Time Warner Cable 2007 Annual Report Download - page 30

Time Warner Standstill. Under the Shareholder Agreement, so long as Time Warner has the power to elect a
majority of TWC’s board of directors, Time Warner has agreed that prior to August 1, 2009 (three years following
the closing of the Adelphia Acquisition), Time Warner will not make or announce a tender offer or exchange offer
for TWC Class A common stock without the approval of a majority of the independent directors of TWC; and prior
to August 1, 2016 (10 years following the closing of the Adelphia Acquisition), Time Warner will not enter into any
business combination with TWC, including a short-form merger, without the approval of a majority of the
independent directors of TWC.
Transactions between Time Warner and TWC. TWC’s By-laws provide that Time Warner may only enter into
transactions with TWC and its subsidiaries, including TWE, that are on terms that, at the time of entering into such
transaction, are substantially as favorable to TWC or its subsidiaries as they would be able to receive in a
comparable arm’s-length transaction with a third party. Any such transaction involving reasonably anticipated
payments or other consideration of $50 million or greater also requires the prior approval of a majority of the
independent directors of TWC. TWC’s By-laws also prohibit TWC from entering into any transaction having the
intended effect of benefiting Time Warner and any of its affiliates (other than TWC and its subsidiaries) at the
expense of TWC or any of its subsidiaries in a manner that would deprive TWC or any of its subsidiaries of the
benefit it would have otherwise obtained if the transaction were to have been effected on arm’s-length terms. Each
of these By-law provisions terminates in the event that Time Warner and TWC cease to be affiliates.
Time Warner Registration Rights Agreement between TWC and Time Warner. At the closing of the TWE
Restructuring, Time Warner and TWC entered into a registration rights agreement (the “Registration Rights
Agreement”) relating to Time Warner’s shares of TWC common stock. Subject to several exceptions, including
TWC’s right to defer a demand registration under some circumstances, Time Warner may, under that agreement,
require that TWC take commercially reasonable steps to register for public resale under the Securities Act all shares
of common stock that Time Warner requests to be registered. Time Warner may demand an unlimited number of
registrations. In addition, Time Warner has been granted “piggyback” registration rights subject to customary
restrictions and TWC is permitted to piggyback on Time Warner’s registrations. TWC has also agreed that, in
connection with a registration and sale by Time Warner under the Registration Rights Agreement, it will indemnify
Time Warner and bear all fees, costs and expenses, except underwriting discounts and selling commissions.
Item 1A. Risk Factors.
Risks Related to Competition
TWC faces a wide range of competition, which could negatively affect its business and financial results.
TWC’s industry is and will continue to be highly competitive. Some of TWC’s principal competitors, DBS
operators and incumbent local telephone companies, in particular, offer services that provide features and functions
comparable to the video, high-speed data and/or voice services that TWC offers, and they are offering them in
bundles similar to TWC’s. The telephone and DBS companies aggressively market their individual products as well
as their bundles or synthetic bundles (i.e., video services provided principally by the DBS operator, and DSL
service, traditional phone service and, in some cases, wireless service provided by the telephone company). These
competitors try to distinguish their services from TWC’s by offering aggressive promotional pricing, exclusive
programming, a bundle including their own or an affiliate’s wireless voice service and/or assertions of superior
service or offerings.
In addition to these competitors, TWC faces competition on individual services from a range of competitors,
including, in video, SMATVand video delivered to consumers over the Internet; in high speed data, Wi-Fi, Wi-Max
and 3G wireless broadband services provided by mobile carriers such as Verizon Wireless; broadband over power
line providers and municipal Wi-Fi services and in voice, cellular telephone service providers and Internet phone
providers, such as Vonage, and others.
Furthermore, TWC operates its cable systems under non-exclusive franchises granted by state or local
authorities. In some of TWC’s operating areas, other operators have overbuilt TWC’s systems and offer video, data
and/or voice services in competition with TWC.
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