Memo- Resolution 2000-12
CITY OF HOPKINS
. MEMORANDUM
To: Hopkins City Council
From: Jim Genellie
Date: April 12, 2000
Subject: Resolution 2000-12
Staffreconunends adoption of the following motion: Approve Resolution 2000-12 approving the
transfer of control ofKBL Cable Systems of the Southwest to AOL Time Warner.
The result of this motion will be to consent to transfer of control of the cable system currently serving
Hopkins to the company formed by the merger of Time Warner and AOL.
Overview
In Janumy, America Online, Inc. (AOL) and Time Warner, Inc. (TW) announced a merger in which
e both TW and AOL will become wholly-owned subsidiaries of a new holding company call AOL
Time Warner, Inc. Because Hopkins is served by KBL Cable Systems of the Southwest, Inc., a
subsidiary of TW, the proposed merger and resulting transfer of control requires approval under our
franchise and MilU1esota Law.
The City Council continued this item at the April 4 City Council meeting. The purpose of the
continuance was to resolve an issue regarding reimbursement by Time Warner for expenses related to
the transfer of control.
Attached are letters from Brian Grogan and Gary Matz concerning this issue. An agreement has been
reached that Time Wamer will reimburse each city up to $2,000. As indicated in Mr. Grogan's letter
this will result in the five cities of the Southwest being responsible for about $1,300 in legal costs.
Hopkins' share would be one-fifth of this.
This is similar to the agreement that was made during the last transfer. One issue that remains
outstanding is Time Warner's statement that it reserves the right to deduct the $2,000 payment from
future franchise fees. According to a conversation I had with Kim Roden, Time Warner does not
intend, at this time, to deduct the fees from future franchise fees. She maintained that this provision
would likely only be used for franchises where there was not a history of reimbursing legal fees.
Mr. Grogan is recommending that cities pass the resolution and deal with any future deductions
when, and if, they occur.
.
.--.----
Page 2
.
Alternatives:
1. Approve Resolution 2000-12. This will approve the Transfer of Control.
2. Do not approve Resolution 2000-12 because there are some additional issues that need to be
resolved.
3. Take no action, which would also result in consenting to the change of control
Staff recommends Alternative #1.
Attachments:
. Resolution 2000-12
. April 10, 2000 letter from Brian Grogan
. April 6, 2000 letter from Gary Matz
e
e
-..- . --
. RESOLUTION NO. 2000-12
APPROVING THE TRANSFER OF CONTROL OF
KBL CABLESYSTEMS OF THE SOUTHWEST, INC.,
THE CABLE TELEVISION FRANCHISEE,
RESUL TING FROM THE MERGERS OF SUBSIDIARIES OF
TIME WARNER, INC. AND AMERICA ONLINE, INC.
INTO AOL TIME WARNER, INC.
WHEREAS, on or about January 1, 1987, the City of Hopkins, Minnesota
("City") passed and adopted Ordinance No. 96-792, granting a Cable Television
Franchise ("Franchise") currently held by KBL Cablesystems of the Southwest,
Inc. ("Franchisee"), a subsidiary of Time Warner, Inc., doing business as Time
Warner Cable (collectively, "TWI"); and
WHEREAS, on January 1 0, 2000, a certain Agreement and Plan of
e Merger ("Merger Agreement") was made and entered into by and among TWI
and America Online, Inc. ("AOL"); and
WHEREAS, the Merger Agreement contemplates the merging of a to-be-
formed TWI subsidiary and a to-be-formed AOL subsidiary with a parent holding
company known as AOL Time Warner, Inc. ("AOL Time Warner"); and
WHEREAS, TWI and AOL have requested consent by the City to these
mergers and the resulting trensfer of control of the Franchisee to AOL Time
Warner; and
WHEREAS, under the Franchise and applicable state and federal law, the
proposed mergers and resulting transfer of control of the Franchisee require
consent from the City; and
e
322747/1 1
. WHEREAS, the City has reviewed the proposed mergers, transfer of
control, and the legal, technical, and financial qualifications of AOL Time Warner;
and
WHEREAS, based on information obtained and on the reports and
information received by the City from TWI and AOL, the City has found no reason
to disapprove of the proposed transfer of control of the Franchisee to AOL Time
Warner.
