terms and conditions of the
MOU has been relied upon by the City in conditionally approving the Transfer and
constitutes material consideration and inducement thereto; and
WHEREAS, the City Council hereby finds that the Franchisee's compliance with
the MOU constitutes a mitigating factor supporting conditional approval of the
Transfer; and
WHEREAS, it would be fundamentally unfair and constitute a fraud upon the
administrative process if the parties to the MOU were allowed to utilize the MOU as
material inducement to approve the Transfer and then subsequently cancel, repudiate,
denounce, or materially degrade the requirements thereof; and
WHEREAS, the City and Franchisee have conditionally prepared an agreement
entitled "Agreement Relating To The Consent Of The City of La Quinta, California To
The Transfer Of Control Of The Franchise Agreement Held By Summit Cable Services
of Georgia, Inc." (hereinafter referred to as the "Transfer Agreement"), attached as
Exhibit A; and
WHEREAS, the City Council has determined that the Transfer should not be
approved unless the Franchisee, agree to the conditions contained within the Transfer
Agreement.
Resolution No. 2000-102
Conditional Approval of Transfer
Summit Cable Svcs. To AOL Time Warner
Adopted: August 15, 2000
Page 3
NOW THEREFORE, BE IT RESOLVED that the City Council of the City of La
Quinta does hereby order as follows:
SECTION 1. The City Council hereby approves and consents to the Transfer,
subject to the Franchisee executing, delivering, and complying with the terms and
conditions of this Resolution as provided herein. This approval and consent shall be
deemed effective as of the date of closing of the Transfer.
SECTION 2. Unless the Transfer Agreement is executed and delivered to the
City by all parties specified on the signature page thereof, other than the City, on or
before 5:00 pm on September 30, 2000, (the "Acceptance Date") the Transfer shall
be deemed denied, without further action of the City Council, as of the date of this
Resolution. Staff is hereby authorized and directed to present to the City Council at
its first regularly scheduled meeting subsequent to the Acceptance Date a resolution
setting forth the specific grounds for denial which grounds shall be consist with the
recitals set forth herein and the requirements set forth in the Transfer Agreement.
SECTION 3. Upon the close of the Transfer, Transferee shall comply with and
be bound by the following documents:
1. The Ordinance;
2. The Franchise Agreement;
3. The Transfer Agreement and all prior Transfer and Extension Agreements;
and
4. This Resolution.
SECTION 4. The Mayor is authorized to execute the Transfer Agreement
attached hereto and incorporated herein with such changes as approved by Special
Counsel. The City Manager, the City Attorney, Special Counsel or their designees, are
hereby authorized and empowered to execute any documents necessary, in their
discretion, to implement the approval contained herein.
PASSED, APPROVED and ADOPTED at a regular meeting of the La Quinta City
Council, held on this 15th day of August, 2000 by the following vote:
Resolution No. 2000-102
Conditional Approval of Transfer
Summit Cable Svcs. To AOL Time Warner
Adopted: August 15, 2000
Page 4
AYES: Council Members Henderson, Perkins, Sniff
NOES: None
ABSENT: Council Member Adolph
ABSTAIN: Mayor Pena
STANLEY SNIFF, YOR PRO
City of La Quinta, Call ornia
ATTEST:
JUNE EK, CMC, City Clerk
City of La Quinta, California
(City Seal)
APPROVED AS TO FORM:
J�
M. KA HERINE JENSON, CiiWAttorney
City of La Quinta, California
EXHIBIT "A"
-- AGREEMENT RELATING TO THE CONSENT OF THE CITY
OF LA QUINTA CALIFORNIA TO THE CHANGE OF CONTROL
OF THE FRANCHISEE TO AOL TIME WARNER INC.
THIS AGREEMENT (the "Transfer Agreement") is entered into this day of
2000, between the CITY OF La Quinta, California (the "City"), and Summit Cable Services of
Georgia, Inc. (the "Franchisee").
