Time Warner Cable 2006 Annual Report Download - page 31

losses from the escrowed cash and shares. In addition, subject to specified exceptions, losses associated with
breaches of representations and warranties generally must exceed certain dollar amounts before a TW Indemnified
Party may make a claim for indemnification. Even after the applicable threshold has been reached, a claim for
indemnification for losses associated with breaches of representations and warranties is subject to specified
aggregate deductibles and cap amounts. With respect to assets acquired from Adelphia by TW NY that were
subsequently transferred to Comcast in the Exchange, ACC’s indemnification obligation is subject to a threshold of
$74 million, a deductible of $42 million and is capped at $296.7 million, subject to certain adjustments, and with
respect to assets acquired by TW NY that were not transferred to Comcast pursuant to the Exchange, ACC’s
indemnification obligation is subject to a threshold of $67 million, a deductible of $38 million and is capped at
$267.9 million, subject to certain adjustments.
The TW NY Purchase Agreement required TWC, at the Adelphia Closing, to amend and restate its by-laws to
restrict TWC and its subsidiaries from entering into transactions with or for the benefit of Time Warner and its
affiliates other than TWC and its subsidiaries (the “Time Warner Group”), subject to specified exceptions.
Additionally, prior to August 1, 2011 (five years following the Adelphia Closing), TWC’s restated certificate of
incorporation and by-laws (as required to be amended by the TW NY Purchase Agreement) do not allow for an
amendment to the provisions of TWC’s by-laws restricting these transactions without the consent of a majority of
the holders of TWC Class A common stock, other than any member of the Time Warner Group. Additionally, under
the TW NY Purchase Agreement, TWC agreed that it will not enter into any short-form merger prior to August 1,
2008 (two years after the Adelphia Closing) and that it will not issue equity securities to any person (other than,
subject to satisfying certain requirements, TWC and its affiliates) that have a higher vote per share than TWC
Class A common stock prior to February 1, 2008 (18 months after the Adelphia Closing).
At the closing of the Adelphia Acquisition, TWC and Adelphia entered into a registration rights and sale
agreement (the “Adelphia Registration Rights and Sale Agreement”), which governed the disposition of the shares
of TWC Class A common stock received by Adelphia in the TW NYAdelphia Acquisition. Upon the effectiveness
of Adelphia’s plan of reorganization, the parties’ obligations under the Adelphia Registration Rights and Sale
Agreement terminated.
Parent Agreement. Pursuant to the Parent Agreement among ACC, TW NY and TWC, dated as of April 20,
2005, TWC, among other things, guaranteed the obligations of TW NY to Adelphia under the TW NY Purchase
Agreement.
The Comcast Purchase Agreement. The Comcast Purchase Agreement has similar terms to the TW NY
Purchase Agreement and the transactions contemplated by the Comcast Purchase Agreement also closed on July 31,
2006. The Comcast Adelphia Acquisition was effected in accordance with the provisions of sections 105, 363 and
365 of the Bankruptcy Code and a plan of reorganization for the joint ventures referred to in the following sentence.
The Comcast Adelphia Acquisition included cable systems and Adelphia’s interest in two joint ventures in which
Comcast also held interests: Century-TCI California Communications, L.P. (the “Century-TCI joint venture”),
which owned cable systems in the Los Angeles, California area, and Parnassos Communications, L.P. (the
“Parnassos joint venture”), which owned cable systems in Ohio and Western New York. The purchase price under
the Comcast Purchase Agreement was approximately $3.6 billion in cash.
TWC/Comcast Agreements
As described in more detail below, on the same day as the parties consummated the transactions governed by
the Purchase Agreements, TWC and some of its affiliates (collectively, the “TWC Group”) and Comcast
consummated the TWC Redemption, the TWE Redemption and the Exchange (collectively, the “TWC/Comcast
Transactions”). Under the terms of the agreement which governed the TWC Redemption (the “TWC Redemp-
tion Agreement”), TWC redeemed Comcast’s investment in TWC in exchange for one of TWC’s subsidiaries that
held both cable systems and cash. In accordance with the terms of the agreement which governed the TWE
Redemption (the “TWE Redemption Agreement”), TWE redeemed Comcast’s interest in TWE in exchange for one
of TWE’s subsidiaries that held both cable systems and cash. In accordance with the terms of the agreement which
governed the Exchange (as amended, the “Exchange Agreement”), TW NYand Comcast transferred to one another
subsidiaries that held certain cable systems, including cable systems acquired by each from Adelphia. The TWC
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