NOW, THEREFORE, the City Council for the City resolves as follows:
1. The Franchise is in full force and effect, and the Franchisee is the
lawful holder of the Franchise.
2. The Franchisee will remain the lawful holder of the Franchise after
e consummation of the mergers contemplated under the Merger
Agreement.
3. The City hereby consents to and approves of the proposed transfer
of control of the Franchisee subject to:
a. Closing of the transaction contemplated within the Merger
Agreement pursuant to the terms and conditions described
in information provided to the City by TWI and AOL.
b. AOL Time Warner or the Franchisee notifying the City in
writing of the completion of the mergers and the transfer of
control within thirty (30) days of the date of closing.
c. The Franchisee, within thirty (30) days of the date of closing,
providing the City with a signed acceptance of this
.
322747/1 2
. Resolution in the form attached hereto and incorporated
herein by reference.
d. AOL Time Warner, lWl, or the Franchisee, within thirty (30)
days of the date of adoption of this Resolution, reimbursing
the City for substantially all reasonable costs, expenses, and
professional fees related to the City's review and action on
the proposed mergers and the transfer of control.
4. The City hereby waives any right of first refusal which the City may
have to purchase the Franchise, or the cable television system
serving the City, but only as such right of first refusal applies to the
request for approval of the mergers and the transfer of control now
. before the City.
5. In the event the mergers of the lV\f1 and AOL subsidiaries into AOL
Time Warner contemplated by the foregoing resolutions is not
completed, for any reason, the City's consent shall not be effective.
6. The City's approval of the transfer of control does not waive or
diminish any lawful authority of the City to require the provision of
non-discriminatory access to the cable system for providers of
Internet access service, subject to applicable law. The City and the
Franchisee have not waived any rights, obligations, claims,
defenses, or remedies regarding the authority of the City to impose
such conditions. Prior to the enactment of any such requirement,
. the Franchisee shall be provided with reasonable notice and an
322747/1 3
e opportunity to be heard, including the right to present evidence on
any findings to be made by the City with respect to the need for
such a requirement.
7. To the maximum extent permitted by all applicable local, state, and
federal laws, this Resolution shall not be construed to in any way
relieve the Franchisee nor limit the Franchisee from any liability
under the Franchise.
This Resolution shall take effect and continue and remain in effect from
and after the date of its passage, approval, and adoption.
A motion to approve the foregoing Resolution No. 2000-12 was made
by Council Member and duly seconded by Council Member
e The following Council Members voted in the affirmative:
The following Council Members voted in the negative:
Passed and adopted by the City Council for the City this _ day of
,2000.
ATTEST: CITY OF HOPKINS, MINNESOTA
By: By:
Its:
.
322747/1 4
---- --- ---- ---
- SOUTHWEST SUBURBAN CABLE COMMISSION
c/o Moss & Barnett, A Professional Association
4800 Norwest Center, 90 South Seventh Street
Minneapolis, MN 55402
Phone: (612) 347-0349
Fax: (612) 339-6686
April 10, 2000
VIA U.S. MAIL
Gordon Hughes Chris Enger David Childs
City Manager City of Eden Prairie City Manager
City of Edina 8080 Mitchell Road City of Minnetonka
4801 West 50th Street Eden Prairie, .MN 55344 14600 Minnetonka Boulevard
Edina, I\1N 55424 Minnetonka, MN 55345
Steve Devich :;Jim Genellie
Assistant City Manager Assistant City Manager
City of Richfield City of Hopkins
6700 Portland A venue 1010 South First Street
. Richfield, I\1N 55423 Hopkins, .MN 55343
Re: Time Warner Reimbursement of Costs
Dear Gentlemen:
1 have received the enclosed letter from Mr. Gary Matz of Time Warner Cable with
respect to the reimbursement issue. The letter explains that Time Warner is willing to reimburse
the Commission up to $2,000.00 per community for a total of$lO,OOO.OO for the transfer related
expenses incurred by the Commission.