WHEREAS, City Council entered into a Franchise Agreement (the "Franchise") with a
subsidiary of the Transferor pursuant to the provisions of the La Quinta Municipal Code (the
"Ordinance") to operate a cable television system within the City (the "System"); and
WHEREAS, the Transferor has filed a written application to the City, (the "Application")
wherein it has requested the consent of the City to the assignment of control of the Franchise to the
Franchisee (the "Transfer"); and
WHEREAS, it is the intent of the City to approve the Transfer; and
WHEREAS, the Franchisee will remain in place and continue to hold the Franchise;
WHEREAS, the City Council of the City has reviewed the Transfer as well as all relevant
documents, Staff Reports and recommendations; and
WHEREAS, pursuant to the Ordinance, the Transfer is subject to written consent of the City
Council; and
WHEREAS, based upon the evidence presented to the City Council, it has determined that
it would be in the public interest to conditionally approve the Transfer.
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 Transfer
as described herein.
2. The granting of this consent to the Transfer does not render or waive the right of the
City to approve any subsequent change in the ownership of the Franchise or the ownership or legal
or operating control of the Franchisee where required by the Ordinance and there shall be no further
material change, amendment, or modification of the ownership or equity composition of the
Franchisee which requires advance consent of the City pursuant to the Ordinance without further
written consent of the City Council.
3. By executing this Transfer Agreement, the Franchisee agrees and acknowledges that
(1) this Transfer Agreement and the approving resolution is not a new franchise agreement, the
granting of a franchise, or the renewal of the existing franchise, but rather is exclusively an
agreement to transfer control of the Franchisee and said Transfer Agreement neither affects nor
prejudices in any way the City's or Franchisee's rights under the Franchise; (2) under Section 625
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101784.02 AM00
of the Cable Act, the term "commercially impracticable" means, with respect to a cable operator, that
it is commercially impracticable for the operator to comply with such requirement as a result of a
change in conditions which is beyond the control of the operator and the nonoccurrence of which
was a basic assumption on which the requirement was based. Franchisee agrees that in judging
whether particular obligations are commercially impracticable, the parties will not consider the
economic burden of debt service and equity requirements, if any, incurred directly or indirectly to
fund the Transfer to the extent such debt service and equity exceeds the debt service and equity
requirements of the Transferor as they existed prior to the Transfer.
4. By executing this Transfer Agreement, the Franchisee hereby agrees that it remains
subject to any and all existing obligations between the City and Franchisee including, but not limited
to, the Franchise, any Transfer Agreements and any Franchise Extension Agreements, any lawful
orders or directives of any administrative agency relating to the Franchise or the System including,
but not limited to, the Federal Communications Commission (the "Commission") and this Transfer
Agreement (collectively, the "Franchise Documents") and Franchisee represents and warrants that
it has examined the requirements of the Franchise Documents as well as the applicable federal, state,
or local laws or regulations, and agrees to abide by all the terms and conditions thereof.
Franchisee agrees and acknowledges that neither the Transfer nor the City's approval thereof
shall in any respect relieve Franchisee, or any of its successors -in -interest of the responsibility for
past acts or omissions, known or unknown, or for any obligations or liabilities pursuant to the
Franchise Documents.
The Franchisee agrees and acknowledges that it finds the Franchise Documents specified
herein to be legally sufficient, enforceable, valid, and binding and accepts the same without
condition or reservation. Franchisee shall continue to be responsible for all rate refund obligations
and possessory interest tax refund liability, if any, both actual and contingent. Franchisee agrees to
cooperate and furnish relevant information in relation to any audit and/or investigation relative to
any audit and/or investigation relative to breaches and/or defaults accruing subsequent to the
Transfer.
To the extent that the Franchisee or any related person or entity, challenges the validity or
interpretation of the Franchise Documents in the future in any administrative proceeding or court of
law, such a challenge shall be subject to all defenses which would have been available to the City
had the Transfer not occurred, 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
Franchisee.
5. On or before the Effective Date, the Transferor, or its designee, shall pay to the City
up to the sum of Five Thousand Dollars ($5,000), as invoiced by the City, which amount is paid in,
and only in, complete satisfaction and reimbursement of all third -party costs incurred by the City
in relation to the Transfer (the "Payment"). 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
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101784,02 AM00 -2-
P
in Section 622(g)(2) of the Cable Act (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 the franchise 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 duly 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
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
6. In regard to the Payment made to the City pursuant to this Transfer Agreement, the
Franchisee, or any affiliate party shall not pass through, externalize, or otherwise attempt to add the
costs of the Payment pursuant to Paragraph 5 hereof to any regulated rate.
