HomeMy WebLinkAbout12/15/1998, C4 - REQUEST FOR CHANGE OF CONTROL OF CABLE TELEVISION FRANCHISE FROM CHARTER COMMUNICATIONS PROPERTIES, LLC TO PAUL G. ALLEN council
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CITY OF SAN LUIS OBISPO
FROM: Ken Hampian,Assistant City Administrative Officer
Prepared By: Wendy George,Assistant to the City Administrative Officer Ws
SUBJECT: REQUEST FOR CHANGE OF CONTROL OF CABLE TELEVISION
FRANCHISE FROM CHARTER COMMUNICATIONS PROPERTIES, LLC TO
PAUL G.ALLEN
CAO RECOMMENDATION
Adopt a resolution approving the change of control of the City of San Luis Obispo's cable
television franchise from Charter Communications Properties LLC to Paul G. Allen and authorize
the Mayor to sign the Change of Control Agreement.
DISCUSSION
Bacl=ound
In March, 1995, the City Council approved a 15-year franchise agreement with Sonic Cable
Television of San Luis Obispo to provide cable service to City residents. Under the terms of the
City's Cable Television Ordinance No. 1238 (1993), that franchise cannot be transferred or control
changed without the consent of the Council through a resolution.At its April 21, 1998,meeting,the
City Council approved the transfer of the cable franchise to Charter Communications Properties,
LLC. On August 18, 1998 the City received notice from Charter that it had entered into an
agreement to sell Charter stock to Paul G. Allen, co-founder of Microsoft, who would thereafter
control Charter, although Charter Communications would continue act as the franchisee. This sale
requires that the City Council once again approve a change in control agreement for the franchise.
In order to assure that the transfer takes place in an orderly manner, and that the City's interests are
protected at all times, the City contracted with The Buske Group to review the change of control
request(Federal Communications Commission Form 394). This consulting group was selected not
only because of its experience with this type of transfer, including handling the prior transfer from
Sonic to Charter,but because its services were also being used by the County of San Luis Obispo to
facilitate its change of control. The City's Cable Television Ordinance requires that Charter
Communication reimburse the City for the cost of the consultant's services.
Timeline for Approval
The Cable Communication Policy Act of 1984 requires that the Council take action to approve or
disapprove a franchise change of control within 120 days of receiving the request. If the City does
not act to approve or deny the request by that time, it is automatically deemed to be approved,
unless the City and the requesting parties agree to an extension of time. The deadline for the City
to act on the change of control is December 18, 1998, and Charter has indicated that it is unwilling
to offer the City an extension of time. Therefore,the Council must take action at this meeting.
C4 -
Council Agenda Report-Change of Control for Cable Television Franchise
Page 2
to offer the City an extension of time. Therefore,the Council must take action at this meeting.
Summaa of Key Findings
The Buske Group has analyzed the information provided by Charter and Paul G.Allen on the Form
394. After completing an initial review, a number of questions were submitted to both parties.
Based on the responses to these questions, as well as the information initially provided, the
consultant reached the following conclusions:
• Charter has generally fulfilled the terms of the April transfer agreement with the City. In
particular,the fiber network linking City buildings is almost completed;the Video Club refunds
have been made to appropriate customers; and all financial obligations to the City from Charter
and Sonic have been paid.
• Mr. Allen will use $2.3 billion of his own money to buy approximately 95% of the equity of
Charter from its current owners
• There is no new debt. Charter's financial resources are not being depleted and its financial
condition is unchanged.
• The purchase does not affect the legal structure oi, or organizational relationships among, the
various Charter entities. Charter,the current City fianchisee,will remain the franchisee.
• There would be a strong incentive, if any Charter financial difficulties arose, for Mr. Allen to
assist in resolving those difficulties.
• Charter will continue to be the Guarantor of the terms of the fianchise.
• While Mr. Allen does not have the technical ability to fulfill the terms of the franchise, his
retention of the current Charter management, as well as the current corporate structure, fulfills
that requirement.
• There is a concern that the cost Mr. Allen has paid to acquire the cable system is well in excess
of what Charter originally paid to acquire Sonic, and it exceeds the norm for recent cable
system transactions. The affect may be seen on future subscriber rates. However, should that
happen, the forum for review is the City's rate regulation authority under federal law.
