Time Magazine 2009 Annual Report Download - page 131

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The following is a description of the Company’s contingent commitments at December 31, 2009:
• Guarantees include guarantees the Company has provided on certain lease and operating commitments
entered into by (a) entities formerly owned by the Company including the arrangements described below
and (b) ventures in which the Company is or was a venture partner.
Six Flags
In connection with the Company’s former investment in the Six Flags theme parks located in Georgia and
Texas (“Six Flags Georgia” and “Six Flags Texas,” respectively, and, collectively, the “Parks”), in 1997,
certain subsidiaries of the Company (including Historic TW) agreed to guarantee (the “Six Flags
Guarantee”) certain obligations of the partnerships that hold the Parks (the “Partnerships”) for the
benefit of the limited partners in such Partnerships, including the following (the “Guaranteed
Obligations”): (a) making a minimum annual distribution to the limited partners of the Partnerships
(the minimum was approximately $60.7 million in 2009 and is subject to annual cost of living
adjustments); (b) making a minimum amount of capital expenditures each year (an amount
approximating 6% of the Parks’ annual revenues); (c) offering each year to purchase 5% of the
limited partnership units of the Partnerships (plus any such units not purchased pursuant to such offer
in any prior year) based on an aggregate price for all limited partnership units at the higher of
(i) $250 million in the case of Six Flags Georgia and $374.8 million in the case of Six Flags Texas
(the “Base Valuations”) and (ii) a weighted average multiple of EBITDA for the respective Park over the
previous four-year period (the “Cumulative LP Unit Purchase Obligation”); (d) making annual ground
lease payments; and (e) either (i) purchasing all of the outstanding limited partnership units through the
exercise of a call option upon the earlier of the occurrence of certain specified events and the end of the
term of each of the Partnerships in 2027 (Six Flags Georgia) and 2028 (Six Flags Texas) (the “End of Term
Purchase”) or (ii) causing each of the Partnerships to have no indebtedness and to meet certain other
financial tests as of the end of the term of the Partnership. The aggregate amount payable in connection
with an End of Term Purchase option on either Park will be the Base Valuation applicable to such Park,
adjusted for changes in the consumer price index from December 1996, in the case of Six Flags Georgia,
and December 1997, in the case of Six Flags Texas, through December of the year immediately preceding
the year in which the End of Term Purchase occurs, in each case, reduced ratably to reflect limited
partnership units previously purchased.
In connection with the Company’s 1998 sale of Six Flags Entertainment Corporation (which held the
controlling interests in the Parks) to Six Flags, Inc. (formerly Premier Parks Inc.) (“Six Flags”), Six Flags
and Historic TW entered into a Subordinated Indemnity Agreement pursuant to which Six Flags agreed to
guarantee the performance of the Guaranteed Obligations when due and to indemnify Historic TW, among
others, in the event that the Guaranteed Obligations are not performed and the Six Flags Guarantee is called
upon. In the event of a default of Six Flags’ obligations under the Subordinated Indemnity Agreement, the
Subordinated Indemnity Agreement and related agreements provide, among other things, that Historic TW
has the right to acquire control of the managing partner of the Parks. Six Flags’ obligations to Historic TW
are further secured by its interest in all limited partnership units that are held by Six Flags. To date, no
payments have been made by the Company pursuant to the Six Flags Guarantee.
In connection with the TWC Separation, guarantees previously made by Time Warner Entertainment
Company, L.P. (“TWE”), a subsidiary of TWC, were terminated and, pursuant to and as required under the
original terms of the Six Flags Guarantee, Warner Bros. Entertainment Inc. (“WBEI”) became a guarantor.
In addition, TWE’s rights and obligations under the Subordinated Indemnity Agreement have been
assigned to WBEI. The Company continues to indemnify TWE in connection with any residual exposure
of TWE under the Guaranteed Obligations.
In April 2009, Six Flags received notices from limited partners of the Partnerships to sell limited
partnership units with an aggregate price of approximately $66 million. The general partner of the
119
TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)