7. Franchisee represents that the letter of credit, insurance and bonding required by the
Franchise Documents have been obtained, and that there will be no gaps in required coverages or
liabilities. Franchisee will continue to maintain the letter of credit and bonds that it was required to
maintain under the Franchise notwithstanding the Transfer.
8. Franchisee represents and warrants that the Transfer complies with and is not in
violation of any applicable federal, state, or local law, statute, and/or regulation. Franchisee agrees
to defend, indemnify and hold the City harmless against any loss, claim, costs, damage, liability or
expense (including, without limitation, reasonable attorney's fees) arising out of this Transfer
Agreement and/or incurred as a result of (i) any representation or warranty made by Franchisee
herein or in the Application or in connection with the City's review of the Transfer which proves to
be untrue or inaccurate in any material respect or (ii) any violation of any federal, state or La Quinta
law, statute and/or regulation relative to Franchisee's ownership or control of the Franchise or the
System. In the event the City receives any such notice of a loss, claim, damage, liability or expense,
the City shall promptly notify Franchisee which shall assume sole and direct responsibility for
defending against any such loss, claim, damage, liability or expense.
124/015610-0004
101784.02 AM00 _3
9. This consent is not an affirmation that Franchisee is currently in compliance with the
Franchise. Any consent given by the City in this Transfer Agreement and any resolution approving
this Transfer Agreement is not a finding that, after the Transfer, Franchisee will be financially,
technically or legally qualified, and no inference will be drawn, positively or negatively, as a result
of the absence of a finding on this issue. Any consent is made without prejudice to, or waiver of,
the City's right to fully investigate and consider Franchisee'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 Transfer is not a finding or representation that the Franchise will be
renewed or extended (and approval shall not create an obligation to renew or extend the Franchise);
that Franchisee is "financially, technically or legally" qualified to hold a franchise; or that any other
renewal issue that may arise with respect to past performance or future cable -related needs and
interests will be resolved in a manner favorable to Franchisee. Unless provided for within this
Transfer Agreement, nothing in this Transfer Agreement shall constitute a waiver of any of
Franchisee's, or City's rights or remedies under federal, state or local law.
10. Franchisee expressly agrees that any litigation arising from or relating to the
Franchise Documents shall be filed and litigated exclusively in the Superior Court, County of
Riverside, State of California or, if jurisdictional requirements are otherwise met, the Federal District
Court for the Central District, California. Franchisee hereby accepts service of process by way of
service upon the General Manager of the local office of the Franchisee.
11. Any violation of this Transfer Agreement or any of the terms contained in the
Franchise Documents shall be deemed to be a violation of the Franchise and the Ordinance.
12. Franchisee will provide interactive high speed cable modem services to buildings
owned or controlled by the City at most favorable commercial or governmental rate offered
anywhere in the same operating division by the Franchisee or any Affiliate thereof.
13. Reservation of Rights Relating to Non -Discriminatory Access to Cable Distribution
System.
A. The City reserves the right to impose a requirement that Franchisee provide
nondiscriminatory access to the cable modem platform of the system to providers of internet access
services, whether or not such providers are affiliated with Franchisee, under either of the following
conditions:
(i) If, by final order or judgment, a court of competent jurisdiction
rendering a judgment enforceable in California upholds or affirms the authority of any local
government to require a cable operator to provide nondiscriminatory access to its cable modem
platform of the system to providers of internet access services and the City otherwise meets the legal
and procedural prerequisites for the imposition of an internet access requirement. For the purposes
of this section, an order or judgment shall be considered final when a court of competent jurisdiction
renders, lets stand or affirms such order or judgment, and the time period in which to challenge such
order or judgment has passed without a challenge. Prior to the enactment or enforcement of any
124/015610-0004
101784 02 AMOO -4
— such requirement, Franchisee shall be provided with reasonable notice and an opportunity to be
heard, including the right to present evidence on any findings made or required to be made by the
City, or
(ii) In the event the City has the authority to regulate cable modem service
as a cable service and Franchisee enters into an agreement with any other franchising authority in
the Los Angeles, San Diego and/or Desert Cities Division, on a non -trial or commercial basis, that
requires nondiscriminatory access to its cable modem platform of the system for providers of internet
services unaffiliated with the Franchisee, provided that any requirement by the City in such instance
would be subject to equivalent terms and conditions.