FISCAL IMPACT
The request for transfer will not have a fiscal impact on the City. Direct costs resulting from the
transfer may not be passed along to subscribers in the form of increased cable rates. The cost of the
consultant's fee is to be paid by Sonic Cable and this payment is documented in the Change of
Control Agreement.
Council Agenda Report-Change of Control for Cable Television Franchise
Page 3
ALTERNATIVE
The Council could act to disapprove the transfer. However, based on the recommendations of our
consultant, and language to protect the City in the Change of Control Agreement,staff believes that
it is proper to approve the transfer at this time.
Attachments
1 -Resolution
2-Change of Ownership Agreement including the following:
Exhibit A-Guaranty of Charter Communications,Inc.
3 -Letter dated 8/18/98 from Charter Communications.
The FCC Form 394 is available in the Council Reading File
G4 -3
RESOLUTION NO. (1998 Series)
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO
APPROVING PROPOSED CABLE SYSTEM CHANGE OF CONTROL
WHEREAS, Charter Communications Properties, L.L.C. ("CCP")holds a franchise to
operate a cable television system in the City of San Luis Obispo("City"); and
WHEREAS, CCP was approved as the franchisee on April 28, 1998,through a transfer
resolution and Transfer Agreement(the"April Transfer Agreement"); and
WHEREAS,as part of the April Transfer Agreement,certain guarantees,conditions,and
provisions were required of and agreed to by CCP,by previous franchise holders and by parties
in previous franchise holders,(Sonic Cable Television of San Luis Obispo, Sonic
Communications, Sonic Enterprises, Sonicvest,L.L.C., Christopher Cohan individually and as
Trustee under the Christopher Cohan Revocable Separate Property Trust,collectively"Previous
Franchise Parties");and
WHEREAS,Charter Communications,Inc., ("Charter" or"Transferor")the ultimate
parent company of CCP,has entered into an agreement which will result in a sale of the stock in
Charter to Paul G. Allen("Allen' or"Transferee"),who will thereafter control Charter(which
transaction is referred to as the"Allen Transaction") and
WHEREAS,Charter,as Transferor,and Allen,as Transferee,jointly filed a Federal
Communications Commission("FCC")Form 394 with the City on August 18, 1998,which filing
more fully describes the transaction, and which form contains certain promises,representations
and warranties by the Transferor and Transferee; and
WHEREAS,the City is willing to approve the Change of Control,but only if the certain
conditions set forth below and in the accompanying Change of Control Agreement(the
"December Agreement") are satisfied; and if the guarantees,conditions and provisions included
in the April Transfer Agreement are reaffirmed; and in reliance on the promises,representations
and warranties made by Transferor and Transferee in the Form 394, and the representations,
warranties and promises in the December Agreement.
NOW,THEREFORE,BE IT RESOLVED by the City Council of the City of San Luis Obispo
as follows:
SECTION 1. The Allen Transaction is approved,but if, and only if,each provision of
this Resolution is satisfied.
SECTION 2. By December 15, 1998,the December Agreement attached hereto must be
signed and Charter must sign and deliver the Guaranty required by the December Agreement;
and
SECTION 3. All conditions set forth in the December Agreement must be satisfied,in
C/+-4
Resolution No. (1998 Series)
Page 2
accordance with their terms; and
SECTION 4. The Allen Transaction must be completed by February 28, 1999.
SECTION 5. Transferor and Transferee must comply with all promises,representations
and warranties made in the Form 394, each of which shall be enforceable by the City against
them.
SECTION 6. Transferor and Transferee accept the following, and shall be deemed to
have done so by consummating the transaction: (a)Transferor and Transferee acknowledge and
accept the City's right to consent to the Allen Transaction pursuant to the Franchise Documents,
and to enter into the Change of Control Agreement; (b)Transferor and Transferee will not
oppose intervention by the City in any proceeding affecting the System and(c)Transferor and
Transferee affirm that the request for approval of the Allen Transaction was acted upon in a
timely manner,that there is no impediment to the effectiveness of this Resolution or the Change
of Control Agreement,and that they will not raise and expressly waive,all claims to the contrary.