The Commission's total fees and costs to date for work on the transfer matter are
$11,334.11. Assuming the Commission accepts this proposal from Time Warner a balance will
remain of $1,33411 which would be the responsibility of the Commission and, therefore, each of
the member municipalities.
One issue to pay particular attention to in the attached letter is the second condition
imposed by Time Warner which relates to Time Warner's reservation of rights to deduct any
reimbursement from future franchise fee payments due to the City. I have had discussions with
both Gary Matz and Kim Roden regarding this matter and neither anticipates that an offset
against franchise fees will be undertaken although neither Ms. Roden or Mr. Matz can guarantee
that such an offset may not occur in the future.
.
. April 10, 2000
Page 2
In an attempt not to belabor this issue and unnecessarily add to the costs incurred by the
Commission, ! suggest that the Commission accept Time Warner's offer of reimbursement of
$2,000 per community. To the extent Time Warner subsequently attempts to offset this amount
from a future franchise fee payment the City and/or Commission can challenge such action at
that time. In other words, we need not undertake a battle with Time Warner over this issue until
we discover whether Time Warner in fact offsets these payments against future franchise fees. If
no such offset ever occurs, the issue is moot and no additional time or expense need be incurred.
Because the amount of reimbursement does not full y cover all of the costs and expenses
associated with the transfer review, I have slightly amended the transfer resolution to reference
the fact that "substantial! y" all of the costs and expenses incurred by the City will be reimbursed
by Time Warner In this way your City Council will be on notice that the reimbursement did not
cover every expense but rather the vast majority of the expenses incurred by the City. From
what I have been able to uncover from the last transfer five (5) years ago, this appears consistent
with the agreement which Time Warner and the Commission entered into at that time.
Assuming this recommendation is acceptable, I have enclosed herewith a revised
resolution for each City to take action on. Among the five (5) cities only the City of Minnetonka
. took action to approve the resolution as originally drafted. Each of the other cities determined to
delay action on the resolution until an upcoming meeting. Those cities that closed the public
hearing have thirty (30) days from the date the hearing was closed within which to take action on
the resolution. I recommend that the revised resolution be placed on your upcoming City
Council agenda for consideration and action.
If you should have any questions or concerns regarding this matter, please feel free to
contact my office and speak with Mr. Tim Gustin, my associate. As I mentioned at our last
meeting I arranged my vacation schedule so that I would be available for each City's public
hearing then back in town for the Full Commission meeting on Wednesday, April 26, 2000. In
my absence Tim is appraised of these issues and can follow-up to take appropriate action as
necessary and appropriate.
Very truly yours,
tblL0-~~
Brian T. Grogan
BIG/tIh
Enclosures
cc: Kim Roden w/enclosures via u.s. Mail
. Timothy L. Gustin, Esq. w/o enclosures
U7079il
--.
APR-06-2000 16:47 TIME WARNER CABLE 2D33284840 P.02/08
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'@> TIME WARNER
CABLE ApriL 6. ;2000
Brian T. Grogan
Moss & Barnett, A Professional Association
4800 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402~4t29
Viti Facsimile
Dear Brian:
I am writing in response to your letter dated April 3, 2000 to Ms. Kim Roden regarding
your representation of certain municipalities served by Tiroe Warner Cable.
Based upon that correspondence, it is my understanding that you are requesting, on behalf
. of your clients, the reimbursement for fees and expel1Bcs Elssociated with your review of the
pending merger between America Online, Inc. and Time Warner Inc. i.o tbe amollilt of $20,000
or, in other words, $2,000 per community.