Provided, however, that (1) any requirement imposed pursuant to subparagraphs 13 (a)(i) and
13(a)(ii) would be subject to equivalent terms and conditions, and (2) prior to the enactment of any
such requirement pursuant to Subparagraphs 13(a)(i) and 13(a)(ii) above by the City, the City agrees
that Franchisee shall be given reasonable notice and an opportunity to be heard including the right
to present evidence on any findings made by the City with respect to the imposition of such a
requirement. If following such a hearing the City decides to require such a non-discriminatory access
provision, Franchisee agrees to modify the Franchise to incorporate such nondiscriminatory access
provisions into the Franchise consistent with the terms of such judicial decision or other agreement
so long as such a provision is technically feasible within the present cable system. Nothing
contained herein shall be deemed a waiver of the Franchisee's rights to appeal a decision of the City
to impose such a condition.
B. Franchisee agrees to comply with all lawful federal, state, and local
requirements with respect to nondiscriminatory access to Franchisee's cable distribution system for
providers of Internet access service. The City approval of the transfer shall not be deemed to be a
waiver of any such rights it may have to impose any requirement relating to nondiscriminatory
access, as herein above provided, at a later date regardless of whether a transfer or renewal is
pending. Except as expressly provided herein, Franchisee, likewise, does not waive any right it may
have with respect to the imposition of such a condition.
C. Transferor and America Online, Inc. ("AOL") represent and warrant they have
entered into and executed a Memorandum of Understanding dated February 29, 2000, regarding
Open Access Business Practices (the "MOU"), a copy of which is attached hereto as Attachment B.
The City is granting its consent to the transfer of control of the Franchise in reliance on the intentions
of the Transferor and Franchisee to diligently implement, or cause to be implemented, the principles
expressed in and underlying the MOU.
14. Franchisee represents and warrants that the Transfer will not be utilized in any
regulatory forum or context to justify, in whole or part, any increases, or to void any decreases, in
any regulated rate. Nothing herein shall prohibit Franchisee from increasing subscriber rates in an
otherwise lawful manner for reasons unrelated to the Transfer.
15. The definition of "Gross Annual Receipts" or "Gross Receipts" as found in the
Franchise and/or the Ordinance is hereby amended to read as follows:
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"Gross Annual Receipts" or "Gross Receipts" means all revenue, as
determined in accordance with Generally Accepted Accounting
Principles, which is received, directly or indirectly, by Grantee and
by each Affiliated Person from or in connection with the distribution
of any Cable Service in the City, and any other Service which may,
under now or then applicable federal law, be included in the
definition of Cable Service for the purpose of calculating and
collecting the maximum allowable franchise fee for operation of the
System, including, without limitation, leased or access channel
revenues, advertising revenues, cable modem revenues to the extent
they are Cable Services, revenues paid by programmers to the
Grantee or any affiliated person for or relating to carriage of any
programming service which are not contractually required for
expenditure or reimbursement of marketing or other expenses relating
to the channel carriage, lease or rental payments from a user,
affiliated or non-affiliated, of the Cable System which provides a
service which is not independently subject to a franchise fee, with the
distribution of Cable Service on the Cable System. It is intended that
all revenue collected by the Grantee, and by each Affiliated Person,
from the provision of Cable Service over the System to the extent that
such revenue is derived through any means that has the effect of
avoiding the payment of fees payable under the Franchise Agreement
be included in this definition. Gross Annual Receipts also
specifically includes: (i) all revenues paid by Subscribers for any
Cable Service which are paid by Subscribers for any Cable Service
which are paid to the Grantee, any Affiliate, or any party in
contractual privity with the Grantee or any Affiliate thereof; (2) any
bad debts recovered; (iii) a pro rata portion (based on the number of
subscribers residing in the City) of all advertising revenue which is
received directly by Grantee or any affiliated person under common
control with the Grantee, from or in connection with the distribution
of any Service over the System in the City or the provision of any
Service -related activity in connection with the System in the City.