SECTION 7. This Resolution is specifically made without a finding or representation
that CCP or any Former Franchise Party is in compliance with all the terms and conditions of its
franchise,and without a finding that Allen is or is not financially,technically or legally qualified
to hold the franchise. Without limiting the foregoing,this approval of the Allen Transaction
specifically is not a finding or representation: that the franchise will be renewed or extended
(and this approval shall not create an obligation to renew or extend the franchise);that CCP is or
will be financially,technically,or legally qualified to hold a renewal license; 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 CCP. For example,the City is not finding or
representing that the amount of money that Allen and CCP propose to devote to the franchise
area, or their plans for the franchise are reasonable to meet the community's future cable-related
needs and interests.
SECTION 8. This resolution is not an approval of any other transaction,whether
required or allowed by the Allen Transaction,nor does the approval of the Allen Transaction in
any respect limit the enforceability of any franchise provision. In the event of a conflict between
any provision of any document related to this Allen Transaction and the December Agreement,
this Resolution and the franchise shall control. CCP,Transferor and Transferee shall be required
to comply with obligations under the same,notwithstanding the provisions of any other
agreement.
SECTION 9. The Mayor is hereby authorized and directed to sign the Change of
Control Agreement attached hereto, on behalf of the City.
SECTION 10.If the provisions of this Resolution are not satisfied, or are deemed to be
unenforceable, then the request for approval of the Allen Transaction shall be deemed denied as
Resolution No. (1998 Series)
Page 3
of this date; and/or the franchise may be revoked..,
This Resolution shall be deemed effective as of December 15, 1998.
Under motion of , seconded by ,and
on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing Resolution is adopted this day of , 1998.
Mayor Allen Settle
ATTEST:
Lee Price, City Clerk
APPROVED:
Lry Jorij Ci Attorney
Gig -6
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT IS MADE THIS 15th DAY OF DECEMBER 1998,BY AND BETWEEN:
CITY OF SAN LUIS OBISPO, CALIFORNIA ("CITY"), CHARTER COMMUNICATIONS
PROPERTIES,L.L.C. ("CCP")AND CHARTER COMMUNICATIONS,INC. ("CHARTER").
WHEREAS, on March 7, 1995, the City entered into an agreement (the "Franchise
Agreemenf")with Sonic Cable Television of San Luis Obispo("Sonic")pursuant to which the City
granted Some a franchise to operate a cable television system in the City, and
WHEREAS,on April 21, 1998,the City approved,subject to certain guarantees, conditions
and provisions, a "Change of Control and Transfer of Ownership Agreement" and a Resolution
"Approving Proposed Cable System Transfers," ("April Transfer Documents"); and
WHEREAS,Paul G. Allen("Allen")desires to acquire the outstanding stock of Charter as
more fully described in the FCC Form 394 submitted to the City on or about August 18, 1998(the
"Allen Transaction"); and
WHEREAS,if the Allen Transaction were approved,Charter would be owned by Allen,but
Charter's ownership of CCP would not be affected,and the Franchisee would not change;
WHEREAS,the Form 394 submitted by Charter and Allen to support the Allen Transaction
relies in part on the experience and resources of the current Charter management team,technical
expertise and corporate structure in order to justify the transfer, and
WHEREAS,as part of the April Transfer Documents, certain guarantees,conditions,and
provisions were required of and agreed to by Charter and CCP,by previous franchise holders and
by parties in previous franchise holders, (Sonic Cable Television of San Luis Obispo, Sonic
City of San Lids Obispo
Charter/Allen Change of Control Agreement
Page 1
Gib-7
Communications, Sonic Enterprises, Sonicvest, L.L.C., Christopher Cohan individually and as
Trustee under the Christopher Cohan Revocable Separate Property Trust, collectively "Previous
Franchise Parties");and
WHEREAS,the City has determined that it should approve the Allen Transaction,but only
if there is an agreement to certain conditions to ensure that the City is not adversely affected by it;
and
WHEREAS,Charter and CCP are each willing to agree to those conditions;
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING AND THE MUTUAL
CONSENTS SET FORTH HEREIN, THE PARTIES AGREE AS FOLLOWS:
PART I: AFFIRMATION OF FRANCHISE OBLIGATIONS AND GUARANTEES
1..1 Definns—CCP is the current cable television franchise holder in the City of San Luis
Obispo. Charter is the ultimate parent company of CCP and Guarantor. Charter and CCP will retain
Charter management services on and after the transfer of ownership. Allen will acquire all
outstanding capital stock of Charter and CCP will retain Charter management services on and after
the change of control.
