Time Warner/Cable Franchise 99AGREEMENT RELATING TO THE CONSENT OF THE CITY
OF LA QUINTA, CALIFORNIA TO THE TRANSFER OF THE
FRANCHISE AGREEMENT HELD BY
MEDIA ONE ENTERPRISES, INC.
This Agreement (the "Transfer Agreement") is entered into
this _0-day of July, 1999, between and among the City of La
Quinta, California (the "City"), and Media One Enterprises, Inc.,
(the "Transferor"), Summit Cable Services of Georgia, Inc., (the
"Transferee"), and TWI Cable Inc.(the "Guarantor").
WHEREAS, City Council entered into a Franchise Agreement
(the "Franchise") with a predecessor -in -interest 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 the Franchise to the
Transferor (the "Transfer"); and
WHEREAS, it is the intent of the City to approve the
transaction whereby ownership and control of the Franchise and
the cable system (the "System") shall be held by the Transferee
and guaranteed by the Guarantor; and
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
124/015630-0004/3273421.3 a<date><time>
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 Transferee where required by
the Ordinance and there shall be no further material change,
amendment, or modification of the ownership or equity composition
of the Transferee 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 Transferee
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 franchise and said Transfer Agreement neither
affects nor prejudices in any way the City's or Transferee's
rights under the Franchise; (2) under Section 625 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. Transferee agrees that in judging whether
particular obligations are commercially impracticable, the
parties will not consider the economic burden of debt service and
124/015610-0004/3273421.3 a<date><time> -2-
equity requirements 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 Transferee
hereby accepts all the terms and conditions of the Franchise, the
Ordinance, that "Agreement relating to the Consent of the City of
La Quinta, California to the Transfer of Control of the Franchise
Agreement Granted to Providence Journal Company", dated as of
October 17, 1995, (the 111995 Transfer Agreement"), that
"Agreement Relating to the Consent of the City of La Quinta,
California to the Transfer of Control of the Franchise Agreement
Granted to Continental Cablevision, Inc., to U.S. West, Inc.",
approved as of August 6, 1996 (the 111996 Transfer Agreement"),
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 Transferee 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.
The Transferee agrees and acknowledges that it has found the
Franchise Documents specified herein to be legally sufficient,
enforceable, valid, and binding and accept the same without
condition or reservation. Transferee shall assume all rate
refund obligations and possessory interest tax refund liability,
if any, both actual and contingent, of the Transferor. The
Transferor 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.
124/015610-0004/3273421.3 a<dato><timo> - 3
To the extent that the Transferee or Guarantor, 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 Transferor, or any related person or entity, brought
said challenge(s) including, but not limited to, waiver,
estoppel, consent, unclean hands and accord and satisfaction, as
well as any and all defenses independently available to the
Transferee or Guarantor.
5. 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 Agreement until the earlier of a
substantive modification of the Federal Communications
_-Commission's existing Cost -of -Service Regulations so that
Transfer Goodwill, or a portion thereof, is expressly provided as
being includable in the calculation of any Regulated Rate or the
Fifth Anniversary of the Effective Date of this Transfer
Agreement.
6. On or before the Effective Date, the Transferor, or its
designee, shall pay to the City up to the sum of Five Thousand
Dollars ($5,000.00), as invoiced by the City, which amount is
paid in, and only in, complete satisfaction and reimbursement of
all thirrl-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 in Section 622(g)(2) of the Cable Act
(47 U.S.C. §542(g)(2); and
124/015610-0004/3273421.3 a<date.<time> - 4 -
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
Transferor, the Transferee, or the Guarantor shall be required to
pay to the City or to any state or federal agency or authority;
and
C. Neither the Transferor, the Transferee nor the
Guarantor shall 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 Transferor, the Transferee, or the Guarantor is
-required to pay to -the City or other governmental agency; and
D. Neither the Transferor, the Transferee, nor the
Guarantor shall 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. Neither the Transfer, the Transferee nor the
Guarantor shall 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
124/015610-0004/3273421.3 a<date> tune - 5 -
7. In regard to the Payment made to the City pursuant to
this Transfer Agreement, the Transferor, Transferee, Guarantor,
or any affiliate party will not pass through, externalize, or
otherwise attempt to add the costs of the Payment pursuant to
Paragraph 6 hereof, to any regulated rate.
8. Transferee 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. Transferee will continue to maintain
the letter of credit and bonds that it was required to maintain
under the Franchise notwithstanding the Transfer.
9. Transferor and Transferee agree to defend, indemnify
and hold the City harmless against any loss, claim, damage,
liability or expense (including, without limitation, reasonable
attorney's fees) arising out of this Transfer Agreement and/or
incurred as a result of any representation or warranty made by
Transferor or Transferee 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. In the event
the City receives any such notice of a loss, claim, damage,
liability or expense, the City shall promptly notify Transferor
and Transferee which shall, at the sole discretion of the City
assume sole and direct responsibility for defending against any
such loss, claim, damage, liability or expense.
10. This consent is not an affirmation that Transferor is
currently in compliance with the Franchic_a Agreement. 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, Transferor or Transferee 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 therefore
124/015610-0004/3273421.3 a<date><time> - 6 -
made without prejudice to, or waiver of, the City's right to
fully investigate and consider Transferor or Transferee'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 Transferor or
Transferee 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
Transferor or Transferee. Unless provided for within this
Transfer Agreement, nothing in this Transfer Agreement shall
constitute a waiver of any of Transferor's, Transferee's,
Guarantor's, or City's rights or remedies under federal, state or
local law.