Gross Annual Receipts shall be calculated at proportional discounts
associated with the bundling or packaging of Cable Services with
non -cable services. Notwithstanding anything to the contrary in the
foregoing, Gross Annual Receipts does not include: (i) the revenue
of any Person to the extent that said revenue is also included in the
Gross Annual Receipts of Grantee; (ii) taxes imposed by law on
Subscribers which Grantee is obligated to collect; (iii) any other
revenue which must be excluded pursuant to applicable law.
16. Franchisee shall cause the Transferee to execute and deliver the Estoppel Certificate
attached as Exhibit A hereto.
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101784.02 AM00 -6
17. Franchisee acknowledges that the City's consent to the Transfer is DENIED unless
the conditions set forth herein are satisfied. To this end, the Franchisee agrees that if any condition
is challenged in federal, state or local court or agency proceedings, directly or indirectly, by claim
or defense, on any ground, by or at the behest of the Franchisee, or any affiliate, then the City's
consent shall be of no force or effect, and only the introductory recitals and the denial of consent to
the Transfer shall survive, and shall be effective as if such clauses were the only clauses adopted.
18. The City hereby gives notice that the Grant or Transfer of the Franchise may create
a taxable possessory interest upon which the Transferee may be liable for the payment of certain
property taxes. The Franchisee hereby acknowledges that it has received actual notice as provided
by Revenue and Taxation Code Section 107.6.
19. This Transfer Agreement shall be deemed effective upon the closing of the Transfer
(the "Effective Date").
20. The parties expressly agree and acknowledge that Paragraph 5 of the 1996 Transfer
Agreement, and the terms and conditions thereof, are applicable and binding upon the Transferee
in relation to this Transfer for the period from the Effective Date of this Transfer.
21. Guarantor hereby guarantees all of the obligations of the Franchise Documents as a
joint and several primary liable party. Guarantor hereby waives any obligation which the City might
possess to exhaust its remedies against the Transferee as a condition of enforcing obligations against
the Guarantor pursuant to the Franchise Documents.
22. 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 if
delivered by facsimile transmission. Such facsimile signature shall be treated in all respects as
having the same effect as an original signature.
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ATTEST
City Clerk
APPROVED:
RUTAN & TUCKER, LLP
By
William M. Marticorena
Special Counsel
CITY OF LA QUINTA, CALIFORNIA
(the "City")
L-M
Its
(the "Franchisee")
an
Its
TWI Cable, Inc. (the "Guarantor")
go
Its
124/015610-0004
101784M AMOO _9_
EXHIBIT A
ESTOPPEL CERTIFICATE OF AOL TIME NN AR.NER INC.
This Estoppel Certificate is hereby executed and delivered by AOL Time Warner Inc.
("AOLTWI") as material inducement and consideration to the City of La Quinta, California (the
"City") for its approval and execution of that agreement entitled "Agreement Relating to the
Consent of the City of La Quinta, California to the Change of Control of the Franchisee to AOL
Time Warner, Inc." (the "Transfer Agreement"). AOLTWI hereby acknowledges that the City
has relied, in part, upon the execution and delivery of this Estoppel Certificate by AOLTWI in
approving and executing the Transfer Agreement.
AOLTWI represents and warrants as follows:
(1) AOLTWI has carefully reviewed the Transfer Agreement and is fully aware of the
contents thereof.
(2) AOLTWI acknowledges that it is the ultimate parent of the Franchisee, as defined
in the Transfer Agreement.
(3) AOLTWI shall take no action or inaction on its own behalf or on the behalf of the
Franchisee which would cause, directly or indirectly, the Franchisee to breach or otherwise fail
to perform its obligations as set forth in the Transfer Agreement; provided, however, nothing
herein shall be construed as a guarantee by AOLTWI of the obligations of the Transfer
Agreement and/or the Franchise.
Executed this _ day of , 2000.
AOL Time Warner Inc.,
Its:
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ATTACHMENT "B"
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MEMORANDUM OF UNDERSTANDING
Between
Time Warner Inc.
And
America Online, Inc.
