Time Warner Cable 2006 Annual Report Download - page 93

Eleventh Supplemental Indenture) would be required to file with the SEC pursuant to Section 13 of the Exchange
Act, if it were required to file such reports with the SEC in respect of the TWE Notes pursuant to such section of the
Exchange Act, subject to certain exceptions as described in the Eleventh Supplemental Indenture.
TW NY Mandatorily Redeemable Non-voting Series A Preferred Membership Units
In connection with the financing of the Adelphia Acquisition, TW NY issued $300 million of its Series A
Preferred Membership Units to a limited number of third parties. The TW NY Series A Preferred Membership Units
pay cash dividends at an annual rate equal to 8.21% of the sum of the liquidation preference thereof and any accrued
but unpaid dividends thereon, on a quarterly basis. The TW NY Series A Preferred Membership Units are subject to
mandatory redemption by TW NY on August 1, 2013 and are not redeemable by TW NY at any time prior to that
date. The redemption price of the TW NY Series A Preferred Membership Units is equal to their liquidation
preference plus any accrued and unpaid dividends through the redemption date. Except under limited circum-
stances, holders of TW NY Series A Preferred Membership Units have no voting rights.
The terms of the TW NY Series A Preferred Membership Units require that holders owning a majority of the
TW NY Series A Preferred Membership Units must approve any agreement for a material sale or transfer by TW
NY and its subsidiaries of assets at any time during which TW NY and its subsidiaries maintain, collectively, cable
systems serving fewer than 500,000 cable subscribers, or that would (after giving effect to such asset sale) cause TW
NY to maintain, directly or indirectly, fewer than 500,000 cable subscribers, unless the net proceeds of the asset sale
are applied to fund the redemption of the TW NY Series A Preferred Membership Units and the sale occurs on or
immediately prior to the redemption date. Additionally, for so long as the TW NY Series A Preferred Membership
Units remain outstanding, TW NY may not merge or consolidate with another company, or convert from a limited
liability company to a corporation, partnership or other entity, unless (i) such merger or consolidation is permitted
by the asset sale covenant described above, (ii) if TW NY is not the surviving entity or is no longer a limited liability
company, the then holders of the TW NY Series A Preferred Membership Units have the right to receive from the
surviving entity securities with terms at least as favorable as the TW NY Series A Preferred Membership Units and
(iii) if TW NY is the surviving entity, the tax characterization of the TW NY Series A Preferred Membership Units
would not be affected by the merger or consolidation. Any securities received from a surviving entity as a result of a
merger or consolidation or the conversion into a corporation, partnership or other entity must rank senior to any
other securities of the surviving entity with respect to dividends and distributions or rights upon a liquidation.
Mandatorily Redeemable Preferred Equity
On July 28, 2006, ATC, a subsidiary of Time Warner, contributed its $2.4 billion of mandatorily redeemable
preferred equity interest and a 1% common equity interest in TWE to TW NY Holding in exchange for a 12.4% non-
voting common equity interest in TW NY Holding. TWE originally issued the $2.4 billion mandatorily redeemable
preferred equity to ATC in connection with the TWE Restructuring. The issuance was a noncash transaction. The
preferred equity pays cash distributions on a quarterly basis, at an annual rate of 8.059% of its face value, and is
required to be redeemed by TWE in cash on April 1, 2023.
Time Warner Approval Rights
Under a shareholder agreement entered into between TWC and Time Warner on April 20, 2005 (the
“Shareholder Agreement”), TWC is required to obtain Time Warner’s approval prior to incurring additional debt
(except for the issuance of commercial paper or borrowings under TWC’s current revolving credit facility up to the
limit of that credit facility, to which Time Warner has consented) or rental expenses (other than with respect to
certain approved leases) or issuing preferred equity, if its consolidated ratio of debt, including preferred equity, plus
six times its annual rental expense to EBITDAR (the “TW Leverage Ratio”) then exceeds, or would as a result of the
incurrence or issuance exceed, 3:1. Under certain circumstances, TWC also includes the indebtedness, annual rental
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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION — (Continued)