11. The Transferee and Guarantor expressly agree 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. Transferee and Guarantor
hereby jointly accept service of process by way of service upon
the General Manager of the local office of the Transferee.
12. 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.
124/015610-0004/3273421.3 a<date x time, - % -
13. 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.
14. Transferee shall maintain a local office, staffed by
live personnel which are employees of the Transferee, at which,
at a minimum, subscribers can pay bills, receive or exchange
equipment, and receive information within a six (6) mile radius
of the intersection of Washington Street and Highway 111.
15. In addition to the Payment and any other payment
required by this Transfer Agreement, Transferor shall reimburse
the City the actual costs of an independent franchise fee audit
for Fiscal Years 1995-1996 through 1998-1999 within thirty (30)
days of the submission of a City invoice if, and only if, the
audit concludes that the City has been underpaid franchise fees
by one percent (1%) or more, as provided by Section 5.10.230(C)
of the Ordinance. Transferor and Transferee shall cooperate with
the City's audit of franchise fees. The City shall reasonably
attempt to complete a final audit report (the "Audit Report") of
franchise fees owed by Transferor within ninety (90) days of the
Effective Date of this Agreement assuming that the Transferor
and/or Transferee expeditiously respond to the City's Information
Requests. If the Audit Report finds that Transferor owes the
City underpaid franchise fees under the Franchise, and the
difference between the amount paid and the amount determined by
the City's audit is less than five percent (5%) of the amount
paid to the City, or if Transferor does not dispute the results
of the City's audit, then Transferor shall pay the City the
difference in the amount determined to be owed by the Audit
Report. This obligation is guaranteed by the Transferee. If the
Audit Report determines that the amount due and owing is more
than five percent (5%) greater than the amount paid to the City
and Transferor disputes the audit results, the dispute shall be
submitted to a mutually agreed upon, independent certified public
124/015610-0004/3273421.3 a<data><tim , - 8 -
accountant ("CPA") whose determination of amount of franchise
fees due shall be final and binding on the parties. The costs of
hiring the CPA shall be borne by Transferor. Any amounts
determined by the independent CPA to be owed to the City shall be
paid to the City within thirty (30) days of such determination.
16. Transferor represents and warrants that it has received
cash refunds from Riverside County relating to possessory
interest tax payments for tax years to (the "Tax
Years"). All, or a portion of these tax payments, were collected
from subscribers as line item surcharges on monthly cable bills.
Not later than four (4) months from the Effective Date,
Transferee agrees to provide a written accounting to the City of
the total amount collected from La Quinta subscribers for the Tax
Years (the "Subscriber Payments"), the amount of the total refund
received from Riverside County for the Tax Years (the "Total
Refund"), the amount of the Total Refund allocable to La Quinta
Subscribers on a pro rata subscriber basis (the "Gross La Quinta
Refund"), the amount of expenses allocable to La Quinta
Subscribers (the "Expense Allocation"), and the "Net Refund" due
La Quinta Subscribers, which is the Gross La Quinta Refund less
the Expense Allocation. The Expense Allocation shall not exceed
ten percent (10%) of the Gross La Quinta Refund. The Net Refund
shall be credited to current subscribers no later than six (6)
months from the Effective Date and written proof of said refund
shall be submitted to City no later than eight (8) months from
the Effective Date.
17. Transferee 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 its San Diego Division systems by the Transferee, the
Guarantor, or any Affiliate thereof.
18. The City hereby gives the Transferee notice that the
Grant or transfer of the Franchise may create a taxable
124/015610-0004/3273421.3 a<date><time> - 9 -
possessory interest upon which the Transferee may be liable for
the payment of certain property taxes. The Transferee 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. 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.
[SIGNATURE BLOCK NEXT PAGE]
124/015610-0004/3273421.3 a<date><time> - 10 -
APPROVED:
CITY OF LA QUINTA, CALIFORNIA
(the "City")
By:
Its:
MEDIA ONE ENTERPRISES, INC.
(the "Transferor")
By:
Its:
SUMMIT CABLE SERVICES OF
GEORGIA, INC.
(the "Transferee")
By:
Its:
TWI CABLE INC.
(the "Guarantor")
By:
124/015610-0004/3273421.3 a<date><time> - 1 1.-
Its:
J1+:-19-99 01:31pm From-RUTAN & TUCKER CM,
7145469035 T-111 P.02/02 F-698
ATTEST:
City Clerk
APPROVED:
utan Tucker, LLP
Special Counsel
1241o1561a0004i3273421 3 07/19/94
CITY Oi? LA QUINTA, CALIFORNTJL
(the "City")
By:
ItS:
MEDIA ONE ENTERPRISES, INC.
(the °Transferor")
By:
Its.
SUMMIT CABLE SERVICES OF
GEORGIA, INC.
(the "Transferee")
By;
TLS:
TWT CABLE INC.
(the "Guai7ancor")
By:
ts.
07-19-99 13:31 RECEIVED FROM:7145469035 P.02
--07/19/99 MON 15:37 FAX 310 647 3036
07-19-99 15:15 City of La Quinta
Aledi a0ne
ID=760 777 7101
4001
P.03
ATTEST:
City Clerk
APPROVED:
Rutan & Tucker, LLP
Special Counsel
124/015610-0001Ja212421.3 a<dat— It it"I
CITY OF Lei QUINTA, CALIFORNIA
(the "City")
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TWI CABLE INC.
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