REGARDING OPEN ACCESS BUSINESS PRACTICES
February 29, 2000
1 This Memorandum of Understanding ("MOU") sets out the
commitments that AOL Time Warner will make to provide open
access (i e , to make a choice of multiple Internet Service Prov)ders
("1SP5') available to consumers) an its broadband cable systems. It
is the intention of the parties to enter into as quickly as possible a
binding definitive agreement to proviae broadband AOL service on
Time Warner's cable systems, which will be used as a model for the
commercial agreements that will be available to other ISPs
2. AOL Time Warner is committee to offer consumers a cnoice
among multiple ISPs Consumers will not be required to purchase
service from an ISP that is affiliated with AOL Time Warner in order
to enjoy broadband Internet service over AOL Time Warner cable
systems AOL Time Warner intends to encourage actively other
cable operators similarly to provide consumers with a choice of
broadband ISP offerings.
3 AOL Time Warner will effectuate such choice for consumers by
negotiating arm's-length commercial agreements with born affiliated
(such as AOL) and unaffiliated ISPs that wish to offer service on the
AOL Time Warner broadband cable systems. Pursuant to sucn
commercial agreements, AOL Time Wamer will partner with ISPs to
offer consumers a choice of competing broadband Internet service
offerings
4. AOL Time Warner will not place any fixed limit on the number of
ISPs with which it will enter into commercial arrangements to provide
broadband service to consumers AOL Time Warner will provide its
consumers with a broad choice among ISPs, consistent with
providing a quality consumer experience and any technological
limitations in providing multiple ISPs on its broadband cable systems.
5. The terms of the commercial agreements between AOL Time
Warner and ISPs wishing to provide broadband service will not
discriminate on the basis of whether the ISP is affiliated with AOL
Time Warner Thus, wnile the economic arrangements reached by
AOL Time Warner and ISPs wishing to provide broadband service
will vary depending on a number of factors (such as the speed,
marketing commitments, ana nature and tier of the service desired to
be offered). AOL Time Warner will not discriminate in those
economic arrangements based upon whether or not the ISP is
affihated with AOL Time Wamer. In addition, AOL Time Warner will
operate its broadband cable systems in a manner that does not
discriminate among ISP traffic based on affiliation with AOL Time
Warner.
6 AOL Time Warner will allow ISPs to provide video streaming. AOL
Time Warner recognizes that some consumers desire video
streaming, and AOL Time Warner will not blocK or limit it
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7. AOL Time Wamer will allow ISPs to connect to its broadband
cave systems without purchasing broadband backbone transport
from AOL Time Warner.
8 Consistent with tecnnologicai capab:hty, AOL Time Warner will
offer ISPs the choice to partner with it to offer broadband Internet
service on a national ton all AOL Time Warner cable systems),
regional or local basis, m order to facilitate the apiiity of consumers to
choose among ISPs of different size and scope. AOL Time Wamer is
committed to bring the benefits of the Intemet to all Americans, and
will not allow ISPs to offer "redlined" service to only a portion of an
AOL Time Warner cable system that is fully enabled to provide
broadband service.
9. AOL Time Warner is also committed to allow born the cable
operator ano the ISP to have the opportunity to have a direct
relationship with the consumer. Accordingly, posh the cable operator
and the ISP will De allowed to market and sell Droadband service
directly to customers. When AOL Time Warner's cable systems sell
Droadbana Internet service to a customer, they will De entirely
responsible for billing and collection When an ISP sells Droadband
Internet service directly to a customer, it may, if it so chooses, bill
and collect from the customer directly
10. This MOu represents an initial step by Time Warner and AOL to
articulate the terms, conditions and parameters under which a
combines AOL Time Warner will offer consumers access to multiple
ISPs on its Droadpand cable systems It is the intention of the parties
TO continue to refine those particulars in a manner trial is responsive
to, and consistent wan. the desire of consumers to have a choice
among multiple ISPs offenng proacmand service and the still -evolving
nature of the cable infrastructure.
11. All of the foregoing is subject to all pre-existing obligations of
Time Warner, including without limitation Time warners agreements
with Serviceco, LLC ((3/0/a Road Runner) and its fiduciary and other
obligations to its partners However. Time Wamer wilt endeavor to
reach agreements and accommodations with third parties to which
pre-existing obligations are due that would permit the full
implementation of the commitments described herein as quickly as
possible.
Stephen M. Case Gerald A4_ Levin
America Onliue, Irle_ Time Warier Inc.
