Time Warner Cable 2007 Annual Report Download - page 110

The indenture (the “TWE Indenture”) governing the TWE Notes was amended in several respects during 2006.
Pursuant to the Tenth Supplemental Indenture to the TWE Indenture, TW NY Holding fully, unconditionally and
irrevocably guarantees the payment of principal and interest on the TWE Notes. As a result of a consent solicitation
that was completed on November 2, 2006, the Eleventh Supplemental Indenture to the TWE Indenture was entered
into pursuant to which (i) TWC provides a direct guaranty of the TWE Notes, rather than a guaranty of the TW
Partner Guaranties (as defined below), (ii) the guaranties (the “TW Partner Guaranties”) previously provided by
ATC and WCI were terminated and (iii) TWE is permitted to provide holders of the TWE Notes with quarterly and
annual reports that TWC (or any other ultimate parent guarantor, as described in the 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 Preferred Membership Units
In connection with the financing of the Adelphia Acquisition, TW NY issued $300 million of its Series A
Preferred Membership Units (the “TW NY Preferred Membership Units”) to a limited number of third parties. The
TW NY 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
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 Preferred Membership
Units is equal to their liquidation preference plus any accrued and unpaid dividends through the redemption date.
Except under limited circumstances, holders of TW NY Preferred Membership Units have no voting rights.
The terms of the TW NY Preferred Membership Units require that holders owning a majority of the TW NY
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 Preferred Membership Units and the sale occurs on or immediately
prior to the redemption date. Additionally, for so long as the TW NY 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 Preferred Membership Units have the right to receive from the surviving
entity securities with terms at least as favorable as the TW NY Preferred Membership Units and (iii) if TW NY is
the surviving entity, the tax characterization of the TW NY 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.
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 ordinary course issuances of commercial paper or borrowings under the Cable Revolving 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 is required to include the
indebtedness, annual rental expense obligations and EBITDAR of certain unconsolidated entities that it
manages and/or in which it owns an equity interest, in the calculation of the TW Leverage Ratio. The
Shareholder Agreement defines EBITDAR, at any time of measurement, as operating income plus
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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)