1.2 Acceptan-e—CCP reaffirms that it continues to accept all of the commitments, duties and
obligations,present,continuing and future, of the Grantee as set forth in the Franchise Agreement,
this Agreement,the relevant local cable ordinances and the April Transfer Documents(together;the
"Franchise Documents"). Charter reaffirms that it continues to be bound by all its obligations to the
City under the Franchise Documents, including the Guaranty that it executed in connection
therewith.
City of San Lids Obispo
Chmta/Allen Chnge of Conhol Ageem®t
• Page 2
c4--8
1.3 Obligations Not Affected — Except as otherwise expressly provided in this agreement,
Charter and CCP agree that the Allen Transaction and the City's approval of the Allen Transaction
shall have no effegt on the past, present or future obligations of the entity that operates as the
Grantee,or prevent the City from taking any action against the entity operating as the Grantee that
it could have taken bad the Allen Transaction not been approved Likewise,the Allen Transaction
and the City's approval of the Allen Transaction will not affect the rights and obligations of Charter,
except as expressly provided herein. By way of example and not limitation, Charter and CCP shall
remain liable for All of the acts and omissions occurring prior to the completion of the Allen
Transaction,known and unknown,for all purposes, including renewal,but only for renewal if such
past performance commitments are not complied with after providing franchisee with proper notice
and opportunity to cure. Furthermore,the Allen Transaction shall not act to release any previous
Grantee(including the Previous Franchise Parties)from any liability,whether individual or joint and
several that such party may have under the Franchise Documents, or in any way limit the City's
rights thereunder.
1.4 Ci, s Reliapce Upon Representations—Any consent by the City to the Allen Transaction will
be made in reliance upon the representations, documents and information provided by Allen and
Charter to the City, including, by way of example and not limitation, the FCC Form 394 and all
information submitted to the City in support thereof, as if fully set forth herein. It is not the intent
of the parties by this section,to change the status of documents that are claimed to be confidential
as a matter of law.
City of San Luis Obispo
Charter/Allen Cbaage of Control Agreement
Page 3
C*-9
PART II: PROMISES OF THE PARTIES
2.1 Compliant&with Franchise —
2.1.1. Charter and CCP agree that no actions will be taken inconsistent with the promises,
standards, or requirements contained in the Franchise Documents.
2.1.2. Charter agrees to reaffirm the Guaranty contained in the April Transfer Documents
in a form attached hereto as Exhibit A.
2.1.3. To the extent that any provision of any document associated with the Allen
Transaction or any provision of any other contract conflicts with the Franchise Documents,
with this Agreement or with applicable federal,state, or local laws, such provision shall be
of no force or effect with respect to the cable system serving the City and the obligations in
the Franchise Documents shall control.
PART III: NO WAIVER
3.1 Any consent given by the City in this Agreement and in any Resolution approving the Allen
Transaction is not an affirmation that Charter or any Previous Franchise Party is in compliance with,
or previously complied with the Franchise. Any consent is made without prejudice to, or waiver of,
the City's right to optain full remedy for any past non-compliance,except as specifically provided
below. Any consgnt given by the City in this Agreement and any Resolution approving this
Agreement is not a finding that, after the Allen Transaction, CCP or Charter 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 made without prejudice to, or
waiver of,the City's right to fiilly investigate and consider Charter and CCP's financial, technical
and legal qualifications and any other relevant considerations during any proceeding including by
way of example and not limitation, any pending renewal proceeding. Without limiting the
City of San Lias Obispo
ChaWdAllen Change of Conhol Agnxment
Page 4
rQ-la
foregoing, any approval of the Allen Transaction is not a finding or representation: that the
Franchise held by CCP will be renewed or extended(and approval shall not create an obligation to
renew or extend the Franchise); that CCP is financially,technically or legally qualified to hold a
renewed 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 Charter or CCP.
Unless provided for within this agreement,nothing in this agreement shall constitute a waiver of any
of Charter's or CCP's rights or remedies under federal, state or local law.
3.1.1. Charter and CCP will continue to cooperate and seek the Citys advice prior to
initiating or deleting service features, alterations in channel line-ups or structures to the extent that
they are initiated at a system level. Charter's commitment includes a two-week advance notice and
opportunity to comment, whenever possible, on all notices to subscribers on any change in rates,
programming services, channel positions, or customer policies included: in customer billing
statements; through direct mail; or cablecast,to the extent that notices are initiated at the system
level. The system will make all reasonable efforts to inform the City of customer communications
initiated outside the system in a timely manner.