As: you know, Time Warner Cable generally does not reimburse for consulting fees in
light of the franchise fees that we are required to pay to the numicipalities. I don't believe it
would be productive or efficlent for either of us to set forth our various legal arguments. In this
instance, however, we are prepared to reimburse the communities f("JT actual out-of-pocket
expenses incurred .by the communities due to your review of the transaction up to a max,wum of
$20,000 for the ten (10) communities or $2,000 per community subject to the following
conditior1S:
1. Ear.h ~om.munity ".ill approve the pending tnuisaction by adopting
a Resolution identical to that attached hereto and taken from
Exhibit A to your March 22,2000 report to Richfield, Minnesota,
or in the alternative, the corrununity will allow the 120 day review
period provided for under applicable federal law to expire without
taking any action; fu.d
2. Time Warner Cllble expressly reserves the right to deduct or credit
the amount of the payment made to each community, not to exceed
$2,000 per COIllmll111ty, against a future franchise fee payment due
. to the community.
A Llil'i~iml "j'7imr Wamer F.m"rrairlfll~fJ[, [.P.
u_ . _ ._..__
RPR-06-2000 16:47 TIME WRRNER CABLE 2033284840 P.03/08
Brian Grogan
. April 6, 2000
Page 2
We understand that the Resolution must be tailored to meet specific formatting
requirements or name changes specific to the community, The condition set forth above is
simply intended to reflect that the substantive provisioJJ..5 of the Resolutions will be identical and
that there will .not be any further substantive provision added to the Resolutions.
We do appreciate your cooperation and assistance as you represent your clients in the
review of the pending merger. I L.-ust that you and your olients will fmd this an acceptable
approach to the reimbursement sought in your April 300 correspondence.
Should you have any questions, please do not hesitate to contact me.
Very truly yours,
. ~M.n
GRlvVsjw
Attachment
co: Kim Roden
.
RPR-06-2000 16:48 TIME WARNER CABLE 2033284840 P.04/08
. Recommendations
Based strictly on the infonnatian made available to us at the time of this
review, we believe that the Franchisee, as controlled by AOL Time Warner, will
possess the n~cessary legal, technIcal, and financial qualifications ba6ed on the
standards of review identified in applicable law, and the Franchise as descrIbed
within this Report.
Based on these findings, we recommend that:
1. The City Council review this Report, listen to public comment, as
necessary or appropriate, and undertake e.1I necessary action to pass and adopt
a resolution similar in form and content to the document following these
recommendations.
2. The City follow-up to ensure that the Franchisee submit the
Acceptance of the Resolution Approving the Transfer of Control, which must be
delivered following closing of the transaction.
Exhibit A
R~solution . Approving Transfer
RESOLUTION NO.
APPROVING THE TRANSFER OF CONTROL OF
KBL CABLESYSTEMS OF THE SOUTHWEST, INC.,
. THE CABLE TELEVISION FRANCHISEE,
RESULTING FROM THE MERGERS OF SUBSIDIARIES OF
TIME WARNER, INC. AND AMERICA ONLINE, INC.
INTO AOL TIME WARNER, INC.
WHEREAS, on or about January 1, 1987, the City of Richfield, Minnesota
("City") passed and adopted Bill No. 1996-26, granting a Cable Television
Franchise ("Franchise") currently held by KBL Cablesystems of the Southwest,
Inc. ("Franchisee"), a subsidiary of Time Warner, Inc., doing bus[ness as Time
Warner Cable (collectively, "nNl"); and
WHEREAS, on January 1 0,2000, a certain Agreement and Plan of
Merger ("Merger Ag reement") was made and entered into by and among T\NI
and America Online, Inc. ("AOL"); and
WHEREAS, the Merger Agreement contemplates the merging of a to-be-
.