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Time Warner tnc.
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08-10-00 15:17
I;(AgfERS I SE:RCri - SiTi mAP i CDnTACT
TIME WARNER INC.
RELEASES / NEWS
AMERICA ONLINE AND TIME
WARNER ANNOUNCE FRAMEWORK y
FOR AGREEMENTS TO OFFER AOL
SERVICE AND OTHER ISPs ON TIME
WARNER BROADBAND CABLE SYSTEMS
Feb 29, 2000
Memorandum of Understanding between AOL and Time Warner
Outlines Open Access Business Practices
DULLES, VA and NEW YORK, NY —America Online, Inc, the
world's leading Interactive services company, and Time Warner Inc.,
the world's leading media company, today announced that they have
signed a Memorandum of understanding setting out the frameworK
under which Time Warner will offer consumers a choice of multiple
ISPs, including AOL, on Time Warners broadband cable systems.
That MOU, which is expected to lead to a pinding commitment
between the companies, will also serve as the frameworK for
agreements by which other ISPs will be available to consumers over
Time Warner Came.
Today's announcement represents a first step by the two companies
to provide more detail on how as a combined company they will put
"open access" into affect on their broadband cable systems and
deliver consumer choice in Internet service providers.
Steve Case, Chairman and Chief Executive Officer of America
Online, Inc., said: "I am very pleased tnat we have been able to make
this significant step forward today toward maKing open access a
reality for Consumers in the marketplace. It is exactly what we believe
our two companies can achieve when we work together. providing
new choices for consumers and value in the marketplace.
"Choice, competition and innovation have been the factors driving the
Interners explosive growth to date Now, with this framework, we are
poised to make it easier, more attractive and more affordable than
ever for consumers to sign up for high-speed, always -on Internet
service, with all of the benefits that has to offer."
Gerald Levin, Chairman and Chief Executive Officer of Time Warner,
said "We Know Time Warner consumers want choice and innovation
in cable Internet service, and we are going to deliver it to
them. —access to AOL as well as to a variety of other ISPs.
" I look forward to the rest of the caole industry following this same
pain of choice and innovation, which I believe will greatly accelerate
consumer adoption of cable broadband services Today's
announcement is another step forward in delivering on the promise
of the interactive medium and nelping maKe broadband access a
reality for every consumer."
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Joe Collins. Cnairman and Chief Executive Officer of Time Warner
Cable. said: "At Time Warner Cable, we are committed to delivering
the services consumers want. Our subscribers want a first-class
array of choices, ano we IoaK forward to working with AOL and other
ISPs to deliver that to them "
Key elements of the MOU include commitments to.
• Offer Consumers Choice AOL Time Wamer is commuted to
offer consumers a choice among ISPs. Consumers will not be
required to purchase service from an ISP that is affiliated with
AOL Time Warner in order to enjoy broadband Internet
service over AOL Time Wamer cable systems.
Diversity of ISPs AOL Time Wainer will not place any fixed
limit on the number of ISPs with which it will enter into
commercial arrangements and it will offer those ISPs the
choice to partner on a national (on all AOL Time Wamer cable
systems), regional or local basis, in order to facilitate the
ability of consumers to choose among ISPs of different size
and scope.
Direct Relationship with the Customer for ISPs: AOL Time
Wamer is also committed to allow both the cable operator and
the ISP to have the opportunity to have a direct relationship
with the consumer Accordingly, both the cable operator and
the ISP will be allowed to market and sell broadband service
directly to customers When an ISP sells broadband Internet
service airectly to a customer, it may, if it so chooses, bill and
collect from the customer directly.
• Video Streaming AOL Time Warner will allow ISPs to provide
video streaming AOL Time Warner recognizes that some
consumers desire video streaming, and AOL Time Warner will
not block or limit it -
While today's MOU is subject to existing Time Warner obligations,
Such as its contracts with Road Runner. Time Warner also said it is
committed to providing a choice of ISPs as quickly as possible, and
will work with its partners to try to achieve that goal even before its
current obligations expire.
The AOL Time Wamer Memorandum of Understanding on open
access is attached
About America Online, Inc.