3.1.2. As required pursuant to City Ordinance No. 1238, Charter agrees to pay all costs
incurred by the City associated with the development of this Agreement and the Resolution
approving the Allen Transaction. All charges will be invoiced by the City,and Charter will provide
a check for these costs no later than 30 days from the receipt of the invoice. If Charter does not
comply with this section,the Agreement and the Resolution will be considered null and void
3.2 City's consent to this Change of Control is expressly not a consent to any future transaction
or change in control,whether or not referenced,required or permitted under any agreement related
directly or indirecoy to the transactions resulting in this Change of Control to Allen. Should the
City approve acquisition of Charter's stock by Allen, there may not be a material change in that
transaction,as represented to the City,without the prior approval of the City. CCP shall obtain the
City of Sen Luis Obispo
Chatter/Allm Change of Control Ag eemmt
Page 5
City's consent for any future transfer of the franchise or change in control as required by City Code
as they exist on the date of this Agreement.
PART IV: COSTS AND RATES
4.1 Obliggfions.Not Franchise Fees—Charter and CCP agree that, under the circumstances of
this Agreement,none of the costs Allen, Charter or CCP must incur under this Agreement or the
April Transfer Documents constitute franchise fees, and instead fall under one or more of the
exemptions set out in 47 USC §542, and further agrees not to raise any claim or defense to the
contrary in any forum with respect to the costs incurred, or the payments that are required by this
agreement
4.2 Charter and CCP represent and warrant that there will not be an increase in subscriber rates
as a result of any cost associated with compliance with this Agreement other than costs incurred in
conjunction with Sections 3.1.1. and 3.1.2. of this Agreement Other than costs incurred in
conjunction with Sections 3.1.1. , any costs associated with complying with this Agreement shall
not be treated as external costs. Charter and CCP further stipulate that for purposes of any rate
proceeding,the Change of Control does not result in a cognizable increase in good will, intangibles
or tangible assets of the cable system serving the City,above the level that could have been reflected
in rates prior to the Allen Transaction.
PART V: REPRESENTATIONS AND WARRANTIES; MENMW
5.1 Renresent4ons and Warranties — Charter and CCP hereby represent and warrant that:
5.1.1. The execution and delivery of this Agreement does not contravene, result in a breach
of or constitute a default under any contract or agreement to which Allen or Charter is a
party or by which any owned properties may be bound (nor would such execution and
City of San Luis Obispo
Charter/Allen Change of Control Agreement
Page 6
delivery constitute such a default with the passage of time or the giving of notice or both),
and does not violate or contravene any law,order, decree,rule, regulation or restriction to
which Allen or Charter is subject;
5.1.2. Chatter is duly organized,legally existing and in good standing under the laws of its
state of organization and is duly qualified to do business in the State of California;
5.1.3. This Agreement, the Franchise Documents, and the reaffirmed Charter Guaranty,
constitute the legal, valid and binding obligations of Charter and CCP, enforceable in
accordance with their terms;
5.1.4. The execution and delivery of,and performance under,this Agreement,the Franchise
Documents and the reaffirmed Guaranty are within Charter's power and authority without
the joinder or consent of any other party and have been duly authorized by all requisite
action and are not in contravention of any respective charters,bylaws,partnership agreement
or other organizational documents,as the case may be, or of any indenture,agreement, or
undertaldn$to which any of them is a party or by which they are bound;
5.1.5. Charter will devote the financial and technical resources necessary to ensure
compliance with all obligations under this Agreement and the Franchise Documents;and
5.1.6. CCP will devote the personnel, equipment and technical resources necessary to
ensure compliance with all obligations under this Agreement and the Franchise Documents.
5.1.6. Charter and CCP each agree that they shall be jointly and severally liable for the
promises, representations and warranties made by Allen in the FCC Form 394, which
promises, rgpresentations and warranties shall be enforceable against them by the city.
City of Smr Luis Obispo
CbmtedAllm CbmW of Control Ageemmt
Page 7
G�'13
5.1.7. Chatter and CCP represent and warrant that the agreement of Allen to this contract
- is not necessary to permit each provision of this contract,and any associated resolution to
be fully enforceable in accordance with its terms.
