Time Warner Cable 2007 Annual Report Download - page 26

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
approximately 162,000 basic cable 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.
The TWE Redemption Agreement contained customary indemnification obligations on the part of the parties
thereto with respect to breaches of representations and warranties and covenants and certain other matters, generally
subject to a $6 million threshold and $60 million cap, with respect to certain representations and warranties of TWE
regarding the TWE 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.
The Exchange Agreement. Pursuant to the Exchange Agreement, dated as of April 20, 2005, as amended,
among TWC, TW NY and Comcast, the Exchange closed on July 31, 2006, immediately after the Adelphia
Acquisition. Pursuant to the Exchange Agreement, TW NY transferred all outstanding limited liability company
interests of certain newly formed limited liability companies (collectively, the “TW Newcos”) to Comcast in
exchange for all limited liability company interests of certain newly formed limited liability companies or limited
partnerships, respectively, owned by Comcast (collectively, the “Comcast Newcos”). In addition, the Company paid
Comcast approximately $67 million in cash for certain adjustments related to the Exchange. Included in the systems
the Company acquired in the Exchange were cable systems (i) that were owned by the Century-TCI joint venture in
the Los Angeles, California area and the Parnassos joint venture in Ohio and Western New York and (ii) then owned
by Comcast located in the Dallas, Texas, Los Angeles, California, and Cleveland, Ohio areas.
The Exchange Agreement contains customary indemnification obligations on the part of the parties thereto
with respect to breaches of representations, warranties, covenants and certain other matters. Each party’s
indemnification obligations with respect to breaches of representations and warranties (other than certain
specified representations and warranties) are subject to (1) with respect to cable systems originally owned by
TWC that were acquired by Comcast, a $5.7 million threshold and $19.1 million cap, (2) with respect to cable
systems originally owned by Adelphia that were initially acquired by TWC pursuant to the TW NY Purchase
Agreement and then transferred to Comcast pursuant to the Exchange Agreement, a $74.6 million threshold and
$746 million cap, (3) with respect to cable systems originally owned by Comcast that were acquired by TWC, a
$41.5 million threshold and $415 million cap, and (4) with respect to cable systems originally owned by Adelphia
that were initially acquired by Comcast pursuant to the Comcast Purchase Agreement and then transferred to TWC
pursuant to the Exchange Agreement, a $34.9 million threshold and $349 million cap. In addition, no party is
required to indemnify the other for breaches of representations, warranties or covenants relating to assets or
liabilities initially acquired from Adelphia and then transferred to the other party, unless the breach is of a
representation, warranty or covenant actually made by the party under the Exchange Agreement in relation to those
Adelphia assets or liabilities.
Operating Partnerships and Joint Ventures
Time Warner Entertainment Company, L.P.
TWE is a Delaware limited partnership that was formed in 1992. At the time of the restructuring of TWE (the
“TWE Restructuring”), which was completed on March 31, 2003, subsidiaries of Time Warner owned general and
limited partnership interests in TWE consisting of 72.36% of the pro-rata priority capital and residual equity capital
and 100% of the junior priority capital, and Comcast Trust I owned limited partnership interests in TWE consisting
of 27.64% of the pro-rata priority capital and residual equity capital. Prior to the TWE Restructuring, TWE’s
business consisted of interests in cable systems, cable networks and filmed entertainment.
Through a series of steps executed in connection with the TWE Restructuring, TWE transferred its non-cable
businesses, including its filmed entertainment and cable network businesses, along with associated liabilities, to
Warner Communications Inc. (“WCI”), a wholly owned subsidiary of Time Warner, and the ownership structure of
TWE was reorganized so that (i) TWC owned 94.3% of the residual equity interests in TWE, (ii) Comcast Trust I
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