APR-05-2000 16:48 TIME WARNER CABLE 2033284840 P.0S/08
formed lWl subsidiary and d to-be-formed AOL subsidiary with a parent holding
. company known as AOL Time Warner. Inc- ("AOL Time Warner"); and
WHEREAS, TWI and AOL have requested consent by the City to these
mergers and the resulting transfer of control of the Franchisee to AOL Time
Warner; and
WHEREAS, under the Franchise and applicable state and federal law, the
proposed mergers and resulting transfer of control of the Franchisee require
consent from the City; and
WHEREAS, the City has reviewed the proposed mergers, transfer of
control, and the legal, technical, and financial qualifications of AOL Time Warner;
and
WHEREAS, based on infol1llalion obtained and on the reports and
information received by the City from 1WI and AOL, the City has found nD
reason to disapprove of the proposed transfer of control of the Franchisee to
. AOL Time Warner.
NOW, THEREFORE, the City Council for the City resolves as follows:
1. The Franchise is in full force and effect, and the Franchisee is the
lawful holder of the Franchise.
2. The Franchisee will remaln the lawful holder of the Franchise after
consummation of the mergers contemplated under the Merger
Agreement.
3. The City hereby consents to and approves of the proposed tran:;fer
of control of the Franchisee subject to:
a. Closing of the transaction contemplated within the Merger
Agreement pursuant to the terms and conditions described
in information provided to the City by TWI and AOL.
b. AOL Time Warner or the Franchisee notifying the City in
.
. --------
APR-06-2000 16:48 TIME WARNER CABLE 2033284840 P.06/0B
writing of the completion of the mergers and the transfer of
. control within thirty (30) days of the date of closing.
c. The Franchisee, within thirty (30) days of the date of closing,
providing the City with a signed acceptance of this
Resolution in the form attached hereto and incorporated
herern by reference.
d. AOL Time Warner, TVlJI, or the Franchisee, within thirty (30)
days of the date of adoption of this Resolution, reimbursing
the City for all reasonable costs, expenses, and profeMional
fees related to the City's review and action on the proposed
mergers and the transfer of control.
4. The City hereby waives any right of first refusal which the City may
have to purchase the Franchise, or the cable television system
serving the Crt}', but only as such right of first refusal applies to the
. request for approval of the mergers and the transfer of control now
before the Ctty.
5. In the event the mergers of the T'NI and AOL subsidiaries into AOL
Time Warner contemplated by the foregoing resolutions is not
completed, for any reason, the City's consent shall not be effective.
6. The City's approval of the transfer of control does not waive or
diminish any lawful authority of the City to require the provision of
non-discriminatory access to the cable system for providers of
Internet access servicet $I)bject to applicable law. The Crty and the
Franchisee have not waived any rights, obligations, claims,
defenses, or remedies regarding the authority of the City to impose
such conditions. Prior to the enactment of any such requirement,
the Fri=.lnchisee shall be provided with reasonable notice and an
.
APR-06-2000 16:48 TIME WARNER CABLE 20332848413 P.07/08
~
opportunity to be heard I Including the right to present evidence on
. any findings to be made by the City with respect to the need for
such a requirement.
7. To the maximum extent permitted by all applicable local, state, and
federal laws, this Resolution shall not be construed to in any way
relieve the Franchisee nor limit the Franchisee from any liability
under the Franchise.
This Resolution shaH take effect and continue and remain in effect from
and after the date of its passage, approval, and adoption.
A motion to approve the foregoing Resolution No, was made
by Council Member and duly seconded by Council Member
The following COuJ'lCil Members voted in the affirmative:
.
The following Council Members voted in the nb~ative:
Passed and adopted by the City Council far the City this _ day of
,2000.
ATTEST: CITY OF RICHFIELD, MINNESOTA
By: By:
Its:
ACCEPTANCE OF THE RESOLUTION
APPROVING THE TRANSFER OF CONTROL
KBL Cablesystems of the Southwest, Inc. hereby agrees to comply with
the terms and conditions of this Resolution No. and the Franchise
referenced herein.
.
RPR-06-2000 16:4'3 TIME WRRNER CABLE 2033284840 P.08/08
. KBL CABL.ESYSTEMS OF THE
SOUTHWEST, INC.
By
Its
Subscribed and sworn to me this
to me this _ day of ,2000
Notary Public
.
.
TOTRL P.0S