5.2 bdemm Charter and CCP agree to defend,indemnify and hold the City harmless against
any loss,claim, damage, liability or expense(including, without limitation, reasonable attorneys'
fees) arising out of this Agreement and/or incurred as a result of any representation or warranty
made by CCP or Charter herein or by Charter or Allen in the FCC Form 394 submitted to the City
requesting consent to the Allen Transaction, or by CCP, Charter or Allen in connection with the
City's Review of the Allen Transaction which proves to be untrue or inaccurate in any material
respect In the event the City receives any such notice of a loss,claim,damage,liability or expense,
the City shall Promptly notify Charter and Charter shall, at its sole discretion, have the right to
assume sole and difect responsibility for defending against any such loss, claim,damage, liability
or expense.
PART VI: MISCELLANEOUS
6.1 Proof of CM&Bonds and Guarantees—No later than ten(10)days after the Closing Date
of the Allen transaction, CCP must provide satisfactory proof to the City that the letter of credit,
msurance and bond4ng required by the Franchise Documents have been obtained,and that there will
be no gaps in cover}ges or liabilities. Charter and CCP will continue to maintain the letters of credit
and bonds that they were required to maintain under the Franchise Documents so long as the
Franchise was undgr the control of Charter, notwithstanding the Allen Transaction.
6.2 Binding_A eement —This agreement shall bind and benefit the parties hereto and their
respective heirs,beneficiaries,administrators,executors,receivers,trustees, successors and assigns,
and the promises a;id obligations herein shall survive the effective date hereof.
City of San Luis Obispo
Charts/Aum Cheng of Control Agement
Page 8
r rd- 14'
6.3 Acceptance of Agreement—By accepting this Agreement,(i)Charter and CCP accept, and
agree to comply with, each provision hereof that is applicable to it; (ii) Charter and CCP
acknowledge and accept the City's right to consent to the Allen Transaction pursuant to the
Franchise Documents,and to enter into this Agreement; (iii)Charter and CCP agree that the request
for approval of the Allen Transaction was acted upon in a timely manner, that there is no
impediment to the effectiveness of this Agreement or the City's action with respect to the Allen
Transaction,and that they will not raise,and hereby expressly waive, all claims to the contrary.
6.4 Failure to S$atisfyConditions — If, at any time prior to or within 10 days after the
consummation of the Allen Transaction,any of the Transaction Parties fail to satisfy the conditions
in this Agreement or in the Allen Transaction Consent Resolution applicable to it,then the Allen
Transaction Consent Resolution,to the extent it approves the Transaction, shall be void and of no
force or effect,and that the Allen Transaction Application shall,without any further action by the
City,be deemed denied as of the date of this Agreement.
6.5 Governing Iaw—This Agreement shall be governed in all respects by applicable federal and
state law,and to the extent state law controls,the laws of the State of California_
6.6 Time of the Essence—In determining whether a party has complied with this Agreement,
the parties agree that time is of the essence.
6.7 Counterparty—This document may be executed in multiple counterparts,and by the parties
hereto on separate opunterparts,and each counterpart,when executed and delivered,shall constitute
an original agreement enforceable against all who signed it without production of,or accounting for,
any other counterpart,and all separate counterparts shall constitute the same agreement.
City of San Luis Obispo
Charter/Allen Change of Control Agreanent
Page 9
C$-1 5
6.8 Ca ons—The captions and headings of this Agreement are for convenience and reference
purposes only,and shall not affect in any way the meaning and interpretation of any provisions of
this Agreement.
IN WITNESS WBEREOF,the parties hereto have executed this Change of Control Agreement as
of the day and year first above written.
For. Charter
By: Tom Schaeffer
Title: Regional Vice President
For: City of San Luis Obispo
Allen Settlo,Mayor
ATTEST:
City Clerk
By:
City of San Luis Obispo
CharW/Alkn Change of Control Agreement
Page 10
r1¢-1 b
APPROVED AS TO FORM:
_i Attorney
By:
Dia:
City oC San Lms Obispo
C4png/Allen Climge d Couol Agreement
Pege l l
c�¢.=17
EJH[BIT A
Guaranty of
Charter Communications,Inc.
This Guaranty("Guaranty")is executed as of December 15, 1998,by Charter Communications,
Inc. (Guarantor)for the benefit of the City of San Luis Obispo("City").
