Time Warner Cable 2006 Annual Report Download - page 32

Redemption Agreement, the TWE Redemption Agreement and the Exchange Agreement, are collectively referred
to as the “TWC/Comcast Agreements.”
The TWC Redemption Agreement. Pursuant to the TWC Redemption Agreement, dated as of April 20, 2005,
as amended, among TWC and certain other members of the TWC Group and Comcast, the TWC Redemption was
effected and Comcast’s interest in TWC was redeemed on July 31, 2006, immediately prior to the Adelphia
Acquisition. The TWC Redemption Agreement required that TWC redeem all of the TWC Class A common stock
held by TWE Holdings II Trust (“Comcast Trust II”), a trust that was established for the benefit of Comcast, in
exchange for 100% of the common stock of Cable Holdco II Inc. (“Cable Holdco II”), then a subsidiary of TWC. At
the time of the TWC Redemption, Cable Holdco II held both certain cable systems previously owned directly or
indirectly by TWC (“TWC Redemption Systems”) serving approximately 589,000 basic subscribers and approx-
imately $1.9 billion in cash, subject generally to the liabilities associated with the TWC Redemption Systems.
Certain specified assets and liabilities of the TWC Redemption Systems were retained by TWC.
The TWC Redemption Agreement contains closing adjustments to be paid in cash based on (1) the relative
growth or decline in the number of basic video subscribers served by the TWC Redemption Systems as compared to
the relative growth or decline in the number of basic video subscribers served by the other cable systems operated by
TWC and (2) the excess, if any, of the net liabilities of the TWC Redemption Systems over an agreed upon threshold
amount.
The TWC Redemption Agreement contains various customary representations and warranties of the parties
thereto including representations by TWC as to the absence of certain changes or events concerning the TWC
Redemption Systems, compliance with law, litigation, employee benefit plans, property, intellectual property,
environmental matters, financial statements, regulatory matters, taxes, material contracts, insurance and brokers.
The representations and warranties of the parties to the TWC Redemption Agreement generally survive the closing
of the TWC Redemption for a period of one year and certain representations and warranties either did not survive
the closing of the TWC Redemption, survive indefinitely or survive until the expiration of the applicable statute of
limitations (giving effect to any waiver, mitigation or extension thereof).
The TWC Redemption Agreement contains customary indemnification obligations on the part of the parties
thereto with respect to breaches of representations, warranties and covenants and certain other matters, generally
subject to a $20 million threshold and $200 million cap, with respect to certain of TWC’s representations and
warranties regarding the TWC Redemption Systems and related matters, and with respect to certain representations
and warranties of the Comcast parties relating to litigation, financial statements, finder’s fees and certain regulatory
matters.
TWC/Comcast Tax Matters Agreement. In connection with the closing of the TWC Redemption, TWC,
Cable Holdco II and Comcast entered into the Holdco Tax Matters Agreement (the “TWC/Comcast Tax Matters
Agreement”). The TWC/Comcast Tax Matters Agreement allocates responsibility for income taxes of Cable
Holdco II and deals with matters relating to the income tax consequences of the TWC Redemption. This agreement
contains representations, warranties and covenants relevant to such income tax treatment. The TWC/Comcast Tax
Matters Agreement also contains indemnification obligations relating to the foregoing.
The TWE Redemption Agreement. Pursuant to the TWE Redemption Agreement, dated as of April 20, 2005,
as amended, among TWC and Comcast, Comcast’s interest in TWE was redeemed on July 31, 2006, immediately
prior to the Adelphia Acquisition. Prior to the TWE Redemption, TWE Holdings I Trust (“Comcast Trust I”), a trust
established for the benefit of Comcast, owned a 4.7% residual equity interest in TWE. Pursuant to the TWE
Redemption Agreement, TWE redeemed all of the TWE residual equity interest held by Comcast Trust I in
exchange for 100% of the limited liability company interests of Cable Holdco III LLC (“Cable Holdco III”), then a
subsidiary of TWE. At the time of the TWE Redemption, Cable Holdco III held both certain cable systems
previously owned or operated directly or indirectly by TWE (the “TWE Redemption Systems”) serving approx-
imately 162,000 subscribers and approximately $147 million in cash, subject generally to the liabilities associated
with the TWE Redemption Systems. Certain specified assets and liabilities of the TWE Redemption Systems were
retained by TWE.
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