Founded in 1985, America Online, Inc., based in Dulles, Va , is the
world's leader in interactive services, Web brands, Internet
technologies, and e-commerce services. America Online, Inc.
operates two worldwlCe Internet services, America Online, with more
than 21 million members. and CompuServe, wan more than 2.5
million members, several leading Internet brands including ICQ. AOL
Instant Messenger and Digital City, Inc., the Netscape Netcenter ana
AOL COM portals; the Netscape Navigator and Communicator
browsers, AOL MovieFone, the nation's 9 1 movie listing guide and
ticketing service,
Spinner Networks and NuiiSoft, Inc., leaders in Internet music; and
Digital Marketing Services, a company specializing in online rewards
programs and online market research- Through its strategic alliance
with Sun Microsystems, the company develops and offers
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3 of
easy -to -deploy, end -to -end e-commerce and enterprise sclutions for
companies operating in the Net Economy.
About Time Warner Inc.
Time Warner Inc (NYSE: TVVX, www.timewarner.com) is the world's
leading media Company. Its businesses Include cable networks,
polisning, music, filmed entertainment, cable ana digital media.
America Online
Contact Name: Katny McKiernan
Contact Phone:(703) 265-1746
Time Warner Inc
Contact Name: Edward Adler
Contact Phone:(212) 484-6630
Contact Name: Scott Miller
Contact Phone:(212) 484-8736
Time Warner Cable
Contact Name: Mike Luftman
Contact Phono:(203) 328-0613
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Caution Concerning Forwara-t-ooking Statements This press release and as
attachment include certain "totward-looking statements- within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are based on
managements current expectations and ate naturally subject to uncertainty and
changes in circumstances Actual results may vary rnatarially from the expectations
contained neretn The forward-IooKing statements herein include statements about the
proposed Time WamerrAmerica Online transaction Tne following taczeirs• among
otners, could cause actual resom to differ materially from those described nerein
failure of the Time Wamer or America Online stocknolders to approve the merger; the
risk that Ine Time Warner and Amenca Online businesses will not oe integrated
sucoassfully, the costs related to the merger, inability to obtain, or meet condttions
imposed for, governmental approvals for the merger of America Online and Time
Wamer; and diner economic, business. competitive andJor regulatory factors affecting
America Online's and Time warner's businesses generally More cletatled information
about those factors is set forth in filings Dy AOL Time Warner, America Online and
Time Warner with the Securities and E.xcndnge Commission, inducting Inc most recent
quarterly report on Form 10-0 anti current reports on Form 8-K. None of AOL Time
Wamer, America Online or Time Wamer is under any obligation to (and expressly
disclaims any sucn ophgauon to) updata or amer its forwara-iooKing starements
wttettter as a result of new information. future events or olnerwise
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AOL Time warner Inc., togetner wan Time Warner Inc and America Online, Inc., filed
witn the Securities and Exchange Commission a preliminary joint proxy statement!
prospectus regarding The proposed ousiness combination transaction referenced in the
foregoing information In addition. AOL Time Warner. Time Warner and America
Online will prepare and file wan the Commission a definitive joint proxy statement/
prospectus ano other documents regarding We proposed transaMOn- Investors and
securery holders are urged to read me definitive joint proxy statel"nOmprospaclus, when
it becornbs available, pBcause a will contain important information. The: definitive joint
Proxy statEmentjprospectus will be sent to stocknoicam of Time Warner and America
Online seeking ineir approval oftne proposed transaction. investors and sewnry
MOM may obtain a tree copy of Inc definitive joint proxy statamenvorospe=4 (when
it is avatiaNe) and other documents filed with the Commission py AOL Time Warner
(as well as by America Online and Time Warner) at the Commisston's web eta at
wvrw.sec.gov Tne definitive joint proxy statememprospectus and these othet
documents may also be obtained for free by Amenea Online stomnolders by directing
a request to America Online, InG, 22000 AOL Way, Oulles, VA 20166, Attention
Investor Relations. telepnone. (703) 265.2741. a -mall. AOL IR @aol com, and by Time
Warner stockholders py directing a request to Tone Warner Inc. 75 Rockefeller Plaza,
New York, NY 10019. Auntion_ snarenotoer Relations, telephone. (212) 484.8971,
e-mail investrequestCtm com
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