WITNESSETH:
WHEREAS,Guarantor,as the parent of Charter Communications Properties,L.L.C. ("CCP"),and
as a party to a management agreement between itself and CCP,has a substantial interest in the completion
of that transaction more fully described in a certain Change of Control Agreement dated December 15,
1998;and
WHEREAS,that transaction cannot be completed until and unless CCP continues as Franchisee
authorized to provide cable service in the City; and CCP cannot continue as Franchisee without the
approval of the City of the transaction; and
WHEREAS, Guarantor's interests will be advanced by providing this Guaranty to the City to
ensure that the City's interests are fully protected if the transaction is approved;
NOW TIEREFORE, Guarantor hereby agrees as follows:
1. The purchase of Charter Communications, Inc., by Paul G. Allen does not affect
Guarantor's Guaranty of April 29, 1998 in any way, and it shall remain Guarantor of CCP.
2. Paragraph 2 of the Guarantor's April 29, 1998 Guaranty is amended to provide that the
Guaranty extends to the Change of Control Agreement dated December 15, 1998 and shall run throughout
the tern of the Franchise and any renewal or extension thereof, except that this Guaranty,
City of San Luis Obispo
Charter/Allen Change of Control Agreement Guaranty
page 1
EXII]Brr A
Guar;mty of
Charter Communications,Inc.
in turn, shall terminate at such earlier time that the ownership and control of the Franchise is lawfiilly
transferred with the consent of the City for such transfer and a substitute of a Guarantor acceptable to the
City is provided-
IN
rovidedIN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed by their
respective duly authorized officers as of the day and year first above written.
CHARTER COMMUNICATIONS,INC.
Be
ATTEST:
City of San Luis Obispo
Charter/Allen Change of Control Agreement Guaranty
page 2
G$- 19
JaCHARTE-1,116.
COMMUNICATIONS
August 18, 1998
The Honorable Allen K Settle
Mayor
City of San Luis Obispo
900 Palm Street
San Luis Obispo,CA 93401
Dear Mayor Settle.
Over the past five ymears, Charter Communications, Inc, and its affiliated entities (`Charted has
grown to be the 10 largest multiple system operator (°MSO') in the United States. Charter
accomplished this phenomenal growth with the aide of some trusted and valued partners. Charter
provided the expertise and cable management acumen while our partners, primarlly Kelso &
Company and Charterhouse Group International,Inc.,provided access to equity and capital.
With the wave of consolidations in the industry, Charter's senior management has been looking at
ways to consolidate the ownership and control of all of the cable properties managed by Charter
under a single umbrella company. We have recently explored the idea of an IPO (issuing public
stock) to provide the liquidity needed to further grow and expand and may still pursue this option in
the future. As we explored all of our aftematives,we were presented with an option that provided for
consolidation of the entities,access m capital,and a vision which is unsurpassed in the industry.
We are extremely pleased to have been chosen by Paul G.Allen,co-founder of Microsoft,to manage
his cable properties and to help develop and deliver his vision of the Wired World' In short, Allen
envisions a connected future marked by the merger of high bandwidth data channels, the power of
the personal computer and the avaraNFdy of compelling contenL
You will be pleased to know that there will be no increase in debt-to-equity ratios of the entities as a
result of this transaction. Mr. Ailed will assume the current debt and in many instances liquidate
some debt instruments. Notwithstanding the consumer benefit of this transaction, the effect of this
transaction on you and your subscribers should be transparent for the most part The anent
corporate staff and system managr.-nent will remain under my leadership. And of course.Charter will
retain its commitment to superior customer service.
In reviewing this appGoaticn, you are called upon to determine that the applicant meets the legal,
technical and financial qualifications to own and operate a CAN system. In this instance, legal and
technical qualifications are a non-issue since there is no change in either corporate or system
management We think you will agree that the financial condition of the company can only be
strengthened by this consolidation and infusion of equity. The men and women of Charter are eager
to foal our energy toward deploying new technology and hope for a speedy transfer process.
Paul Allen's vision helped bring forth the computer revolution. Just imagine the possibilities when
compelling content, personal computing and high bandwidth data channels combine. The staff at
Charter looks forward to bringing you the Wired World'
Sincerely,
(2) �
Jerald L Kent
President and CEO
Wit:... . .
12444 Powerwourt Drive-Suite 100•St.Louis,Missowi 63131-3660•(314)965-0555•Fax(314)909-0675-Intemet hip-\\www.chartemomcom
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